Special Edition The Federation of Finnish Technology Industries New paradigms, trends, and changes affecting the world. FOREWORD Jukka ViitasaariCompetitiveness of Finland’s IT & AUTHORSTelecom Industries Today and Tomorrow Teemu Arina Sam Inkinen Juhani V. Parda
Megasignals explore the major paradigms, trends,and changes aﬀecting the world.Why You are in the now business. The world lacks a straight-to-the-point publication that describes the current paradigm shifts in an understandable way so that you can take immediate action.For Our publication is intended for global leaders and business owners who need to make informed decisions under extreme pressure in a short time frame.How www.megasignals.com publishes an exclusive e-book quarterly and a blog expanding on the topics addressed in the e-book and featuring top minds weekly – free of charge. Stay connected and stay ahead: Subscribe to next free e-books This issue has been produced in collaboration with:
Foreword – Jukka ViitasaariThe world is changing ever faster. The global changes of today can be radicaland shocking, and they challenge everyone, everywhere in the world. Thosecountries which are agile and prepared for discontinuities and changes in theecosystems of several industrial sectors will win out. Finland has a number ofcore competencies and advantages which many other nations lack. ForFinland, the current global changes can truly be an opportunity.The Finnish way of life, our organizational structures, and our managementprocesses are lean, open, and agile. In Finland, the top management normallylistens to input; it is very much accessible to everyone in the organization, aswell 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 thecapability to think in a new, diﬀerent, and improved way. We have neither oilnor hardly gold – not even particularly welcoming weather.Regardless, our base from which to tackle the challenges and changes of todayis brilliant: we have an educational system that is cherished as the world’sbest. Certainly, we, as Finns, can be content that we have one of the world’smost equal educational systems, in which anybody can become somebody, ifhe or she so desires.
Corruption is almost nonexistent in Finland, and the country was recentlyvoted the best in which to live. Our government-funded innovation systemis well appraised abroad. All of this recognition and these awards are justsome of the highlights in a very short time period – only the last couple ofyears. These aspects are signiﬁcant core competencies and advantageswhich we Finns too often take for granted.Finland is one of the top nations in the world in the IT and telecomsectors. This “world champion”-level of competence and knowledge canalso be well utilized in creating value for other sectors of Finnishtechnology industries, as we create the future’s success stories inproducts, services, and companies.Changes naturally challenge us. Even if our starting point is ahead of mostother regions and societies, we must continuously strive for a morecreative, more eﬃcient, smarter, and more ﬂexible way of working. TheMegasignals strategy report will kick oﬀ this process. The time to act isnow. Let us create the pillars of well-being in Finland for the 21st century.Jukka ViitasaariDirectorThe Federation of Finnish Technology Industrieswww.teknologiateollisuus.ﬁ
ContentsMegasignals for the IT & Telecom industries of Finland: The Challenges of Globalization Posed to Finland How to increase jobs, assets, and creative buzz in Finland? Innovations and Supporting Structures The right judo moves: How do we turn strategies into action? Agile Processes and Growth Companies Tomorrow’s platforms, drivers, and working culture. 5
The Challenges of Globalization Posed to Finland How to increase jobs, assets, and creative buzz in Finland?
The Challenges of Globalization to Finland Finland – A Leader in Technology Industries Key concepts – yesterday and today: Yesterday Finland modernized very late, only after the second world war. • Automatic Data Development from an agrarian Finland to a modern welfare state and Processing (ADP) technology-driven “Nokia-Finland” happened in only a few decades. • information society Finlands educational and innovation systems are well regarded, • mobile Internet benchmarked, and have been adapted to many other parts of the world. • NMT, GSM, 3G Today • SMS, MMS Globalization and socio-technological changes are challenging the • convergence country. The nation is challenged by tax-free zones and other, more entrepreneur- and asset-friendly jurisdictions. We are also challenged by • smart phones nations and production areas of lower cost levels. • e-commerce Despite our well-being and welfare system, growth has slowed in Finland • outsourcing due to the global ﬁnancial crisis. This has also somewhat impacted • paperless oﬃce innovation and the ability to take risks at both the individual and • knowledge national level. Some of the bottlenecks – which are also future management 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. 8www.megasignals.com
