Internal Market,Industry,Entrepreneurshipand SMEs

Digital Transformation Monitor

Espoo as adigital launch pad

January 2017

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Espoo as a

digital launch pad

© Tero Sivula/Shutterstock.com

The city of Espoo is today regarded as one of the high-tech hot-spots of Europe. The city was long heavily dependenton a limited number of technology flagship companies: Espoo was synonymous to Nokia. Hence, when Nokia’ssituation became tougher, Espoo had to face a major challenge: how to cope with a massive wave high-skilled,unemployed technology experts. This crisis was turned into new opportunities by Espoo, by creating a vibrant startup ecosystem. For example, Slush, Europe's leading startup event, originates from Aalto University of Technology.Today, Espoo is entrepreneurship and entrepreneurship is Espoo.

A European high-tech hot-shop

The city of Espoo is regarded as oneof the high-tech hot-spots of Europe.The city benefits from stronginnovative roots deeply linked withthe history of Aalto University andthe headquarters of large companiessuch as Nokia.

Nokia is major contributor to Finnisheconomy

Nokia plays a major role in thedigital economy of Espoo. During itspeak, this Finnish multinationalcompany employed more than23,000 workers in Finland andaccounted for ca. 4 % of the FinnishGDP.1

Layoffs at Nokia are a big challengeon the national and local level

Over the past decade, the series oflayoffs at Nokia and the acquisitionof Nokia’s mobile phone business byMicrosoft have left the city of Espoowith a surplus of tech workers.

14,000 ICT professionals (14%) outof the approximately 100,000 ICT-workers in the country, have beenaffected by the mass layoffs of Nokia.A large majority these layoffs tookplace in Espoo.2

Problem statement

1The aim of this collaborative actionwas notably to survey the skill andrecruitment requirements ofcompanies in the metropolitan areain order to provide advice andtrainings to Nokia’s laid offemployees.

The success of the initiative isillustrated by the high number offormer Nokia employees who foundnew career paths and employmentopportunities thanks to the program.

Despite Nokia shock, Espoo remainsvibrant place for digital innovation

Despite the Nokia crisis, the city ofEspoo managed to preserve itstechnology-driven prosperity.

The phenomenal success of thecompany and the rapidity of itsdecline act as powerful reminders ofthe negative impacts and knock-oneffects likely to result from a digitaldisruption.

Over the past 10 years the vibrantstart-up community in Espoo hasbeen extremely active. Lately thisdigital start-up community hashighly contributed to the digitaltransformation processes of localtraditional companies.

The concentration of tech workersand the innovation andentrepreneurship spirit drove Espooto a supreme burst of digitaltransformation.

Nokia’s initiative to turn layoffs intonew opportunities

The city of Espoo and Nokia alongwith the national government andeducation providers have developedcollaborative strategies to easeNokia’s strain and to turn it intoFinland’s benefit.

In 2011, Nokia launched the “Bridgeprogramme” which aimed to providenew career opportunities to its laid-off employees.3

The Bridge programme led to thecreation of about 1,000 businessstart-ups by former Nokia workerswho benefitted from theentrepreneurship programs and theinvestments made by Nokia to(re)train its former labour force.

Public support complements Nokia’sefforts to re-employ laid-off workers

The engagement of the city of Espoowas reflected by the creation of the“Task force for the structural changein the Metropolitan area”.4

This network-based collaborationmodel gathered companies,educational institutions and careerplanning services.

Mass layoffsof Nokia in Finland

Out of 100,000 ICT-workers

in Finland, 14,000 were

affected by the layoffs

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Espoo as a digital launchpad

© SFIO CRACHO/Shutterstock.com

“Aalto University is phenomena of itsown; combining technology, business,art and science under the one roof”– Micke Paqvalen, CEO of Kiosked

Abundance of highly skilled, laid-offworkers attract foreign companies

The crisis of Nokia brought newopportunities to Espoo. Foreign techcompanies struggling to find highlyskilled developers and engineersmoved to Espoo to benefit from theskilled workers made redundant byNokia.

Continuing investments in Espoofurther strengthen digital workforce

Leading global companies, such asGoogle, Microsoft and most recentlythe Chinese tech company Huaweiand the Russian Yandex, haveengaged in direct investments inFinland.

The attractiveness of the city ofEspoo for new Foreign DirectInvestments (FDIs), for start-ups andfor major companies has increasedthe amount of digital jobs andbusiness tax revenues in Espoo.

