Finland Economic Report : An Economy Centered around Nokia

Finland used to be one of the European Union's most prosperous countries. That was during the heyday of the former mobile phone giant Nokia, before the global economic crisis. Finland has stagnated in recent years. Finland is an amazing country, but they made a series of blunders, which resulted in severe consequences. Joining Eurozone common currency has resulted in Finland no longer can devalue its currency to sell high-quality products; joining the so-called EU alliance is putting sanctions on Russia has produced more bads than goods to Finnish exports to Russia. Last but not least, the decision of Nokia not to enter in touch mobile business and to join an already failed OS i.e. Microsoft proved to be the last nail in their coffin. Nokia failed to innovate, to stay in business, and the whole business was swept away, leaving only remnants involved in networks behind. In Finland, the state accounts for the bulk of the economy – it’s similar in share to France (if not slightly bigger). But as a country with a large mass and dispersed population, there aren’t too many options to reduce it further. So the biggest issue is economic growth in the private sector, in particular, the lack of growth in Finnish exports. Partly this is due to the decline of the Phones business of Nokia and the surrounding ecosystem. But as an observation, many Finnish companies tend to be more oriented to domestic trading than international business. Exports as a share of GDP trails that of Sweden and Denmark. This won’t be solved overnight. This was The Atlantis Report. So how has the decline of Nokia affected Finland? Nokia, including its whole subcontractor chain, was an important employer, so the decline definitely had an effect on the unemployment rate and hit particularly hard in some areas in the country. Especially in some cities outside the Helsinki capital area, the local impact was big. For example, in Salo, it was a local crisis when Nokia, the main employer, closed its factory and left thousands of people without jobs with very limited career opportunities in the small city. The Finnish government even gave extra funding to the Salo area to help in the transition. Some events along the way: January 2011: Nokia – the mobile phone giant – starts feeling the impact of changing markets; lays off 500 people from the Symbian mobile phone OS R&D. June 2011: Nokia announces laying off 7,000 worldwide (1,400 in Finland). September 2011: Nokia outsources 2,300 people to the consulting company Accenture (1,200 in Finland). November 2011: Another 300 are let go. June 2012: Nokia lays off 10,000 worldwide (3,700 in Finland), announces shutting down the factory in Salo. Direct impact in Salo: 800 people. August 2013 – April 2014: Nokia sells its mobile phone business to Microsoft for €5.44 billion and concentrates on their remaining business units – primarily mobile networks, and licensing their patent portfolio. The R&D facility in Salo is part of the Microsoft deal, so the employees there is now part of Microsoft. Altogether 25,000 employees worldwide (4,700 in Finland) are transferred from Nokia to Microsoft. April 2015: Nokia announces strengthening its position in the network's market by buying Alcatel-Lucent, the French telecommunications giant, which also owns Bell Laboratories, from the former Alcatel and Lucent Technologies merger. This deal is valued at €15.6 billion. July 2015: Microsoft closes down the R&D facility in Salo; lays off 1,000 there and 1,300 elsewhere in Finland. April 2016: Nokia lays off 1,300 in Finland, 400 in France, as part of rationalization efforts due to the merger with Alcatel-Lucent. May 2016: Microsoft puts an end to mobile phone development in Finland; sells feature phones to Foxconn, lays off 1,850 worldwide 1,350 in Finland. Counting quickly, over 10,000 Nokia/Microsoft employees have been let go in Finland (alone) since 2011, which is around when the turmoil started. Then there are the local subcontractors… It’s been a rough ride, especially for the localities where the old Nokia and its subcontractors were significant players in the job market. Finland is not a too populous country, and the impacted cities (especially Salo) are not particularly big. Also, even though Nokia remains a large company, the mobile phone business generated a lot of revenue in its heyday and a lot of tax euros in the budget of the Finnish government as well. Now the Finnish government obviously needs to support a more diverse technology sector actively. Putting a positive spin on it, some people view these events as psychologically liberating: now that the old, towering behemoth is gone, tech people are perhaps more eager to found startups and run their own businesses, instead of just trying to join Nokia or get a piece of Nokia’s action. Before Nokia’s rise, Finland was a ‘smokestack industry’ country; forestry, paper, heavy industry, and process industry country. If you said ‘industry,’ people would understand it as a brickwork factory with a tall chimney. In the late 1970s, the Finnish futurologists understood computers and electronics would be the stuff of the future. They suggested the whole society adapt to it. Finland had just undergone a school reform, and stuff essential for computing, like logics and set theory, was included in the curriculum. Came the eighties and the Prime Minister Harri Holkeri had the slogan hallittu rakennemuutos (Controlled Structural Change), whose intention was to change the structure of the Finnish economy from smokestack industry into a high-tech industry. Nokia, formerly a rubber and paper manufacturer, later a conglomerate, shed off the other industries (the rubber manufacturer is today known as Nokian Tyres OY) and concentrated on electronics. Cue