International Perspectives

Kalle Lyytinen and Seymour Goodman : The Unknown Soldier on the IT Front uring the same week in of Finns use the Internet every turn its high levels of technology August 1998 two Finns week to pay bills or to buy ser- adoption into a competitive asset. Dappeared on the covers of vices. Only a handful of other Ireland and Finland are the only Fortune and BusinessWeek. Linus countries have 10 percent of their two European countries with posi- Torvalds was acclaimed by Fortune population using the Internet in tive trade balances for IT products as the master of network-based any minimal way, much less for and services [9]. Finland has software development and the regular e-commerce (and a large strong export positions in mobile new role model for cyber- fraction of these countries are in phones, base stations and programmers. The father of the Nordic region). switches, is Europe’s largest manu- Linux, age 28, has become a Finland has also been able to facturer of PCs (through ICL Per- world-renowned guru on sonal Computers) and has operating system platforms. recently created some suc- BusinessWeek profiled cessful software products. CEO , who Moreover, exports of Finnish brought Nokia from the IT products and services are brink of collapse to a leading expected to double by 2002. international company in Finland has evolved from mobile communications and a peripheral European coun- services. try producing paper and tim- These men and their ber into a nation with per accomplishments exemplify capita IT production and use Finland’s rapid rise as one of ranking among the highest the most networked nations in the world. In Finland, we in the world [1, 4]. A larger have a rare example of a fraction of Finns have mobile small country that is able to phones (50%) than in any spawn a successful, entirely other country, and Finland indigenous, multibillion dol- was the first country where lar IT company [3]. To the income from wireless understand how this came communications exceeded about, it is necessary to that from land lines. Tele- review some Finnish history phone costs are among the and policies that have taken world’s lowest, and phone ser- the country from some very vices are fully digitized. The hard times to its present number of Internet hosts per position. We also have to capita is the world’s highest, examine aspects of the insti- as is the per capita volume of tutional environment of Internet use. Internet-based Scandinavian societies since

TERRY MIURA commerce is such that 10% the late 1960s, dramatic

COMMUNICATIONS OF THE ACM March 1999/Vol. 42, No. 3 13 changes in technology in the learning skills, literacy, and atti- the mid-1980s and in the early 1980s, and specific features of the tudes toward learning—all 1990s, and a third will take place Finnish management culture that arguably factors in achieving suc- between 1998 and 2000. By the all contributed to the radical cess in adopting IT—are well end of 1996 IT topics were taught transformation. developed. In a recent Institute for in 15 universities that annually Finland’s five million people Management Development graduate about 600, five-year live in a large, sparsely populated (IMD) survey on the competitive- M.S. degrees and 40 Ph.D.’s. Fin- stretch of land between Sweden, ness of nations [5], the quality of land also has an extensive network Russia, and the Arctic Circle. His- Finland’s educational system and of polytechnics that produce over torically Finland has been part of the quality of its workforce were 2,000 degrees each year in com- both Sweden and Russia, becom- ranked second after Singapore. puting and engineering. ing independent in 1917 after About 60% of the population is Research activity in IT has been Czarist Russia’s collapse. A nation expected to complete tertiary edu- steadily growing over the last without many natural resources, cation institutions, including uni- decade. The productivity index of largely unsuited for advanced agri- versities and polytechnics. IT-related publications per one culture, it has also suffered from The Finnish educational system million inhabitants was highest in several wars during this century. has actively promoted IT skills. By Finland, followed by the U.S. in Due to all these factors, it has his- 1999 all Finnish schools will have 1995 and 1996 [10]. Finnish torically had a relatively low eco- Internet connections. Primary and research has achieved world-class nomic standard of living. In 1948, secondary schools have offered results in neural computing, com- Finland’s GNP per capita was half computing since the mid-1980s. putational theories, cryptography, of Sweden’s. Traditionally, Fin- Finland’s extensive public library digital signal processing, program- land’s economy had wooden legs, system is now completely linked ming languages and compilers, dependent on its forests. Since to the Internet, providing virtually telecommunication protocols, World War II, Finland has devel- every Finn with free access and databases, operating systems, oped a machine industry, which some help with Internet use. In information systems, and software produces luxury cruisers, paper the early 1990s Finland intro- engineering. machines, and lifts. Forests and duced the “IT Driver’s License.” The Ministry of Education was machines still account for 50% of This is a publicly developed and the major funding agency in the Finland’s exports, while another maintained national test to evalu- 1980s when the Finnish Univer- 25% now comes from electronics ate IT skills among the workforce. sity Network (FUNET) was and IT. By 1997 GNP per capita The model is currently being developed and it soon connected equaled Sweden’s. adopted within the entire Euro- all universities and research insti- pean Union (see www.tieke.fi/ tutions. This led to a rapid Educational Policies and tieke/ajokortti/). increase of use of the Internet in Funding in Computing and University education in com- institutions close to universities, Networks puting started when the first chair including high schools, hospitals, By international standards, in computing was established in municipalities, ministries, and Finnish society achieved full liter- 1965. Although teaching resources libraries. Consequently, the com- acy relatively early (in the late were insufficient for a long time, mercial Internet service market 19th century) and has since paid the early start provided an ade- became highly competitive. Now much attention to public educa- quate basis for educating a compe- basic access to the Internet can be tion. Among the Organization of tent Finnish IT workforce. Similar obtained for U.S. $8 per month. Economic Cooperation and developments have taken place in The post office plans to provide Development (OECD) countries, related fields: electrical engineer- every citizen with an individual Finland uses the largest portion of ing, telecommunications, and email address. Some widespread its GNP for primary education applied mathematics. Growth of Internet services have been of and is among the top five in sec- teaching personnel has been twice Finnish origin, including the ondary education [5]. Therefore, boosted by national programs in Internet Relay Chat (IRQ).