With this background, it is estimatedthat the population of Espoo growsby 24% within the next 20 years. 5

Espoo’s strong digital ecosystemenabled the instant recovery

The Nokia case and the newopportunities which resulted fromthe generation of highly skilled ICTprofessionals served as a primeevidence for the benefits arisingfrom the creation of a digitalecosystem in Espoo.

As a result, an increasing number oftraditional businesses in Espoo areengaging in a digital transformationprocesses. This digital shift of whichwas carried out by start-ups andtraditional businesses in Espoo hasrevitalised the local economic fabric.

Realised benefitsand newopportunities

2Digitalisation has also reached thepublic service in Espoo

The development of a digitaleconomy has increased the wealthgeneration capacity of the city ofEspoo. Consequently, this led to thecreation of improved public servicesfor the city residents.

The city of Espoo has increasinglyinvolving local tech companies andstudents to develop innovativedigital solutions to tackle localsocietal or environmentalchallenges.

Aalto University focuses exclusivelyon the skill-demand of businesses

The creation of Aalto University andthe recent strengthening of its digitalcompetence form part of theacademic strategy to meet the needsof the quickly digitizing economy inEspoo.

Aalto University announced thelaunch of a project to study theopportunities and impacts ofdigitalisation, robotics, the platformeconomy, and the energy revolution.

These strategic projects receivedover EUR 13 million of funding fromthe Academy of Finland's StrategicResearch Council (STN).6

They will enable the creation oftargeted policy solutions toaccelerate the digital transformationof Finnish industries.

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Espoo as a digital launchpad

Local businesses are largely focusedon the high-tech industry

Espoo’s local industry with its hugeamount of high-tech firms is themain driver of the digital ecosystemin Espoo.

The presence of the headquarters oflarge companies, such as Nokia,Kone, Fortum, and Neste and variousmarket leading tech companies, likeKiosked and Rovio had aconsiderable impact in the digitaltransformation processes of the cityof Espoo.

The existence of huge amount ofsoftware companies, the universityas well as the start-up sauna haveinfluenced the boom of the softwareand gaming industry over the lastyears.

Intermediary organisations fuel thedigital transformation of Espoo

Intermediary organisations are thecornerstones for the change of mind-set towards innovation and digitaltransformation.

The creation of new incubators andaccelerators are mainly privately-ledinitiatives which proved essential tofoster open innovation and digitalentrepreneurship in the city.

The excellent reputation of Espoo inthe software, gaming and healthsectors is attracting different typesof talents from all around.

Key initiatives

Creation of the biggest digitalecosystem in Northern Europe

The Espoo Innovation Garden ispoised to shape Espoo as Europe’sdigital star. The Keilaniemi-Otaniemi-Tapiola area is situated atthe heart of the Espoo InnovationGarden and has become the largestinnovation hub in Northern Europe.

The area connects businesses, firmsand Aalto University with theTechnical Research Centre of Finland(VTT).

Aalto University is a birthplace ofinnovative potential in Espoo

The University of Aalto is the “heart”and centre of the digital ecosystemin Espoo. The university startedoperating in 2010 as a result of themerger of the Helsinki School ofEconomics, the University ofTechnology and the University of Artand Design.

The creation of the new Aaltouniversity has reinforced Espoo’sreputation regarding researchexcellence and innovation. Itsestablishment was well receivedacross local businesses and broughtrenewed interest in industry-academia collaboration.

Aalto University has embraced theadded value of industry-academiacollaboration

The recent nomination of the formerNokia employee Henry Tirri as“Executive in Residence at AaltoUniversity” reflects the institution’scommitment to better integrate theacademic and business domains.7

His role is to strengthen the digitalcompetence, which will definitelyhave a broader impact on societyand on the digital transformation oflocal businesses.

Drivers andobstacles

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Key stakeholders

The City of Espoo actively fosters anenabling ecosystem

The Economic and BusinessDevelopment of the city of Espooacts as a facilitator in the digitalecosystem. For this, the localgovernment has launched numerousinitiatives such as the EspooInnovation Garden.

By following these initiatives, thecity intends to provide the requiredconditions for startups and firms toform networks as well as to createcollaborative platforms betweenlocal stakeholders (businesses, thepublic sector, universities etc.) andthe citizens.

