Published January 20, 2011

Eero Eloranta: What does the future hold for Finnish industry?

Can Finnish industry recover to the path of growth it was on in the early 21st century? Sitra’s book Teollinen Suomi, which deals with Finnish industry, aims to find answers to this question. Now, almost a year after the book was published, it is obvious that large and small-scale companies following the simple but challenging ideas really are going forward.

About two years ago, Finnish companies encountered the global recession, each at their own pace. The prospects were the darkest in early 2009, when it seemed there was no light at the end of the tunnel. At the beginning of 2011, the business world has been divided in two. Strong international industrial companies in the Asian market perform very well. This is indeed understandable, as 50% of the global economic growth originates from Asia. However, small-scale companies focusing on the domestic market continue to be in trouble. After the decline, technology industry companies’ backlog of orders has remained at the level of the previous millennium.

Can Finnish industry recover to the path of growth it was on in the early 21st century? Sitra’s book Teollinen Suomi, which deals with Finnish industry, aims to find answers to this question. The book has a clear message: Industry can rise from its poor state, but solutions are needed, and innovation-based renewal is the most important one. One has to find customer-oriented product and service innovations, sell solutions different than those of competitors, learn to carry out global purchasing, have the courage to utilise the innovations of suppliers, be capable of increasing service business operations and have the courage to go where the market is growing.

Now, almost a year after the book was published, it is obvious that large and small-scale companies following the simple but challenging ideas described above really are going forward. Regarding major companies, Kone, Konecranes, Wärtsilä, Kemira and Outotec were very successful in 2010. The high-quality products and competence of these companies also indicate future success.

The significance of large international companies for national success should not be ignored, although they are hardly capable of providing more industrial jobs in Finland. Leading companies keep their innovation flowing, which is why they are continuously capable of new systematic innovation, which also benefits other companies. In the last decade, the number of industrial jobs has decreased by about 50,000, while business sector services have grown to the same extent.

SMEs account for the majority of workforce in the Finnish industry. Previously, strong leader companies also covered their Finnish subcontractors under their wings of success, including SMEs. This will not happen in the future anymore. An increasing share of leader company production takes place near the growth centres of the market areas. Therefore, SMEs must build their future much more courageously and independently. Meconet is a prime example, whose special expertise in manufacturing services has found an increasing demand in the German market. At the same time, Meconet has become less dependent on its old Finnish clients. Rannikon Konetekniikka (RKT) is another kind of example: despite its small size, the company has started creating its future by establishing a lifting device factory in Pune, India.

Small-scale companies must follow the example of Meconet and RKT and invest in their competence as well as have an open mind in seeking success through globalisation. A national mission has to be created for this using Germany as the model, where SMEs account for the majority of industrial exports.

In addition to efforts made by companies, industrial renewal requires changes to the national innovation system. What we need is education, research, encouraging taxation, funding support and good examples. It is particularly important to have an atmosphere that values creative entrepreneurship and understands the significance of those who are baking the cake of the nation. There is no shortage of those who want a piece of the cake.

Eero Eloranta, D.Sc. (Tech.), is a professor of Industrial Engineering and Management at the Aalto University. He has acted as a department leader at the Helsinki University of Technology, and as a researcher in the Netherlands. Eloranta has worked for Nokia as an integrator of global logistics and as a senior advisor. Eloranta is a member of the boards of many companies.