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Technology Policy and The reason why Finland was Strategies Before the mid-1980s, the Acad- able to be so successful requires an emy of Finland, an institution similar to the U.S. NSF, funded understanding of the changes in small pockets of basic IT-related research. Some industry-oriented the institutional and technical R&D was conducted in the state- owned Technical Research Center, environment. which also is funded through the state budget. Since the mid-1980s it has operated a research labora- funding after joining. The importance of these pro- tory in IT. The R&D system changed grams in fostering industry-based In the mid-1980s, the state when the Technology Develop- R&D cannot be overestimated. adopted a long-range planning ment Center of Finland (TEKES) They created a tradition and mode and monitoring system. This was established in 1983. TEKES of close industry-university inter- adoption changed the role of the has played a vital role in fostering action more advanced than in National Science and Technology industry-oriented R&D. Its most European countries. There- Council, which had been estab- annual funding currently is about fore Finland was ranked the best lished in 1963. The Council was U.S. $400 million, of which in industry-university cooperation transformed into a top-level pol- almost U.S. $160 million is allo- among all countries in the IMD icy-making body chaired by the cated to IT. TEKES offers fund- survey [5]. Finland helped to prime minister. The Council has ing for selected areas for develop a critical technology base representatives from major min- companies alone, or for joint for the growing IT industry in istries and institutions who play research projects between universi- many areas, including radio fre- important roles in the national ties or other research institutions quency and antenna technologies, innovation system. In addition, and industry. TEKES has focused digital signal processing, applica- the council has members from its research programs in selected tion-specific integrated ciruits, industry and labor organizations. domains to create synergies in operating systems, groupware During the last decade, the coun- learning and to achieve world- products, telecommunication soft- cil has been crucial in shaping class competence. During the ware, and software engineering long-range plans and sustaining a 1980s and early 1990s, it funded [6]. In both IT and telematics of steady growth in investments in several programs in software engi- the IV Framework program of the R&D, even during the deep neering, telecommunication sys- EU, the Finnish share of received recession in the early 1990s. The tems, electronics, and intelligent funding has been much larger council has developed an effective systems. The projects in these than the Finnish share of the EU division of labor and coordina- programs were funded on the research budget. tion between different policy- basis of research quality and making bodies. industry interest. The programs Electronics and The growth in research spend- allowed small- and medium-sized IT Industries ing has been among the highest in companies to participate, offered The start of the Finnish IT indus- OECD countries. The national larger companies opportunities to try dates to the early 1960s when goal has been to increase the share carry out research in high-risk Nokia began to manufacture pulse of R&D within the GNP to 2.9% technologies, and fostered educa- code generators. At this time, the by 1999, up from 2.6% in 1997. tion. In contrast to many EU company was making paper, cable, Moreover, unlike other members research programs, these initiatives and rubber boots. Nokia started its of the European Union (EU), Fin- were not heavily burdened by electronics department in 1967, land has not cut its own research bureaucracy. and this became Nokia Data.