“Digital ecosystem should foster thedialogue between large and smallfirms in the city.” -Taina Tukiainen, Aalto University

“In Espoo, we have moved fromclosed to an open innovation” -Tuula Antola, City of Espoo

© Rawpixel.com/Shutterstock.com

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With a total of 5,000 researchers, 25R&D centres, a vast number ofFinnish and international companiesbringing together workers frommore than 100 nationalities; theEspoo Innovation Garden hascreated the biggest digital ecosystemin Northern Europe.8

Espoo Innovation Garden stands forfruitful co-creation and creativity

The launch of the Espoo InnovationGarden in 2014 illustrates the city’sstrategy to encourage collaborationbetween the local stakeholders ofthe digital ecosystem.

The term “Espoo Innovation Garden”refers to the creative working styles,the co-creation culture and theentrepreneurial mindset in theinnovation ecosystem.

The concept was selected as ametaphor recalling the fruitfulcollaborations to build the bestpossible environment for start-upsand all size of firms.

Espoo offers numerous initiatives toaccelerate digital transformation

The city of Espoo is launchingseveral initiatives to accelerate thedigital transformation of the city. Asan example, 3D city modelhackathons are used.

These hackathons activate the localcommunity and citizens to solvesocietal challenges. In doing so, theyserve as key enablers for citizenengagement and for the digitaltransformation processes.

Aalto University and its forerunnerinstruments for digitalisation

The Aalto University is a forerunnerin the pursuit of digitalization anddigital talent creation. It acts as a keyplayer for the generation of digitaland entrepreneurial skills andcapabilities. 9

Espoo as a digital launchpad

Aalto is also a forerunner in thedigital transformation of local andtraditional businesses. In fact, theUniversity campus is surrounded bybusiness and residence areasalongside a multitude ofintermediary organisations.

Since decades, the Aalto universityand its predecessors maintainedinitiatives and projects that supportthe digitalisation and digitaltransformation of local andtraditional businesses.

To achieve this, Aalto University usesa multitude of tools and platforms,such as:

• Aalto Digital Platform;• Aalto Energy Platform;• Aalto Living Plus;• Aalto Design Factory;• Aalto Start-up sauna;• Urban Mill;• Aalto Start-up centre; and the• Aalto Camp for Societal

Innovation.

Intensive coaching opportunities areavailable to the students

Successful serial entrepreneurs,investors and industry experts fromFinland and other parts of the worldare coaching the students in theirstart-up projects.

This accelerator is an evidence forthe commitment of students in thedigital ecosystem. Hence, itguarantees the continuity of thedigital transformation process byfuture generations.

“We, as a city, are a matchmakerbetween people, capabilities, talentsand skills. We serve all; start-ups,large and small firms, universities,public sector and citizens” –Tuula Antola, City of Espoo

Startup sauna accelerator

13 batches

194 start-ups

4,500+ applications

More than EUR 100 millionfunding raised

The Startup Sauna located at the AaltoUniversity campus in Otaniemiis is aprime evidence of the engagement ofstudents in the digital transformationprocess of local businesses. Theaccelerator is totally operated bystudents and was awarded the prizeof best accelerator run by students ofthe world in 2014. 10

University students benefits from thesupport from coaches who representsome of the most successful serialentrepreneurs, investors and industryexperts in Finland. The creation ofthis accelerator not only acts as aprime evidence of the commitment ofstudents in the digital ecosystem butit is also a guarantee of the continuityof the digital transformation processby future generations.

The Startup Sauna, a studentoperated accelerator

© goodluz/Shutterstock.com

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Accelerators and incubators havehigh presence in Espoo

There are several accelerators andincubators in Espoo that were set upto support the digital transformationof businesses.

After having been set up recently,“Vertical” Accelerator focuses onhuman health technologies, smartliving and well-being-relatedapplications and innovations.

The accelerator, therefore, enableslocal companies to acquire and applydigital solutions which have thepotential to disrupt the traditionalhealth industry.

Strong ecosystem is complementedby sophisticated advisory services

Enterprise Espoo provides advisoryservices for local entrepreneurs.These services support all kinds offirms from international-growthoriented companies to potentialdigital entrepreneurs.

Thanks to these services, localbusinesses have the opportunity toacquire a diverse entrepreneurialskillset ranging from questionsrelated to funding to digitalcapabilities.

The workshops offered by EnterpriseEspoo are positively welcomed bythe audience and reflect the highentrepreneurial spirit prevailing inEspoo.

