I argue that Finnish companies and society are stagnating because we misunderstand risks. In Finland, there has long been a culture of incremental improvements to existing operations. Development to make them more efficient. We avoid even small risks that might change the fundamentals. This leads to companies and the society at large not progressing sustainably. This at a time, when change and development are no longer optional. They are a necessity. 

I am not alone in my thoughts. In the autumn several economists have approached the same issue from slightly different viewpoints. VTT and Startup Community, for example, noted in their research that Finland exports the wrong products, and the Bank of Finland’s Petri-Mäki Fränti states that we should export products that require a lot of expertise in design and manufacturing instead of bulk goods. With the risk of slight over interpretation, I claim that one major reason for the stagnation of companies and society is that we misunderstand risks. 

To elaborate a bit. Do you recognise this situation? A supplier for the solution is being selected. Five good offers are received, one of which is very different from the others. It is innovative and novel, created by a newly established startup. Although the buyer is interested in this solution, it is not purchased. It’s not even tested, not even superficially assessed for its potential benefits. Purchasing it is deemed too risky. It goes even further in public tenders, where unnecessary thresholds are created. For example, in many IT tenders, there is a requirement for significant turnover over several years. This effectively excludes all new entrants. 

What was left undone in these cases? Was the risk assessed regarding what if the novel solution is actually beneficial? What if a competitor exploits it and gains new business and an excellent competitive advantage as a result? And what about the city organisation? What if this solution would have significantly reduced emissions at a low cost? Now the reduction has to be done expensively, and achieving cuts will take a long time. What was left undone was the evaluation of opportunity costs. 

By this, I don’t just mean financial value. I use opportunity cost as the value that is forfeited when making a choice between two or more options. In this case the choice of not even considering new solutions from startups. It could mean, for instance, a new building material that, over the long term, would be better and cheaper for the property user and environmentally friendly. But the new material is left unused due to perceived risk. So, opportunity cost is essentially the best option that is forfeited due to a decision. 

Regarding previous examples, perhaps proposals should have been reconsidered to assess the risks of not testing, piloting, or purchasing certain solutions or services. What advantages might be missed? Why was this not done? Possibly because many observed risks when working with startups are indeed real. Solutions are often untested many times; they are new and innovative. A startup may fail along the way. However, not so easily if it has a client. These risks could, however, often be minimised. Hence, it is crucial to evaluate the risks of not utilising the latest innovations and constantly developing one’s operations and offerings. The same applies to public organisations. 

So, how should one proceed? The key is to learn to collaborate with startups. Simultaneously, one’s own organisation would learn to better utilise new solutions. I would propose taking cues from leading actors. Many pioneering companies, from BMW to Siemens and Bosch, have recognised the benefits of working with startups. They systematically work with companies offering new innovative solutions. Revitalised companies see the benefits in this approach. It accelerates the renewal of collaborating firms. It keeps buyers one step ahead of competitors and, therefore, the risk of not experimenting is seen as greater than the potential risks of partnering with a fledgling company. 

Therefore, I challenge all organisations to start assessing the risks of not adopting new solutions provided by startups. Calculate, or at least evaluate, those opportunity costs. When this is done, it will make you better; it enables the utilisation of new innovations. Moreover, it can be truly inspirational for everyone. Not least of all: this way, Finland can rise from its current doldrums, and Finnish companies’ business can be revitalised, allowing them to achieve sustainable growth once more. 

This text pertains to the Smart Business, Big Impact initiative jointly launched by Urban Tech Helsinki, KIRAHub, and the KIRA Growth Programme. We aim to effect a significant change in the built environment sector, that is, to lower the threshold for large companies and public actors to purchase from startups. Why is this important? By buying from startups, we support growth in Finland, accelerate the sustainability transition, as well as the industrial transition. Yes, the buyer also benefits. Companies can even create new business for themselves – good heavens. 

If you want to partake in solving these challenges, there’s room for you—send me a message, and we’ll deliberate on how to proceed. We can work together through an individual challenge or support, for instance, in organising startup events. Moreover, when looking for new solutions, our network has them 🙂