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There is no better innovation model in the world

Esko Lukkari | 8.12.2016

​The Finnish innovation system is facing a major 
challenge. The economy has been flat-lining for seven years and exports are still at a lower level than 2008. The share of high-tech exports has fallen sharply.

Research and development expenditure has been hit hard by the public spending cuts made in recent years. 

However, Dr Ilona Lundström, Director General of the Enterprise and Innovation Department at the Ministry of Economic Affairs and Employment, still puts her trust in our innovation ecosystem.

 
– We certainly have room for improvement and have spent the last few years developing our cooperation. But there seem to be no better models in the world.

 
Lundström mentions that, for the first time, the OECD is currently evaluating the efficiency of Finland’s research and innovation activities. The last international evaluation of our innovation activities was performed in 2009. 

 
Questions about the efficiency of our innovation system have also been raised in Finland. The Finnish Parliament’s Committee for the Future issued a critical statement on this issue last year. On the other hand, Finland has almost always been in the top three in EU country comparisons of innovation policy.

 
Lundström mentions the high-profile, export promoter, Team Finland, which has also been subject to criticism, as an example of intensified cooperation. A working group led by Minister Olli Rehn is considering this issue and will give its recommendation in the near future.

 
Lundström has spent most of her career working for Tekes and the Association of Finnish Local and Regional Authorities. Her last spell with Tekes was 2014–2016, when she was Executive Director in charge of customer accounts and funding for large companies and research. 

 
She was appointed from among 63 applicants to succeed Petri Peltonen, who had become an Under Secretary of State, as Director General at the Ministry of Economic Affairs and Employment.

 
There are many big players in the ministry’s innovation ecosystem led by Lundström: Tekes, VTT, Finnish Industry Investment Ltd, Finnvera and Geological Survey of Finland (GTK). She is in charge of building a more efficient innovation environment for Finland, to ensure that our companies succeed in the world.

 

More strong SMEs

The paradox is that our innovation system has failed to create enough new export companies. Exports rest almost entirely on the shoulders of ten or so large companies. Unlike Denmark and Germany, we lack a strong SME sector. 

 
What could the public sector do to accelerate the growth of an internationally successful SME sector?

 
– This is a question of training. Some believe that the state should step away from actual business activities, leave this to companies, and just create a favourable business environment.  That’s what has happened.

 
– On the other hand, the state has a role in sharing risk alongside companies, but not as a risk taker. We have to develop our system with respect to how we can operate as efficiently as possible as a risk sharer, she says.

 
She praises the Growth Group, formed by Finnish companies, and its annual Kaski event, at which executives who have earned their spurs spar to develop strategies for SMEs and guide them onto the road to international growth. Hundreds of companies have participated.

 
– This is the best therapy for SME entrepreneurs who doubt their ability in terms of risk taking and growth. If public sector activities can be efficiently combined with this, firms 
can succeed in taking the next leap forward, she says. 

 
Deep cuts have been made to research and product development funding during the current and last term of government; this has affected the innovation system. Tekes’ funding was cut by EUR 107 million this year, while state research institutes lost EUR 59 million. These are having a major effect when combined with the previous years’ cuts. 

 

What will be the consequences 
of ending SHOK funding?

Lundström chooses her words carefully when referring to companies’ hopes about the funding of SHOK programmes already underway. Companies were founded to implement the SHOK programmes, whose continuation now depends on private sector willingness to keep funding such companies.

 
– You’d have to ask those who drew up the Government programme about the decision to cut funding.

 
– Perhaps the SHOK programmes weren’t transparent enough and their ROI was too low. Or the results were not communicated well enough to the decision-makers, she speculates.

 
According to Lundström, Tekes has already adapted its operations to the cuts in the research budget. However, it remains focused on supporting growth among SMEs and on the internationalisation of companies.

 
From the beginning of next year, the large cuts to Tekes’ budget will have an indirect effect on the activities of VTT and Aalto University, which are customers, in particular. 

 
– I nevertheless have faith in VTT’s ability to adapt to the situation. High-level strategy work has been carried out there. VTT needs time to adjust, given that its incorporation was so recent, she adds.  

