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How Finland Brought Down Nokia and Revived Itself

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"Anytime you have a very big duck in a very small pond there are effects that are not in the interest of the pond or the duck."

It may sound a strange analogy, but Risto Siilasmaa knows what he is talking about. Once Finland's wealthiest man, Siilasmaa is the chairman, founder and former CEO of Helsinki-based F-Secure, one of the largest security companies in the world. Since 2008 he has sat on Nokia's board of directors.

"If you went to a Finnish university a few years ago the vast majority of graduates went to Nokia or into the public sector," he explains. "There was always a job, there was security. Nokia's success guaranteed it."
risto
This may sound extreme, but to understand it fully requires context. Nokia may be a technology heavyweight, but it has been in existence since 1865. Its founder, Fredrik Idestam, didn't call it Nokia until 1871 when he named it after a small nearby town. Over the years it has made car and bicycle tyres, plastics, aluminium and chemicals, televisions, robotics and military equipment including gas masks. It didn't move into the electrical business for nearly 30 years and only focused purely on telecommunications since the 1990s.

Despite its evolutionary nature the company has come to define Finland. It has 132,000 employees; Finland has a population of 5.4m. In 2003 it accounted for one quarter of all Finland's exports. In 2007 it was responsible for a third of the market capitalisation of the entire Helsinki stock exchange. Its dominance is a unique situation for any industrialised country and its huge 'Nokia House' headquarters (pictured below) overpower its hometown of Espoo. 

"It created an attitude of complacency in the population that we are trying to change," said Siilasmaa. "Nokia became a victim of its own success because over time this attitude then filtered through the company."
nokia house
In recent times Nokia's collapse has been spectacular. Its share of the mobile phone market has dropped from 40 per cent to 28 per cent in three years. It has effectively canned Symbian, left one-time saviour MeeGo to rot and will reduce its staff by 4,000 by the end of next year. Of these 1,400 will come from Finland, proportionally the equivalent to 20,000 staff in the UK or 60,000 in the US.

And yet Finland is on the up. A recent poll from Helsinki's Aalto University found 77.2 per cent of tech sector respondents believe Nokia's further decline would not be a threat to their business and that overall profitability has returned to "almost pre-recession levels". In particular, Finnish tech companies – loved for their innovation and lampooned for their inability to market themselves – have come to the fore.

Most famous is mobile gaming company Rovio. Founded in 2003, for many years it was the creator of hit and miss mobile games and skirted with bankruptcy before setting Angry Birds loose on the world in 2010. It hasn't looked back. Unable to rely on Nokia it instead built the core of its business on Apple's iOS before expanding onto Android, webOS and - eventually - Symbian. It has redefined marketing of mobile games with big movie tie-ins, animated film shorts coming this autumn and even a full feature length film of its own talked about in 2012. Meanwhile it floods the market with everything from soft toys to cookery books.


"It hasn't hurt us being on top of the charts when Apple and Google are activating anywhere from 200,000 to 400,000 devices per week," admits Ville Heijari, marketing head and 'Bird Whisperer' at Rovio, but its success is in staying on top. "Last year revenue grew 300 per cent in a shortened fiscal year," he explained. "First quarter revenue this year will be $20m, there are 40m active users monthly and we can double that with a good online social game."

Rovio is looking at an IPO, but won't rush it. "We're working to make a long lasting industry franchise" says Heijari. When it does float Rovio's value is expected to be measured in the billions. It isn't the only example…

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