COMMUNICATIONS OF THE ACM March 1999/Vol. 42, No. 3 15 Nokia Data had some manufac- “These standards were offered to was transferred in the late 1980s turing operations, but most of its us on a silver plate.” The first to the European Telecommunica- initial income came from software wireless service operated at tion Standard Institute. The devel- development and services. The 450MHz and the standard has opment of GSM followed the manufacturing operations grew since been known as Nordic same pattern as NMT. GSM was steadily when Nokia Data started Mobile Telephone 450 (NMT- developed to become an open to manufacture PCs, and later its 450). The development of NMT- standard that would allow interop- own switching platforms (in a dif- 450 was started in 1969; its erability of mobile phones in all ferent division called TeleNokia), specification was ready in 1978. European countries. A new feature though for a long time without The service started in Sweden in of GSM introduced a fully digital great success. Much of Nokia 1981 and in the other Scandina- air interface, thus necessitating Data’s early trade was carried out vian countries by 1982. The more processing power in the with the USSR through bilateral Nordic countries have offered phone to code speech into a digi- agreements. These agreements wireless services 3–4 years longer tal form. All Nordic countries assured modest but steady growth than any other major economic played a visible role in the devel- that enabled Nokia to advance its region, at the lowest prices in the opment of GSM. The first GSM technical capabilities. Much of the world. call was made in in 1991 advancement was due to the The NMT standard was open over a Nokia-manufactured GSM CEO, Kari Kairamo. He sustained in all major interfaces and network. Since then, Nokia and the belief in the importance of included the idea of digital switch- Ericsson have shared about 60% high-technology business despite ing for radio phone services, of this fast-growing market. GSM the company’s small size and con- though the air interface still oper- has become the standard on all tinuous losses in these operations ated in the analog mode. The other continents except the Amer- for over 10 years [8]. NMT-450 standard and the sub- icas. It forms the dominant tech- Finland’s big opportunity came sequent NMT-900 standard intro- nical platform for second- in the mid-1980s after cellular duced several novel concepts now generation mobile phones. In technologies and microprocessors found in most wireless communi- Scandinavia, the change to GSM were introduced. These were not cations including light portable has affected about 50% popula- Finnish inventions, and the phones and roaming. These stan- tion penetration levels, and these opportunities they offered could dards were so successful that are expected to grow to 70% over have been seized by many other NMT platforms were adopted in the next five years. The develop- countries. The reason why Finland several other countries, offering a ment of a pan-European GSM was able to be so successful continuing sales stream in base standard was critical for the con- requires an understanding of the stations and switching systems tinued growth of Nokia and other changes in the institutional and first to Ericsson and, after 1986, telecom firms in Finland. technical environment of the to Nokia. Nokia initially decided This was all made possible by Scandinavian societies and of fea- that it would manufacture phones the availability of cheap micro- tures of the Finnish culture and conforming to major phone stan- processors in the early 1980s. management style. dards including advanced mobile These were necessary for light Cellular phone technologies phone service and total access portable handsets, and their were invented in the early 1960s communication systems. importance in developing Nokia’s in the U.S. by Bell Labs, and the The second major change was switching platforms was decisive. first commercial cellular services the acceptance of the Global Sys- Before 1980 there was no true appeared a few years later. The tem for Mobile Communication Finnish production of switches golden opportunity for Ericsson of (GSM) standard in 1989 [7]. The (save some small switches devel- Sweden—and later Nokia—came development of GSM started in oped for military purposes). When when the Nordic monopoly 1981 under the European two small Finnish manufacturers telecommunication carriers jointly Telecommunication Operators’ of telecommunications equipment developed a service specification organ CEPT (The European Con- merged under Nokia, it obtained a for a Nordic wireless service. As ference of Postal and Telecommu- prototype and patents for a digital one Nokia manager observed: nications Administrations), but switch based on Intel microproces-