The Challenges of Globalization to Finland Key concepts – Finland – A Future Leader in Technology Industries? tomorrow: Tomorrow • agility The rules and fundamentals of technology industries are changing • crowdsourcing more and more rapidly. Our opportunity is to better allocate our capabilities and innovation potential and, through this, create • cloud computing wealth and well-being (jobs and growth companies) in Finland. • social media The low-cost advantage and lower taxes transfer many business • virtual companies sectors to Asia and other lower cost areas. It is easier to allow • ubiquitous society customers to participate in R&D through crowdsourcing. Millions • open data of well-educated professionals graduate in India and China every • Internet of Things year. These human resources are ever easier to utilize though the Internet. At the same time, we are concerned in Finland about the • Application phones future of our top talent, employment development, • hyperconnectivity and wage levels. • user-centered Cloud computing may signiﬁcantly save costs in IT and innovation telecommunications support and maintenance. The outsourcing of • business ecosystems IT, the distributed technology environment, and social media capabilities are all impacting organizational processes, R&D, and corporate culture. 10www.megasignals.com
The Challenges of Globalization to Finland The Nokia Impact: From Production to Software Development 100 employees 600 450 Nokia transfers production abroad 300 150 0 ‘75 ‘77 ‘79 ‘81 ‘83 ‘85 ‘87 ‘89 ‘91 ‘93 ‘95 ‘97 ‘99 ‘01 ‘03 ‘05 ‘07 ‘09 IT’s software and service sectors in Finland Radio, TV, and other high-tech production (Nokia’s production subcontractors) 11www.megasignals.com
The Challenges of Globalization to Finland Market Value: Apple vs. Nokia vs. Exxon (3 Years) Source: Bloomberg.com, August 11, 2011 12www.megasignals.com
The Challenges of Globalization to Finland Market Value: Apple vs. Nokia vs. Exxon (6 Months) Market value USD August 11, 2011: NOK: 18,54 billion XOM: 336,99 billion AAPL: 341,25 billion Source: Bloomberg.com, August 11, 2011 13www.megasignals.com
The Challenges of Globalization to Finland 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 Screenshot: Elance.com services, journalism, and copywriting. 14www.megasignals.com
Innovations and Supporting Structures The right judo moves: How do we turn strategies into action?
Innovations and Supporting Structures Key concepts – Innovations: From Plans to Action yesterday and today: Yesterday • R&D One must consider the last few decades to be a success story in • cluster improving the Finnish innovation system and the national spirit of the country. For a long time, Finland has no longer meant a • innovation system periphery of forests and archipelago; rather, Finland has become a • innovation dynamic, Nordic EU country – a “futures laboratory.” Finland is environment particularly well-known as a technology, education, and • tacit knowledge innovation pioneer. • Triple Helix Today • swarm intelligence Clusters and innovation systems are concepts that have impacted • Creative Class the thinking of researchers, experts, and decision makers considerably since the 1990s. These days, there is also lots of talk • creative industries 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. 17www.megasignals.com
Innovations and Supporting Structures Business model Challenge: Challenge: new way to Ecosystemic What you innovate create value innovation Changing “what” Challenge: Traditional product Changing “how” new way to Product development create value or service innovation Closed How you innovate Open Source: Henry Chesbrough, 2007 18www.megasignals.com
Innovations and Supporting Structures Key concepts – Innovations: From Plans to Action tomorrow: Tomorrow • R&D&I One of the biggest challenges for Finland and the entire EU • Open Innovation regarding innovation is bureaucracy – so-called red tape. Many entrepreneurs point out that EU processes often take the • serendipity administrative angle rather than the business growth angle. • innovation The short-term challenge is to make strategic decision making and ecosystems the political environment more agile. Growth companies play a key • homo connectus role in creating jobs and well-being in the Finnish society. • growth companies Global competition and connected cultures transfer innovations in a • game industry 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. 19www.megasignals.com
Innovations and Supporting Structures Top-down Bottom-up Management and Idea source Customers and users. the organization. Internal resources, product Deep understanding of customer Drivers portfolio, and positioning. needs, user-centered design. Interaction Structured and controlled. Spontaneous and self-organizing. Inviting customers, partners, Strategy Protecting competitive advantage. and competitors. Processes Clearly deﬁned processes. Agile processes. Market research, questionnaires, (Net)communities, peer Methods and focus groups. production, and crowdsourcing. 20www.megasignals.com
Innovations and Supporting Structures Learning from the users text n Co Stimulus Insight Information Knowledge Products of choosing of using Wisdom the product the product n ce r ie x pe E • parameters • preferences • insight • presentations • experimentation • research • speciﬁcations • conversation • retrospect • comparison • recommendation • combination 21www.megasignals.com
Innovations and Supporting Structures 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 22www.megasignals.com
Agile Processes and Growth Companies Tomorrow’s platforms, drivers, and working culture.