Espoo as a digital launchpad

Key infrastructure

Transport infrastructure: A growthand development corridor

The extension of the metro line inEspoo is expected to be finished in2016. This new metro line is goingreduce the travel time betweenEspoo to Helsinki to 7 minutes. Thus,it will facilitate job creation, growthand vitality in Espoo.11

In addition to this Metro, Espoolaunched its biggest constructionproject in its history which aims toreform Tapiola, Otaniemi andKeilaniemi. In toal EUR 4-5 billionpublic and private funds are a beinginvested in the area.12

Among others, these investmentsinclude:

• an extension of the metro lines,• the tunnel construction of a ring

road,• housing, offices and business

buildings,• public services,• university buildings• as well as sports and• cultural facilities.

These new investments willcontribute to make Espoo a moreattractive place to live, work andinnovate.

Obstacles

Simplifying and reducing thebureaucracy

The city of Espoo is a catalyst for thedigital business and transformationprocesses.

However, the city still has to bear theburden of old working traditionswhich are preventing theadministration from accelerating theinitiatives in support of the digitaltransformation of local businesses.

The capacity to overcome thismanagerial challenge depends on theability of policy makers to adapt tonew forms of public management.

“Focus of strategy, processesand operations are neededfor successful digitalpublic services” –Taina Tukiainen, Aalto University

Co-creation and networks areessential for digital ecosystem

Key findings have emergedregarding the role of networks andco-creation. More specifically, it isessential how different stakeholdersin the digital ecosystem cancomplement each other, interact andcooperate by bringing forwardwin-win opportunities for all parties.

Non only private, but also publicinstitutions can take action

Local governments have a key role toplay in the creation of long-lastingpartnering and trust-based relationsbetween all the stakeholders.

The Espoo Innovation Garden is anexcellent example of a city initiativeaiming to connect existing localinitiatives and to gather localstakeholders around a communal,inclusive and participatory way ofthinking and acting.

Lessons learnt

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West Metro Growth Corridor

13 new stations,

70,000 new residents,

100% growth in jobs.

© Peshkova/Shutterstock.com

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Espoo as a digital launchpad

The Aalto University closely links itscurriculum to business needs

The key role of the university isdriving forward a favourable digitalecosystem and to engage strongly intalent creation. This was repeatedlystated by different stakeholders ofthe city of Espoo.

Creating tighter linkages betweenuniversities and businesses,therefore, acts as a key success factorfor the digital transformation of localbusinesses.

All the initiatives developed by theuniversity to facilitate thedigitalization and digitaltransformation are held in highregard by local businesses who areincreasingly relying on them.

The creation of a business-friendlyecosystem is the first step towardsdigital transformation

The creation of a business-friendlyecosystem is a precondition for thesuccess of any digital transformationstrategy.

Cities can create the right frameworkconditions for the start-ups byinvesting in the requiredinfrastructures, ensuring access totalent, education and science as wellas by encouraging industry-academia collaboration.

The Finnish culture nurturesentrepreneurship

The existence of a flat hierarchy ispart of the Finnish culture. TheFinnish culture encourages everyoneto share ideas. Everybody is awarethat the targeted audience will listenand follow if the idea is well-formulated and thought-through.

Also, the passion to strive for abetter future is a key driver forEspoo citizens’ engagement in thedigital transformation of the city.

Bottom-up mentality regardinginnovation

The city government in Espoo doesnot only encourage innovation butalso carefully details why the needfor innovation in the city is soessential.

This approach creates the necessaryawareness in the city, ultimatelyleading to a bottom-up innovationmentality. This mentality is reflectedin the city’s efforts to act as amoderator and a connector ofstakeholders in the digital start upecosystem.

The creation of the concept of“Bench learning” reflects the sharingculture of the city wherecollaborative thinking and openinnovation have become integralparts of the working style.

Digital technologies as a driver forpublic sector innovation

Digital solutions have the capacity tomake a breakthrough in thereduction of old and sub-optimalmanagement styles in the publicsector.

The city of Espoo decided to launchDigi Espoo, a crowd-solving tool fordevelopers and SMEs. It consists ofreal life challenges which areintended to be solved by theparticipating parties.

Espoo raises awareness for value ofdigitalisation

The city of Espoo intends to enablemanagement and policy makers toget a better understanding of thenew opportunities driven by thedigital revolution.

To do so, the city follows manyinitiatives to showcase howbusinesses and public services canuse digital solutions to solve theirchallenges.

This initiative, thus, also serves toraise the awareness of policy makerson digital technologies. Mindful ofthis awareness, they will be betterequipped to design policies insupport of the digital transformationof local businesses.

