FOREWORDJukka Viitasaari

AUTHORSTeemu ArinaSam InkinenJuhani V. Parda

Competitiveness of Finland’s IT & Telecom Industries Today and Tomorrow

Special EditionThe Federation of Finnish Technology Industries

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Foreword – Jukka ViitasaariThe world is changing ever faster. The global changes of today can be radical and shocking, and they challenge everyone, everywhere in the world. Those countries which are agile and prepared for discontinuities and changes in the ecosystems of several industrial sectors will win out. Finland has a number of core competencies and advantages which many other nations lack. For Finland, the current global changes can truly be an opportunity.

The Finnish way of life, our organizational structures, and our management processes are lean, open, and agile. In Finland, the top management normally listens to input; it is very much accessible to everyone in the organization, as well as to outsiders. We Finns are creative by nature.

The wealth of nation is derived from innovations – technologies, applications, services, concepts, and process innovations. The main challenge is the capability to think in a new, different, and improved way. We have neither oil nor hardly gold – not even particularly welcoming weather.

Regardless, our base from which to tackle the challenges and changes of today is brilliant: we have an educational system that is cherished as the world’s best. Certainly, we, as Finns, can be content that we have one of the world’s most equal educational systems, in which anybody can become somebody, if he or she so desires.

Corruption is almost nonexistent in Finland, and the country was recently voted the best in which to live. Our government-funded innovation system is well appraised abroad. All of this recognition and these awards are just some of the highlights in a very short time period – only the last couple of years. These aspects are significant core competencies and advantages which we Finns too often take for granted.

Finland is one of the top nations in the world in the IT and telecom sectors. This “world champion”-level of competence and knowledge can also be well utilized in creating value for other sectors of Finnish technology industries, as we create the future’s success stories in products, services, and companies.

Changes naturally challenge us. Even if our starting point is ahead of most other regions and societies, we must continuously strive for a more creative, more efficient, smarter, and more flexible way of working. The Megasignals strategy report will kick off this process. The time to act is now. Let us create the pillars of well-being in Finland for the 21st century.

Jukka ViitasaariDirector

The Federation of Finnish Technology Industrieswww.teknologiateollisuus.fi

Innovations and Supporting StructuresThe right judo moves: How do we turn strategies into action?

Agile Processes and Growth CompaniesTomorrow’s platforms, drivers, and working culture.

Megasignals for the IT & Telecom industries of Finland:

The Challenges of Globalization Posed to FinlandHow to increase jobs, assets, and creative buzz in Finland?

Contents

5

The Challenges of Globalization Posed to Finland

How to increase jobs, assets, and creative buzz in Finland?

Kuva: Sievin kotiseutuarkisto

www.megasignals.com

Finland – A Leader in Technology Industries

Yesterday

Finland modernized very late, only after the second world war. Development from an agrarian Finland to a modern welfare state and technology-driven “Nokia-Finland” happened in only a few decades. Finland's educational and innovation systems are well regarded, benchmarked, and have been adapted to many other parts of the world.

Today

Globalization and socio-technological changes are challenging the country. The nation is challenged by tax-free zones and other, more entrepreneur- and asset-friendly jurisdictions. We are also challenged by nations and production areas of lower cost levels.

Despite our well-being and welfare system, growth has slowed in Finland due to the global financial crisis. This has also somewhat impacted innovation and the ability to take risks at both the individual and national level. Some of the bottlenecks – which are also future opportunities – exist in service innovations, content production, and understanding the changes to business ecosystems posed by the Internet. There is concern regarding how to retain top skills and the highest value-adding jobs and processes in Finland, also in the IT and telecom sectors.

8

The Challenges of Globalization to Finland

• Automatic DataProcessing (ADP)

• information society• mobile Internet • NMT, GSM, 3G• SMS, MMS• convergence• smart phones• e-commerce• outsourcing• paperless office• knowledge

management

Key concepts –yesterday and today:

www.megasignals.com

Tomorrow

The rules and fundamentals of technology industries are changing more and more rapidly. Our opportunity is to better allocate our capabilities and innovation potential and, through this, create wealth and well-being (jobs and growth companies) in Finland.

