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We must maintain Finland as an attractive target for investment

Antti J. Lagus | 31.12.2014

​The Manifesto of Growth published by the Confederation of Finnish Industries this autumn lays out challenges facing Finnish companies.

Industrial operations have been draining out of Finland and Europe into other continents. The United States attracts entrepreneurs with its cheap energy. The share of industry of the Finnish gross domestic product has dropped from 23 per cent to 15 per cent. 

However, Jyri Häkämies, CEO of Confederation of Finnish Industries (EK), sees also opportunities for Finland, related to innovativeness and technology. In Häkämies’ opinion, here in Finland, we should not settle with the basic notion that we are losing­ production, but we have to take care of educational system, energy and logistics, and the flexibility of the labour system. We have to ensure that Finland maintains its attractive­ness for the industrial sector.

According to Häkämies, in certain cases it may be advisable to take the production elsewhere due to, for example, market proximity. In such cases, however, it is extremely important to keep the corporate headquarters and product development here. 

– We can manage by two routes. The industrial sector needs to streamline its competitiveness, and our competencies have to be among the best in the world, as has been the case, says Häkämies.

The exile of industry is by no means inevi­table, Häkämies argues. There are examples of production returning to Finland from Malesia, for example, due to application of Lean Management practices. 


 

Speed and agility

– It is often said that Finns are eager to adopt new matters. In my opinion, Pekka Ala-Pietilä, chairman of the board at Solidium, has summarised this very well: Finland has two strengths, speed and agility. I, however, feel that these are not being exploited well enough. The labour market is inflexible and decision-making is slow.

According to Häkämies, we should be fast to react and willing to test new things, so that we would be the first in the world to do something. 

– Forest industry is an excellent example of how a sector can reform itself. They have been hit hard, for example, in the paper sector, but now they are discussing such matters as biofuels and wood-based construction.


 

Technology must rest on a solid theoretical basis

According to new research results, 60 per cent of the existing professions will disappear. Robots and machinery will replace human labour. Häkämies says that instead of decelerating, we should press the gas pedal even harder, and embrace robotics and techno­logical solutions. In other words, in his opinion, we should not think that new technologies are eating away our work, because that kind of thinking will prevent any chances of success. 

Häkämies notes that technology needs to be commercial in order to sell at all. This is also visible in VTT’s operations, one third of which consists of basic research, one third of enterprise­-driven research and one third of commercialisation of technologies. According to Häkämies, this is also one of the eternal questions of innovation policy: what is the ratio between theoretical­ and applied research? Häkämies is convinced that innovations cannot rest on applied foundations only, since without more solid foundations they soon lose their momentum.

Häkämies points out that, when making techno­logy investments, industry must consider their payback period. The rules applied vary from one sector to another. For example, energy investments are made for several decades, whereas games industry, for instance, is much more fast-paced.


Companies value predictability

Häkämies is of the opinion that low corporate tax system is better than a complicated system of deductions. 

– The clearer and simpler the tax system for corporate actors, the more predictable the business environment. When making investment decisions, companies value predictability, so that they can be sure, for example, that a tax decision made this year is not totally reversed the next.

The Confederation of Finnish Industries’ recent industrial manifesto points out that drawing the line between industry and services has become more difficult than before. The limits are now drawn partly within the companies. Many traditional technology companies are earning a larger and larger share of their turnover from services. Häkämies believes that the Internet of Things will further promote this development, when products around the world can be supervised from central control rooms located in Finland.

Häkämies summarises the message of enterprises as follows: the public business subsidy machinery must be highly customer-driven. SMEs in particular may not have a separate product development unit, but the same entrepreneur considers also these aspects of the operations alongside other business activities.


 

More turnover, new products

Companies sometimes consider money invested in research and develop­ment as an unproductive expense item. The impact study published­ by VTT in June tells another story.

Almost 80 per cent of VTT’s customer companies estimated that ­collaboration with VTT had generated new products, services­ or processes.­ About 73 per cent of them estimated that their competitiveness­ had improved. Totally new technology was introduced as a result of the project by 57 per cent of the customers.

VTT’s share of Finland’s investments in R&D is about four per cent. With that money, VTT has been involved in the development of 36 per cent of Finnish innovations. This can definitely be called impact, says Erkki KM Leppä­vuori, President & CEO of VTT. 

– In difficult times, we should make even higher investments in ­reforming and developing trade and industry, he says.

When distributing funds, the CEO would place the emphasis on applied research, which brings direct benefits to companies.

– In my opinion, in Finland, the situation is somewhat skewed in the direction­ of basic research. It would be advisable to shift the focus, he says.

The statistical data of the impact study derived from the extensive SFINNO innovation database and the data collected by Statistics Finland.

– This makes the results reliable. Of course, there are several other ­factors affecting the success of companies than investments in research, but the direction is clear: research and development is of great importance,­ says Anne-Christine Ritschkoff, Executive Vice President of Strategic ­Research at VTT.


 

The background support of bioeconomy

The impact on the customer companies’ turnover, product range, and ­competitiveness was reviewed on several sectors. VTT contribution boosted the company turnover the most in the bioeconomy sector. There the growth was as high as 73 per cent after innovations where VTT had played a major role.

Bioeconomy touches especially the forestry sector and the chemical industry that account for almost 45 per cent of the Finnish exports.

– Forest biomasses and the added value products derived from it naturally play a key role in the Finnish bioeconomy strategy. Bioeconomy is a rising sector,­ and on a sector like that it is a must to invest in research and development to have the business take off and soar, underscores Leppävuori.

Promising prospects lie also in cleantech and digital technologies.

– And this does not necessarily mean the same sector on which Nokia operated. For example, social media shows how much potential is hidden in digital services.

Consumers do not necessarily recognise the role of research investments­ in the products and services. Within the industrial sector, on the other hand, the benefits are well acknowledged.

– Most of our operations are B-to-B. We do major contribution to, for example, nuclear security. Thanks to our testing services, construction industry products are granted their CE markings and boat models their ­approvals, says Ritschkoff, continuing the list.

VTT has two perspectives in its operations: Firstly, research gives companies­ ”technology impulses”, which facilitate development of products and services. Secondly, technology is used in the efforts to solve any encountered problems.​


 

 

 

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