© Rawpixel.com/Shutterstock.com

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Espoo as a digital launchpad

Key Recommendations5

Category Role of the stakeholder

Local

government

Act as moderators and facilitators of collaboration between local stakeholders

Engage key stakeholders in long-term partnerships and build trust relationship between them

Invest in key infrastructures for a business-friendly environment such as transport

infrastructures, business offices, university buildings

Open access to public infrastructure for technology and to develop projects

Encourage open innovation

Universities/

Research

centres

Strengthen your digital competences (e.g. by seeking support from local tech champions)

Develop institutional strategies for capacity building

Retain and attract digital talents

Be proactive in the creation of a digital ecosystem around the university and get involved in

industry-academia collaborations

Contribute to increase the livability of the city to attract and retain talents

Businesses Collaborate with other stakeholders from the digital ecosystem

Innovate, create and apply digital technologies

Traditional companies should seek support in the application of digital opportunities

Tech companies should support traditional companies in their digitalisation efforts

Invest in cybersecurity to ensure resilience against digital threasts

Incubators/

Accelerators

Provide inspiration, support, stimulation

Connect businesses with relevant stakeholders to enable their digital transformation

Provide spaces for people to meet, open space for cross-fertilization

Develop a sound understanding of local paths to economic development to better advice local

firms on growth strategies

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References

Espoo as a digital launchpad

1 Gordon Kelly, “Finland and Nokia: an affair to remember”, 2013, available at:http://www.wired.co.uk/article/finland-and-nokia2 EC, “e-skills in Europe, Finland - Country report”, available at:http://ec.europa.eu/DocsRoom/documents/4569/attachments/1/translations/en/renditions/pdf3 BBC, “The upside to being let got by Nokia”, 2014, available at: http://www.bbc.co.uk/news/magazine-259651404 Espoo, “Collaboration to support those laid off by LähiTapiola”, 2014, available at: http://www.espoo.fi/en-US/Collaboration_to_support_those_laid_off_(49703)5 Espoo Innovation Garden, “The west metro growth corridor”, http://www.espooinnovationgarden.fi/en/espoo-innovation-garden/locate/the-west-metro-growth-corridor/6 Aalto University, “Aalto-led strategic projects receive funding of over EUR 13 million”, 2015, available at:http://www.aalto.fi/en/current/news/2015-10-12-002/7 Yle, “Aalto University names digitalization expert to executive programme”, 2015, available at:http://yle.fi/uutiset/osasto/news/aalto_university_names_digitalisation_expert_to_executive_programme/83524008 Espoo Innovation Garden, http://www.espooinnovationgarden.fi9 Espoo Innovation Garden, “Orchestrating Regional Innovation Ecosystem”, 2015, availablet at:https://urbanmillblog.files.wordpress.com/2015/04/eka_final_cover_hires.pdf10 Startup Sauna, http://startupsauna.com/11 Espoo Innovation Garden, “The west metro growth corridor”, http://www.espooinnovationgarden.fi/en/espoo-innovation-garden/locate/the-west-metro-growth-corridor/12 Espoo, “Mayor Jukka Mäkelä: Espoo launches the biggest change project in its history in Tapiola”, 2011, available at:http://www.espoo.fi/en-US/Housing_and_environment/Mayor_Jukka_Makela_Espoo_launches_the_bi(7458)

About the Digital Transformation MonitorThe Digital Transformation Monitor aims to foster the knowledge base on the state of play and evolution of digital transformation inEurope. The site provides a monitoring mechanism to examine key trends in digital transformation. It offers a unique insight intostatistics and initiatives to support digital transformation, as well as reports on key industrial and technological opportunities,challenges and policy initiatives related to digital transformation.

Web page: https://ec.europa.eu/growth/tools-databases/dem/

This report was prepared for the European Commission, Directorate-General Internal Market, Industry, Entrepreneurship and SMEs;Directorate F: Innovation and Advanced Manufacturing; Unit F/3 KETs, Digital Manufacturing and Interoperability by the consortiumcomposed of PwC, CARSA, IDATE and ESN, under the contract Digital Entrepreneurship Monitor (EASME/COSME/2014/004)

Authors: Laurent Probst, Bertrand Pedersen & Olivia-Kelly Lonkeu, PwC

DISCLAIMER – The information and views set out in this publication are those of the author(s) and should not be considered as theofficial opinions or statements of the European Commission. The Commission does not guarantee the accuracy of the data included inthis publication. Neither the Commission nor any person acting on the Commission’s behalf may be held responsible for the use whichmight be made of the information contained in this publication. © 2017 – European Union. All rights reserved.