The low-cost advantage and lower taxes transfer many business sectors to Asia and other lower cost areas. It is easier to allow customers to participate in R&D through crowdsourcing. Millions of well-educated professionals graduate in India and China every year. These human resources are ever easier to utilize though the Internet. At the same time, we are concerned in Finland about the future of our top talent, employment development,and wage levels.

Cloud computing may significantly save costs in IT and telecommunications support and maintenance. The outsourcing of IT, the distributed technology environment, and social media capabilities are all impacting organizational processes, R&D,and corporate culture.

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• agility• crowdsourcing• cloud computing• social media• virtual companies• ubiquitous society • open data• Internet of Things• Application phones• hyperconnectivity• user-centered

innovation• business ecosystems

Key concepts –tomorrow:

Finland – A Future Leader in Technology Industries?

The Challenges of Globalization to Finland

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0

150

300

450

600

‘75 ‘77 ‘79 ‘81 ‘83 ‘85 ‘87 ‘89 ‘91 ‘93 ‘95 ‘97 ‘99 ‘01 ‘03 ‘05 ‘07 ‘09

The Nokia Impact: From Production to Software Development

IT’s software and service sectors in Finland

Radio, TV, and other high-tech production (Nokia’s production subcontractors)

Nokia transfers production abroad

100employees

The Challenges of Globalization to Finland

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Market Value: Apple vs. Nokia vs. Exxon (3 Years)

Source: Bloomberg.com, August 11, 2011

The Challenges of Globalization to Finland

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Market Value: Apple vs. Nokia vs. Exxon (6 Months)

Source: Bloomberg.com, August 11, 2011

Market value USD August 11, 2011:NOK: 18,54 billionXOM: 336,99 billionAAPL: 341,25 billion

The Challenges of Globalization to Finland

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Business Case Hire employees via the Internet

Elance offers a reliable way in which to access capable employees without complicated contractual negotiations.

Description

The Elance website links potential employees with employers. The site is a fast, cost-effective, and bureaucracy-free way to hire employees. Previous employers evaluate the services they received. The model is disruptive in several sectors of the economy. By April 2011:

• Over 49,000 work assignments.

• Over 350,000 employees.

• Over 360,000,000 USD of delivered work.

Why?

Services such as Elance make the hiring of labor (high quality, lower cost) easy, not least due to honest recommendations and references. This type of service erodes the margins of traditional, local consulting businesses. Impacted sectors, for example, include marketing, accounting, customer service, legal services, IT services, journalism, and copywriting.Screenshot: Elance.com

The Challenges of Globalization to Finland

Innovations and Supporting StructuresThe right judo moves: How do we turn strategies into action?

www.megasignals.com

Innovations: From Plans to Action

Yesterday

One must consider the last few decades to be a success story in improving the Finnish innovation system and the national spirit of the country. For a long time, Finland has no longer meant a periphery of forests and archipelago; rather, Finland has become a dynamic, Nordic EU country – a “futures laboratory.” Finland is particularly well-known as a technology, education, and innovation pioneer.

Today

Clusters and innovation systems are concepts that have impacted the thinking of researchers, experts, and decision makers considerably since the 1990s. These days, there is also lots of talk of a creative economy and innovation ecosystems.

Silicon Valley in California is often described as the successful, market-driven, future-oriented ecosystem which creates the ideas and innovations that enrich societies. Finnish growth companies are actively seeking relationships and presences in Silicon Valley and Asia.