 
According to Lundström, VTT should continue to be Finland’s jewel in the crown in terms of applied research.

 
– It plays an important role in creating international contacts and obtaining new information. For example, GE’s major investment in Finland, i.e. the digital health programme​, would never have happened without VTT. VTT is also a powerful instrument within Invest in Finland, she says.

 
lundsröm_02.jpg
 

 

EU Horizon 2020 funding is needed

VTT has been the most effective winner of EU Horizon 2020 funding in the Nordic countries and the eighth most successful in the EU.  Last year it brought around EUR 42 million in framework programme funding to Finland.

 
– Horizon projects are of the utmost importance to companies. The related international contacts bring market intelligence – which would otherwise be impossible to gather – to our companies, she comments. 

 
Despite the cuts to the research budget, the Government of Juha Sipilä is investing EUR 250 million of new money in promoting the bioeconomy, cleantech and digitalisation. Many comparable countries share these priority theme areas. How can Finland find its own growth sectors in the face of fierce competition?

 
– We are a small economy and there are plenty of niche areas in which we have always been good. We need to make the right choices and produce goods and services which other countries cannot do without, she says. 

 
The ministry is currently preparing a new climate and energy strategy, which Lundström views as being highly important to Finland. She has been following the preparations for Sweden’s highly ambitious climate and energy programme. Over there, the major parties want to be free from fossil fuels by 2040.

 
– The Swedish programme is not yet ready, but it looks highly promising given that the politicians are behind it, she says. 

 
Finland, on the other hand, is strongly investing in bioenergy and biofuel production, for example, despite the fact that, within the EU, there is even talk of a ban on internal combustion engines by the 2030s. Most recently, the Federal Council of Germany proposed their prohibition from 2030.

 
Lundström points out that, although internal combustion engines may have a limited future in passenger cars, their use in heavy goods vehicles and aeroplanes is likely to continue for a long time. This means that biofuels will long remain on the global markets.

 
Finland is also developing a new breed of bio­mass combustion technology, based on which carbon dioxide generated by heat and electricity co-production can be collected and used in emissions trading, in the same way as fossil fuels. 

 
In Bioruukki, established in Espoo in 2015 by VTT, pilot testing has been carried out on this Chemical Looping Combustion technology and the results are promising.  

Ilona Lundstörm

  • Age: 40
  • Born: In Kotka
  • Education: Doctor of Administrative Sciences, University of Tampere
  • Career: Specialist in the Association of Finnish Local and Regional Authorities 2001–2007; Senior Advisor Tekes 2007–2012; 
  • Director, built environment, safety and security at Tekes 2012–2014; Director, large companies and public organizations at Tekes 2014–2016; Director General and Head of the Enterprise and Innovation Department at the Ministry of Economic Affairs and Employment 2016–
  • Family: husband and daughters aged 12 and 7
  • Hobbies: scouts, jogging, reading and orienteering for exercise

 

 

"New products must be testable in finnish markets"

What does Ilona Lundström want to achieve during her five-year term as 
Director General.

 
– I think that Finland will look very different in five years’ time. By then, we will have functioning domestic markets and thriving SMEs that are succeeding in international markets. The Ministry of Economic Affairs and Employment has created a proper framework for them. 

 
Lundström believes that Finland’s reform of social welfare, healthcare and municipal government, and its climate and energy policies, will enable companies to create the new products and services they need to succeed in the world. 

 
– This requires that companies can test their products and services on the Finnish markets. We need to ensure that this economically crucial breeding ground is available.

 
– Freedom of choice resulting from the social welfare and healthcare reform offers a historical opportunity to develop direct digital services. The related savings will not be achieved without new, flexible service models, she states.

 
Lundström believes that the same applies to the preparation of Finland’s new climate and energy policy. Companies should be given the opportunity to market their renewable energy products on the domestic markets.

 
– Take solar energy products, for example. Solar energy is only just entering the debate here. But we have already made good progress with smart grids and international interest has been raised in our expertise, she says. ​


 

 

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