Agile Processes and Growth Companies Key concepts – Growth Companies in Finland yesterday and today: Yesterday Forest (Finland’s green gold), pulp, and paper, as well as metal and • trade with the machinery industries, were the growth pillars of the Finnish economy. Soviet Union Bilateral trade with the Soviet Union was a cornerstone, in addition to a • bilateral agreements growing export business to other parts of Western Europe. Technological • Nordic cooperation development and automated manufacturing increased eﬃciency. • clearing and bartering Electronics (and the mobile phone sector in particular) grew to become the third pillar of growth in the 1990s. The Nokia supply cluster became • West Germany and a signiﬁcant provider of employment before its unwinding the Soviet Union in the last few years. • Pulp and paper, Today icebreaker ships The Nokia-led IT and telecom sectors are a signiﬁcant part of the Finnish • European Union business landscape. As Finland joined the EU and the Soviet Union • subcontracting for the ceased to exist, the Finnish export sector has successfully diversiﬁed. mobile phone sector 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. 25www.megasignals.com
Agile Processes and Growth Companies Key concepts – Growth Companies in Finland tomorrow: Tomorrow The IT and telecom sectors are vital for Finland. The Nokia cluster has • agility created top talent in Finland and an ecosystem which currently does not • global markets exist anywhere else in the world. Finlands challenge is now to utilize • swarm intelligence these strengths in the big changes and transformations occurring in the • design thinking IT and telecom sectors. Finlands innovation and educational systems • free economic zones have to perform even better in supporting growth companies, entrepreneurship, and further diversiﬁcation of its technology industries. • living labs Executed correctly, we can utilize the existing base of competencies to • human testbed maintain our pioneer positioning in the IT and telecom sectors and • creative class remain at the top of the value creation. A signiﬁcant part of the work is • cloud company transferring to virtual space – so-called cloud companies are networked • game industry around the world, rather than structured traditionally and hierarchically. • Nokia and Finland needs to develop entrepreneur- and asset-friendly platforms, Angry Birds 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. 27www.megasignals.com
Agile Processes and Growth Companies The significance of small companies for the growth of Finnish economy is remarkable: > 500 • Almost half of Finnish employees work for small companies, and one third of the turnover is generated in these companies. 402 • There are 320,000 companies in Finland. Over 99% of these companies are small. The share of small companies of the whole 688 national economy has grown in the last few years. 120 < 50 < 500 238 < 250 thousand of employees Companies Employees Turnover < 50 99.1 % 47.5 % 34.6 % < 250 0.7 % 16.4 % 16.4 % < 500 0.1 % 8.3 % 9.9 % Employees / company > 500 0.1 % 27.8 % 39.0 % Source: Statistics Finland – Companies, 2009 28www.megasignals.com
Agile Processes and Growth Companies June 3, 2011 August 4, 2011 29www.megasignals.com
Agile Processes and Growth Companies Business Case Angry 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. Image: Rovio.com 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. 100 million downloads (March 2011) 300 million downloads (July 2011) 30www.megasignals.com
SummaryCompetitiveness of Finland’s IT & Telecom industries today and tomorrow.
Summary Science and technology parks Cost advantage and cost-eﬃciency Business incubators and accelerators Creative culture and the creative class Future labs Globalization Entrepreneur-friendly environments Competent and educated employees Asset-friendly platforms Encouraging entrepreneural culture s rm Social media Dr tfo ive Pla rs Ecosystem Global + Local = Glocal Distance and mobile working Hyperconnectivity Distributed systems Virtuality Networks 32www.megasignals.com
Summary 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. 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. 33www.megasignals.com
Recommendations 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. Innovations and Supporting Structures • 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. 34www.megasignals.com
Recommendations Agile Processes and Growth Companies • Culture: From administration to action and creating real value. Promoting entrepreneurship as a career choice and a model 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. 35www.megasignals.com
Juhani V. PardaAuthors • 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. Dr. Sam Inkinen • 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 large The 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. Teemu Arina • 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. 36www.megasignals.com
About the Authors Megasignals 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. Like us on Facebook Visit: www.megasignals.com Follow us on Twitter Subscribe to next free e-booksShare Copyright Share This Material FreelyShare this e-book with your friends: The copyright of this work belongs to the You are given the unlimited right to print this authors. e-book and distribute it electronically (via email, Share on Share on your website, and through any other means). You Twitter Facebook This work is licensed under the Creative can hand out copies to everyone you meet. Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License. To view a copy of this You can use parts of it in your presentations or license, visit Creative Commons. articles but you have to display the “megasignals” logo or provide a reference to megasignals.com. For licensing alternatives (modiﬁcations, commercial intent etc.), please contact the However, you may not alter this e-book in any way authors at firstname.lastname@example.org and you may not charge for it.