17

• R&D• cluster• innovation system• innovation

environment• tacit knowledge• Triple Helix• swarm intelligence• Creative Class• creative industries

Key concepts –yesterday and today:

Innovations and Supporting Structures

www.megasignals.com18Source: Henry Chesbrough, 2007

Businessmodel

Productor serviceinnovation

Closed OpenHow you innovate

Wha

t you

inno

vate

Challenge:new way tocreate value

Challenge:new way tocreate value

Challenge:Ecosystemicinnovation

Traditionalproduct

development

Changing“how”

Chan

ging

“wha

t”

Innovations and Supporting Structures

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Innovations: From Plans to Action

Tomorrow

One of the biggest challenges for Finland and the entire EU regarding innovation is bureaucracy – so-called red tape. Many entrepreneurs point out that EU processes often take the administrative angle rather than the business growth angle.

The short-term challenge is to make strategic decision making and the political environment more agile. Growth companies play a key role in creating jobs and well-being in the Finnish society.

Global competition and connected cultures transfer innovations in a blink of an eye to the other side of the world (for example Angry Birds, Max Payne, Skype, and Spotify). A small idea can quickly become a concept that holds mass appeal for millions of consumers.

Global hyperconnectivity and competition require a move from closed innovation models to open, more transparent ways of working. We need improved innovation processes in Finland,as well as work and study environments which cultivate serendipity.

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• R&D&I • Open Innovation• serendipity• innovation

ecosystems• homo connectus• growth companies• game industry

Key concepts –tomorrow:

Innovations and Supporting Structures

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Top-down Bottom-up

Idea sourceManagement andthe organization.

Customers and users.

DriversInternal resources, productportfolio, and positioning.

Deep understanding of customer needs, user-centered design.

Interaction Structured and controlled. Spontaneous and self-organizing.

Strategy Protecting competitive advantage.Inviting customers, partners,

and competitors.

Processes Clearly defined processes. Agile processes.

MethodsMarket research, questionnaires,

and focus groups.(Net)communities, peer

production, and crowdsourcing.

Innovations and Supporting Structures

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Informationof choosingthe product

Knowledge of using

the productWisdom

Stimulus Insight

• parameters• presentations• specifications• comparison

• preferences• experimentation• conversation• recommendation

• insight• research• retrospect• combination

Products

Learning from the users

Context

Experience

Innovations and Supporting Structures

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Business Case

Flowd is a mobile, social media concept for music lovers by Digia. It has been built with a start-up mentality – even bigger companies like Digia can work in a new way when they utilize opportunities provided by digital ecosystems, an active Internet fan base, and beta users’ feedback in the product development process.

Screenshot: flowd.com

Innovations and Supporting Structures

Agile Processes and Growth Companies Tomorrow’s platforms, drivers, and working culture.

+?

www.megasignals.com

Growth Companies in Finland

Yesterday

Forest (Finland’s green gold), pulp, and paper, as well as metal and machinery industries, were the growth pillars of the Finnish economy. Bilateral trade with the Soviet Union was a cornerstone, in addition to a growing export business to other parts of Western Europe. Technological development and automated manufacturing increased efficiency. Electronics (and the mobile phone sector in particular) grew to become the third pillar of growth in the 1990s. The Nokia supply cluster became a significant provider of employment before its unwindingin the last few years.

Today

The Nokia-led IT and telecom sectors are a significant part of the Finnish business landscape. As Finland joined the EU and the Soviet Union ceased to exist, the Finnish export sector has successfully diversified. Our innovation and educational systems support growth companies and entrepreneurship, but there is still further work to be done in more optimally allocating funds and resources. Out of necessity, the IT and telecom sectors have diversified quickly. The game industry has grown strongly in the last few years, and expectations are high for that sector.

25

• trade with theSoviet Union

• bilateral agreements• Nordic cooperation• clearing and bartering• West Germany and

the Soviet Union• Pulp and paper,

icebreaker ships• European Union• subcontracting for the

mobile phone sector

Key concepts –yesterday and today:

Agile Processes and Grow

th Companies

www.megasignals.com

Growth Companies in FinlandTomorrow

The IT and telecom sectors are vital for Finland. The Nokia cluster has created top talent in Finland and an ecosystem which currently does not exist anywhere else in the world. Finland's challenge is now to utilize these strengths in the big changes and transformations occurring in the IT and telecom sectors. Finland's innovation and educational systems have to perform even better in supporting growth companies, entrepreneurship, and further diversification of its technology industries.

