05 Mar 2019   |   Viewpoint

Viewpoint: Boosting small business R&D is the key to Finland’s future

Eight years on, the collapse of Nokia’s mobile phone business continues to reverberate. For Pekka Soini, head of the innovation and investment agency Business Finland, this shows the country can’t afford to put all of its eggs in one basket again

Finland shouldn’t rely on “one national champion” like Nokia again, but should push smaller companies to increase their R&D spending and to adopt new technologies, says Business Finland’s CEO Pekka Soini, setting out his ideas for Finnish success in the future.

In 2011 and 2012, Nokia laid off thousands of highly skilled workers in Finland as it moved to cut losses in the mobile phone market it once dominated. But that hammer blow was the start of a new beginning. Through a programme that received support from the company, technology was transferred to Finnish start-ups and more than 300 companies were formed, in areas including wearable devices, digital health, internet of things and cybersecurity.

“The Nokia impact in Finland has been dramatic but it has also served Finland in terms of the renewal,” said Soini. Many of those who were made redundant “have gone to different jobs, renewing different industries, establishing their own businesses.” That has provided a “boost” and a “renewal” for Finland, he told Science|Business.

Now Soini too, is poised to move to pastures new and will step down as head of the government’s inward investment and innovation funding agency in August. 

Business Finland was formed at the beginning of 2018 in a merger between Tekes, the technology funding agency, and the FinPro trade promotion body. After serving as CEO of Tekes for six years before taking the helm of Business Finland, Soini says he is ready to look for new challenges.

His advice to his successor, who is expected to be announced soon, is, “We don’t need one national champion. Diversifying is a much better solution.”

At its peak, Nokia was the world’s largest mobile phone maker, accounting for 4 percent of Finland’s gross domestic product and 21 percent of its exports.

Rather than put “all the eggs in the same basket,” as it did with Nokia, Soini said Finland should encourage the development of new business models and networks of small, interdependent, research-intensive firms using new technologies, particularly artificial intelligence.

Building on advances in AI and advanced communications, Soini believes new sectors such as autonomous unmanned ships will create new markets for many small, productive firms, and push businesses to invest more in R&D.

Business Finland is a partner in the One Sea project, which aims to develop the ecosystem needed to support autonomous shipping by 2025. Other partners include the engineering companies ABB and Rolls Royce, the communications technology company Ericsson and software company Tieto.

Creating the autonomous maritime ecosystem will call for a range of different specialist high tech suppliers, Soini said “[It will] need a lot of different kind of SMEs which are related to communication, situational awareness, virtual reality, and augmented reality.”

In December Rolls-Royce and the Finnish government-owned ferry operator Finferries reached an important milestone for One Sea, when they successfully demonstrated the world’s first fully autonomous car ferry in the archipelago south of the city of Turku, on a voyage between Parainen and Nauvo.

During the demonstration the car ferry was under fully autonomous control. The vessel detected objects using sensors and artificial intelligence and conducted collision avoidance.

The data were relayed to Finferries’ remote operating centre on land, some 50 kilometres away in Turku city centre, where a captain monitored the autonomous operations, and was ready to take control of the vessel if necessary.

It will be as important to attract investment and skills from overseas as it is to develop home-grown companies, in fostering the development of this ecosystem, Soini believes. As one case in point, the Israeli satellite firm Imagesat International could provide communications services to autonomous ships, which need constant access to data in difficult weather conditions.

At the same time, Business Finland is supporting the local earth imaging company Iceye, awarding the company a €10 million loan to manufacture synthetic aperture radar satellites that are able to carry out earth observations through cloud and at night.

The company, which span out of Aalto University in 2014, plans to launch a constellation of satellites, to create what it calls an internet of locations. In addition to imaging for autonomous shipping, that would be the basis of a range of other applications in areas including flood mapping, pipeline monitoring and monitoring port and sea traffic.

A difficult decade

Nokia’s retreat from the mobile phone market has not been the only shock to hit the Finnish economy in the last decade. Since the 2008 financial crash, the country has been through three lengthy recessions, in part due to its exposure not only to the global financial sector, but also to the economy of its Russian neighbour, which has buckled under the pressure of low oil prices and international sanctions.

Finland’s labour market also suffers from structural weaknesses that may be further stressed by automation. A recent OECD report said Finland’s employment rate is low compared to other Nordic countries, in part because the combination of high labour taxes and generous social security support can reduce incentives to re-entering the labour market.

That raises the question of what effect the automation of lower-paid jobs will have on employment. Soini argues automation will both create and destroy jobs in Finland. Low skilled jobs may go, but automation will see companies “renewing themselves.” He pointed to a recent example of a bank that laid people off due to automation, noting, “They say that if they reduce [by] 2,000 people, they will rehire 2,500 people, because of the new skills that they need.”

However he acknowledged, “There is a major challenge [of] retraining existing people, and that is in front of us in every country.”

Finland recently ran a high-profile trial of Universal Basic Income, which some see as the solution to job destruction caused by automation. But the Finnish experiment fizzled out last year. “When they set up the test, they figured that it is probably not the solution because it is too expensive,” Soini said. “But that is a sign of our willingness to try out new kinds of things in terms of social security.”

He expects other approaches to be trialled in the coming years, “I bet that we will have different kinds of new methods to be trialled,” Soini said. “We have to figure out something.”

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