Speech by Mr Jukka Valtasaari, Secretary of State: "Information Technology in Finland", at the Foreign Service Institute of Manila on 20 March 2001

Venue: The Foreign Service Institute of Manila (Philippines) on 20 March 2001

Mr. Jukka Valtasaari
Secretary of State,
Ministry for Foreign Affairs of Finland

"Information Technology in Finland"

An analysis of the impact of information technology on development starts from stating the obvious: Innovations of technology and dynamics of communication are the main drivers of social change. In the late 19th century American society was built along the railways and telegraph lines, reaching towards the West. In Finland early industrial development to a large extent was a product of student exchange, as Finns went abroad to acquire higher education. They brought back recent innovations and applications and created networks, or friendships as we used to say in the old days.

During the last millennium, three key innovations in information technology were made. The first was to put speech into print (in the late 15th century), the second (in the late 19th century) to transmit it by wire and the third to do it wirelessly (in the late 20th century). While the speed and reach of communication grows exponentially, its costs come down on an equally steep curve. In addition, one-way streets of communication give way to total interactivity, with everybody being able to interact with everybody else, at least in principle. Each of the three innovations of information technology: print, wire and wireless was disruptive enough to merit the description, revolutionary. The last, the wireless revolution, is the fastest of all, the least predictable and completely global. To quote America’s famous baseball character-cum-philosopher Yogi Berra, "The future ain’t what it used to be".

Information technology is not just another instrument that has been added to the toolboxes of companies, governments, non-governmental organisations and individuals. It has made information the defining variable in our activities and greatly added to openness and transparency in our relations. Think about future trends. Ten times more chips, or computing power of storage capacity, every five years for your dollar. And experts say that the revolution has barely begun.

It is difficult to discuss a visionary issue such as information technology in an entirely practical manner, conceptual analysis is needed to grasp the phenomenon. Let me, however, try to suggest a few down to earth conclusions, which may be important when trying to figure out the future of an information society – or the functioning of the Foreign Office.

First, knowledge has become the organising principle of industry and governments. Ideas attract capital and create employment. Knowledge offers a new logic for producing wealth. It tends to unite elites and specialists, while containing at the same time the seeds of fragmentation between countries and within countries. For governments such as the Finnish one that believes in equal opportunity, equality and an even distribution of income, there are challenges galore if we want to do well in the international league of competitiveness as "Team Finland." Not everybody scores goals but all contribute to the result. So far so good. Finland is very high, sometimes at the top of international rankings of competitiveness while maintaining a flatter range of incomes than the competition.

Second, the free flow of information has provided surprises for governments that believed in centrally controlled information flows, like our former eastern neighbour, the Soviet Union did. For civil society it offers entirely new opportunities of getting heard. For business and industry, free flow of information literally opens a whole new world. Since markets shape up horizontally and globally and since competitiveness is affected by every phase in the global value chain, transparency is a must and it in fact becomes a key factor of production. In the 1990s, the IT-related industries grew many times faster than traditional sectors in the Finnish economy contributing to rapid overall growth and well-being in the country.

Third, success stems from speed and adaptability. In the world of information technology, everything grows double in less than two years. Those who are able to foresee, adapt and use this opportunity to a maximum will fare best.

Quite a number of management conclusions follow. Hierarchies are replaced by networks, fixed strategies by adaptability, detailed instructions from the top by company wide standards. Even inherently slow-moving organisations such as foreign offices learn new ways. Doing used to be preceded by planning. Now they are parallel and interdependent.

The conduct of international relations remains a human activity, which can’t be replaced by "virtual diplomacy". But information technology affects chanceries in another way. It flattens hierarchies that used to be rigid and multi-layered. Today’s organisational charts resemble more flat bricks than pyramids. This gives room for initiatives by innovative youngsters. The role of senior officers is to transform their experience and accumulated wisdom into coaching, to see to it that reflection is not replaced by speed and quality by sheer quantity of information.

Fourth, globalisation and the information age change our operating environment fundamentally by multiplying exchanges between governments, companies and individuals thereby multiplying opportunities for innovation. This makes good understanding of foreign societies imperative for players in all walks of life, not just for diplomats and other specialists in international relations. It remains important to distinguish between excellent means of communication and excellent communication. Technology takes care of the former, but educated people are needed for the latter. In diplomacy, solid reporting remains the foundation of good decisions. If analysis is not sound, decisions are not likely to be wise.

I have often been asked why Finland is in the forefront of information technology. Why has such a small and remote country evolved into a Mecca of high-tech communication? After all, Finns are not talkative by nature, nor does geography make Finland a likely candidate for the title of the most wired or rather, the most wirelessly connected nation in the world.

I can think of a few reasons. Some have to do with history, some with the Finnish mind and some with government policies.