Executed correctly, we can utilize the existing base of competencies to maintain our pioneer positioning in the IT and telecom sectors and remain at the top of the value creation. A significant part of the work is transferring to virtual space – so-called cloud companies are networked around the world, rather than structured traditionally and hierarchically.

Finland needs to develop entrepreneur- and asset-friendly platforms, drivers, and culture – these are in a key position for tomorrow’s strategies and decision making. Nurturing agility, creating vibrant buzz, developing fruitful innovation ecosystems (such as a free economic zone in Finland) and supporting structures, and efficiently allocating governmental R&D grants and funding are key focus areas.

27

• agility• global markets• swarm intelligence• design thinking• free economic zones• living labs• human testbed• creative class• cloud company• game industry• Nokia and

Angry Birds

Key concepts –tomorrow:

Agile Processes and Grow

th Companies

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Companies Employees Turnover

< 50 99.1 % 47.5 % 34.6 %

< 250 0.7 % 16.4 % 16.4 %

< 500 0.1 % 8.3 % 9.9 %

> 500 0.1 % 27.8 % 39.0 %

The significance of small companies for the growth of Finnish economy is remarkable:

• Almost half of Finnish employees work for small companies, and one third of the turnover is generated in these companies.

• There are 320,000 companies in Finland. Over 99% of these companies are small. The share of small companies of the whole national economy has grown in the last few years.

402

120

238

688

thousand of employees

< 50

< 250

< 500

> 500

Employees /company

Source: Statistics Finland – Companies, 2009

Agile Processes and Grow

th Companies

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June 3, 2011

August 4, 2011

Agile Processes and Grow

th Companies

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Business CaseAngry Birds is the world’s most popular mobile game at the moment. The game has been downloaded over 300 million times (July 2011). In addition to game design, the marketing and licensing of the concept to film production, toys, and table games are testimonies of the creativity of this Finnish success story.

Rovio’s Angry Birds game is a good example of a business breakthrough through competence, creativity,and human capital.

Although human capital is recorded as a cost in accounting, it is a powerful engine of growth which allows companies to create value almost from thin air.

Image: Rovio.com

100 million downloads(March 2011)

300 million downloads(July 2011)

Agile Processes and Grow

th Companies

SummaryCompetitiveness of Finland’s IT & Telecom industries today and tomorrow.

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Ecosystem

DriversPlat

form

s

Global + Local = GlocalDistance and mobile working

HyperconnectivityDistributed systems

VirtualityNetworks

Science and technology parksBusiness incubators and accelerators

Future labsEntrepreneur-friendly environments

Asset-friendly platformsSocial media

Cost advantage and cost-efficiencyCreative culture and the creative class

GlobalizationCompetent and educated employeesEncouraging entrepreneural culture

Summ

ary

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Summary: Competitiveness of Finland’s IT & Telecom Industries Today and Tomorrow

The IT and telecom sectors – and technology industries in general – are important sectors on their own; they also play a major role in increasing efficiency as the engines of the other parts of the economy.

Finland has an opportunity to utilize its global position as an industry leader in the mobile telecom sector. This can be the engine of growth for the entire economy. Business realities are constantly changing – yesterday’s truths do not apply in the present, and tomorrow’s challenges will be different from those of today.

Summ

ary

Some of the key focus areas for decision makers will be systemic changes in the economy and the nation’s ways of creating and developing new businesses. New innovation ecosystems, open innovation, and an entrepreneur-friendly culture will play significant roles in future developments.

The Internet, as a platform, means business, but, more importantly, it also means a new way to organize work and processes. Apart from business process reengineering, further cultural changes in marketing, sales, and management will be key to our success.