16 March 1999/Vol. 42, No. 3 COMMUNICATIONS OF THE ACM International Perspectives sors [8]. The development of this a key to understanding Finnish joint mission has enabled fast reac- switching architecture started in management culture. tions in many difficult situations, the mid-1970s, but the results had The prominent features of the starting with the payment of huge been unimpressive until the Intel Finnish World War II military World War II reparations (Finland 8086 processor became available. organization were organic forms, was the first country to do so). Due to its modular architecture improvisation, individual reliabil- The same determination is also and the growth in microprocessor ity and responsibility, and fast visible in many of the nation’s IT- performance, the switch was scal- reaction. Many of these features related accomplishments. c able, flexible and was soon adapted are still visible in Finnish high-tech to different purposes, including firms. Nokia, for example, is References wireless telephone switches. The famous for its grassroots orienta- 1. Cairncross, F. A connected world—A survey of telecommunications. Econ. (Sept. 13, switch, known as the Nokia DX- tion and flat hierarchy, depen- 1997). 200, became the backbone of all dence on talented individuals who 2. Damsgaard, J. and Lyytinen, K. EDI Diffu- sion in Finland—An institutional analysis of Nokia network systems. are allowed to improvise and also alternative diffusion patterns. J. Strat. Info. to fail, and the resulting capability Syst. To appear, 1999. The Unknown Soldier for fast reaction. Accordingly, 3. Dedrick, J.L., Goodman, S.E., Kraemer, K. L. Little engines that could: Computing in Nokia was at the brink of collapse Finnish organizations value doing small, energetic, countries. Commun. ACM in the early 1990s for several rea- and not just talk or social rituals. 38, 5 (May 1995), 21–26. 4. Ibrahim, Y. Finland: An unlikely home base sons, including the suicide of its As one colleague pointed out to for universal use of technology. New York CEO. It was forced to sell its us: “In Finland people are doing Times, Jan. 20, 1997. computer division to Britain’s ICL the work when people in other 5. IMD. The World Competitiveness Year Book 1998. IMD, Lausanne, May 1998. and its consumer electronics to countries are still exchanging their 6. Kuusi, J. (Manager of TEKES), Personal some Japanese firms. Without the business cards and trying to figure communication Jul. 26, 1995. boom in wireless communications out whether the person they are 7. Mouly, M. and Patet, M. The GSM-System for Mobile Communications. European the company and the Finnish talking to is at the same hierarchi- Telecommunication Standardization Insti- high-technology industry could cal level and thus appropriate to tute, 1995. 8. Mäkinen, M. Nokia Saga: Kertomus yrityk- have collapsed. Finland has also talk with.” sestä ja ihmisistä jotka muuttivat sen, Gum- been unsuccessful in several other Another feature of the merus, 1995 (Nokia Saga, a Story about a endeavors, including planar dis- Unknown Soldier evident in firm and people that changed it), in Finnish. 9. Observatory, European Information Technol- plays, the state-regulated program- Finnish society is the ever-present ogy Observatory 98, 1998, EITO, Frankfurt. ming language FAS, and Nokia’s understanding of a shared fate. 10. Suomen Tieteen Tila ja Taso, Luonnontietei- den ja tekniikan tutkimus 2, 1997, Suomen attempt to develop the ADA- The nation has been so often on Akatemian Julkaisuja 10/97, “The Status and based operating system MPS-10. the brink of destruction that the Level of Finnish Science, Natural Sciences But these setbacks have not culture cherishes the consensus and Engineering” (in Finnish). caused Finnish policymakers to that helped the country through lose the strategic vision they chose so many hardships. This is still Kalle Lyytinen ([email protected]) is a in the 1980s. known by the term “Winter War professor of computer science and information systems at the University of Jyväskylä, Helsinki, Part of this persistence can be Spirit,” after the Russo-Finnish Finland. explained by the Finnish culture War of 1939–1940 during which Seymour Goodman is a professor of and national characteristics that little Finland almost held off Stal- information systems and policy at the University underlie social interactions and in’s Soviet Union. This spirit still of Arizona and Director of CRISP at Stanford University, Stanford, Calif. organizational behavior. The most shapes many arenas of Finnish widely read Finnish novel after policy-making and management. Readers are encouraged to send comments, suggestions, World War II is Vdinv Linna’s For example, the current cabinet anecdotes, insightful speculation, raw data, and articles on Unknown Soldier. The novel tells has representatives from various subjects relating to international aspects of IT to: Sy Goodman the story of a platoon that fought parties—conservatives, commu- MIS/BPA in World War II on the Finnish nists, and greens. The same con- University of Arizona eastern border against the Soviet sensus-seeking spirit was obvious Tucson, AZ 85721 Union. Despite the absence of a in decisions to implement joint [email protected] fax: (520) 621-2433 clear plot, the novel is a master- EDI systems by Finnish trading piece in the Finnish language and companies [2]. The feeling of a © 1999 ACM 0002-0782/99/0300 $5.00

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