First, History. Since 110 years ago competition has been a feature of the Finnish telecommunications scene. This is exceptional in Europe, where usually the PTTs – post and telecom bureaucracies – reigned supreme. Our story was different. It begins in the late 19th century when Finland was an autonomous Grand Duchy in the Russian Empire. Telegraph was the important communications technology of the day. The imperial government in Russia understood its strategic value and kept it strictly under control. In contrast, to use copper wire to relay conversation among neighbours was probably not considered serious and the imperial government did not bother to regulate the telephone. The result was that independent telephone co-operatives sprouted up in dozens of towns and produced a telephone market that was quick to adapt to new technology. Judging from the figures, the Philippine telecom market is quite similar although I don’t know what the original reasons were here, maybe 7000 islands. Another factor is that in order to provide equal access to communication the government of Finland - and Sweden for that matter - invested heavily in cable and link networks over the decades. Nokia and LM Ericsson obviously benefited and since both came from small countries they quickly turned global.

The second reason has to do with the Finnish mind. Ours is country of engineers. The role of engineers is to figure out different solutions for existing problems. Another related factor is that since higher education had to be acquired abroad in the early days, technological ideas travelled fast to Finland. Only two years after it was invented, electricity was in industrial use in a small city in central Finland. The first telephones travelled to Finland even faster.

Another feature of the Finnish mind is that it abhors authority. In an IT society this is a practical quality since innovative skills do not flourish in a hierarchical environment. Hierarchy suppresses talent.

Third, the role of the government. Education policy is decisive. In the 20th century, an education system was created in Finland whereby high quality education was within reach of all regardless of social background. A university network was built to cover the whole country. Talent is not wasted. International contacts are encouraged. Education in sciences is valued highly. In my generation, the overwhelming majority of the highest people on the corporate ladder are engineers.

The other government contribution is a deliberate research and development policy. In the early 80s, a decision was made to triple the investment in research and development from one to three percent of GNP. We reached the target last year and are now, together with Sweden and Japan, in the three percent basket. If only civilian R&D is counted, Finland in the lead. The percentage of high technology products among total exports increased in a similar fashion, from six percent in 1990 to twenty–one percent in 1999 (fourth after the USA, Japan and the UK).

I don’t want to imply that from the very beginning Finland was walking a predetermined path towards new ways of thinking and producing. On the contrary, many of the innovations of information technology were made in the sixties only. The sixties and seventies produced perhaps more visionaries than more recent years, as well as strong arguments for and against technological determinism. A British study predicted in the seventies that half of the jobs were to be taken away by automation and that the age of the British lead in the area of technology was gone. Today, Britain is among the top three exporters of high-tech products. Later in the seventies the role of technology and its application for the future was assessed in a more systematic manner. The United States Congress founded the Office of Technology Assessment in 1976, and in Finland a report with a similar title was produced in the same year.

In the late 80s, the focus shifted from threats to opportunities. Science, innovation and technology policies were institutionalised. In hindsight, one of the most productive decisions in Finland was to create centres of growth and technology connected to universities around the country. Finally, towards the end of the 80s, a series of decisions on the information highway network were made. The new infrastructure made it easy for individuals to jump on the bandwagon of the IT revolution. Thus Finns lost no time in adopting early communication systems, which were resisted in bigger and older countries. Today, more than a million Finns out of a population of five take care of their banking at home, through the Internet. Two thirds of Finns have access to the Internet and over seventy percent have a mobile phone. The government is making its services available to citizens on the Internet to the widest extent possible. The SMS is a favourite means of instant messaging not only among teenagers but also among civil servants, diplomats, politicians and journalists. It already accounts for two thirds of mobile phone traffic.

Where do we go from here? From what we know about the recent past, we can try to extrapolate a few signposts for the future. We don’t see very far, five years is a long time when every year brings it with it a little revolution. After all, the first GSP telephone call in a commercial network was made less than 10 years ago. But we see directions and can identify some obstacles.

In the area of technology the next big step is to put "the Internet in your pocket", in other words to combine internet, intranet and mobile telephony in order to make it possible to do on the mobile telephone all that is now done online. The offering of mobile digital services has barely begun. With them lifestyles will change, but more importantly, flexibility in office work will significantly increase efficiency in industrial production. In Europe right now discussion regarding technological development dominates most other subjects. In the future there will be more discussion on improvement of accessibility - the digital age should be open to youth at large - and on technology’s impact on the quality of life. The promotion of e-commerce and the improvement of public services in a digital form will be among the priorities.

Deregulation is the third issue. The web pulls us towards uniform international standards, but many fundamental decisions regarding standards were made a decade or two ago. The result is that different standards – AMPS, GSM, CDMA and TDMA, to use acronyms, still compete in the world market. Protection of previous investments is entirely legitimate but development must go on.

Fourthly, and finally, maintaining an innovative environment is central. Since exclusion stifles innovation, investment in people and their skills is both effective and democratic. Emphasis must be placed on special skills throughout education. At the high levels, international compatibility becomes important in order to support international exchange.

And after this serious business is done there is room for some fun as well. You may carry your favourite cartoon characters in your pocket mobile, send Christmas cards and wedding pictures to your loved ones. The Filipinos will probably be the first to utilise this potential since they have already performed the first ever change of government by using SMS.