For growth companies, structural development in creating more entrepreneur- and asset-friendly platforms and environments is crucial. New ways of adding value, as well as dynamic drivers and platforms, are the basis for tomorrow’s success.

www.megasignals.com

Innovations and Supporting Structures

34

The Challenges of Globalization Posed to Finland

• Defining and developing the nation’s core competencies.

• Finland’s competitive advantage has been based on a high level of education: this lead should be further extended by lifelong learning, Internet-based learning, and new pedagogical models.

• The nation needs to fully utilize the opportunities provided by the connected and networked world: crowdsourcing, social media, and networks are some examples of these opportunities.

• Opportunity windows are short and constantly changing: the time to market (TTM) for products and services must become shorter.

• Even more efficient product development processes. Ideas outside the organization need to be utilized (open innovation).

• Finland needs to focus on the strategically significant and value-adding segments of its innovation ecosystems. Other (less significant) parts and processes can be outsourced and crowdsourced abroad.

• Moving further from technology and business process reengineering toward more holistic views of business models, service, content, and design innovations.

• From bureaucracies and hierarchies to real action: even more creative, open, lean, and agile structures are required.

Recomm

endations

www.megasignals.com

• Culture: From administration to action and creating real value. Promoting entrepreneurship as a career choice and amodel of success.

• International expansion: New markets open major opportunities (such as Asia, South America, Middle East and Africa).

• Managing and tolerating uncertainty and failures: Implementation of strategic visions and missions (including project and venture capital).

• Further improvements in entrepreneur- and asset-friendly structures.

• Development of the venture capital market and structures: Venture capital needs an attractive tax base (benchmarking with Estonia, the Emirates, and many other completely tax-free or low-tax zones). Low-bureaucracy structures and openness to foreign ownership are also important topics.

• Business incubators, accelerators, and science and technology parks: In addition to physical space, fully utilizing digital spaces,and working tools.

35

Agile Processes and Growth Companies

Recomm

endations

www.megasignals.com

• Partner, Translink Corporate Finance Middle East and Africa.

• M. Sc. (Eng.), CFA III Candidate, corporate trainer, and coach.

• Has done business on 6 continents. Travelled around the world 55 times,lived in 8 countries, and discovered approximately 100 countries.

• Previously GM of Nokia Multimedia Service Business in Latin America, Chief Negotiator, Ericsson Telecommunications, Asia-Pacific.

• Key strengths: High growth markets in Latin America, Asia, the Middle East, and Africa.Technology and innovation assessment and investment + market entry process.

36

Authors

• Media scholar, futures researcher, writer, curator, and senior consultant.

• Author, co-author, editor and co-editor of over 30 books. Publications include Mediapolis (1999), Understanding Innovation Dynamics (2009), and the four-volume largeThe Integrated Media Machine (1999–2005).

• Over 100 countries discovered on six continents.

• Key strengths: Media technologies, digital culture, creative processes, open innovation, arts and design, experience economy, foresight, and network society.

Dr. Sam Inkinen

• Technology entrepreneur, speaker, writer, author, and consultant (digital strategies).

• Keynote presentations at recognized conferences, business summits, and universities in Germany, the U.S., the UK, Belgium, the Netherlands, Finland, and Italy.

• CEO of Dicole and Meetin.gs technology startup.

• Key strengths: Social media, open innovation, net generation, knowledge management, service design, digital ecosystems, collaborative learning, and e-learning.

Teemu Arina

Juhani V. Parda

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About the AuthorsMegasignals is a joint book and media project initiated by three internationally known writers, consultants, and researchers:Mr. Teemu Arina , Dr. Sam Inkinen, and Mr. Juhani V. Parda.

The authors live a nomadic lifestyle exploring markets, cultures and societies, writing articles and books, giving presentations at major conferences, and providing advice to leading organizations on all continents. They have a background in the high-tech, media and telecom industries, and the academic context.

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