the 1990s depression and collapse of the USSR. Finland was in really deep poo-poo. It was a worse depression than the 1930s, and unemployment reached 25% at worst. The controlled structural change had become uncontrolled, catastrophic. Something had to be done. The state is a bad business manager but an excellent business angel. The Finnish state had funded several promising electronics corporations and their research and development, and Nokia had already manufactured the best military communication device of the era, SANLA (short from Sanomalaite M/90 or Messaging Device, Model 1990). It was a revolutionary gadget which neither NATO nor USSR had. It both encrypted the message automatically, sent it as a burst on the radio - any military radio transmitter could be used - and decrypted it at the other end. It was basically uncrackable. Scandinavia had had the NMT (Nordiska Mobiltelefon) network, and Nokia was one of the manufacturers. The follower of NMT was GSM, which was to be global. Nokia used the encryption technique learned when developing SANLA, and applied on mobile phones, making communication secure. The killer application was SMS (Short Message Service), which really blew up the bank. Nokia proved superior to all its competitors. The rise of Nokia began in 1991. Nokia expanded like soufflé, and it really was needed. Nokia absorbed a lot of the available workforce and soon became the leading employer. Nokia did not pay a good salary, but in those years, anything was better than the dole. A cheap and available highly educated workforce certainly helped the situation. The next 20 years were history. Nokia was a Finnish company. While Wärtsilä, Kone, Valmet, United Paper Mills, Kymi, Stora Enso, and such corporations certainly still existed, Nokia overshadowed everything. It was also a lesson of capitalism. In the world of ‘smokestack industry,’ everything was predictable, the planning period was a decade ahead, markets meant volume and availability of capitals, energy, and cheap raw materials were the keys, in the new ‘high-tech industry’ everything was unpredictable, the planning period was now a quartal - four months, and shares were to be purchased for speculating, not for investing for the future and harvesting the dividends. Nokia was (and is still) the finishing school for Finnish engineers. There they would learn the true secrets of electronics, computing, telecommunication, and other high tech stuff. Finns are excellent engineers, but bad businessmen. It is said if you want to have a successful corporation, hire Finns for engineers, Germans for managers, and Jews for marketing. And unfortunately, the complacency of the management - not that of the engineers - hit hard. Nokia had become a prisoner of its success. The initial engineer-led management style was superseded with business-led, and it led to the catastrophe of 2011. It was a horrible mental shock in Finland. Demoralization ensued. Everyone feared a similar disaster to the 1990s depression. And it was the depression of 2008 initiated by Lehmann Brothers which had hit globally. In the ‘smokestack industry,’ corporations did not collapse nor go bankrupt nor be outsourced. They were stable, they were firm, and they were reliable. In the ‘high tech industry,’ everything is unpredictable, swift, and volatile. Anything can happen. And that was yet another lesson. Yet the 20 years of Nokia in Finland had generated a whole generation of good and competent engineers. When Nokia sold its consumer markets to Microsoft, many of the former Nokia engineers founded new businesses, new industries, and new companies, and they quickly absorbed all the engineers, and other personnel left redundant from Nokia. Finland has grown out of dependency on Nokia alone. But the corporation itself is still there, and it has an amazing ability to renew and reinventing itself. It is likely it will again reinvent itself in the future - and become something anew and yet unpredictable. What are some ways Finland can develop its economy? Re-adopt a floating currency, but interfaced with the ultra-low-cost real-time exchange. Radical re-imagination of urban planning, heavily focus on dense university towns with great amenities (not just cheap office space). Introduce emergency measures for simplifying corporate-related processes (starting, operating, and winding up businesses). A proactive, targeted migration policy, where recruiters go out and headhunt globally for talent and give them free passes for travel/movement. Lead by hospitality: similar to the urban planning part, have world-class facilities and resorts for people to visit or stay -- introduce them to the sauna. Push industry-related skills down the curriculum, say game or VR development to younger kids, free up the curriculum structure earlier. Instead of electing ministers, just elect a board (popularly), then hire executives based on competence (maybe also through a global talent search) to deliver on democratically set national-level goals. Snatch ideas from the Australian brainstorming: The Idea Boom. Also, run the Finnish brainstorming; form special economic zones to allow experimenting with new ideas and policies. Finland has modulated an efficient business framework which provides robust innovation and growth in economic productivity. Finland also elevated the length of probation or permanent which in turn will boost the industrial sector. They also formulated reforms to get rid of the unemployment problem. Removing unemployment will indirectly increase the the human contribution to the economy of the country. This shows that Finland has the potential to improve its stand in the World Market. This was The Atlantis Report. Please Like. Share. And Subscribe. Thank You.












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