New Services and Products Through Flexibility

After the collapse of the Nokia-led ecosystem, the software industry in Finland has created new and agile ways of developing software. The N4S Mercury Business work package focuses on further improving business flexibility.

The software industry in Finland has changed radically after the collapse of the Nokia-led ecosystem. It has been replaced by new and agile ways of developing software – even in established companies. The work package of the N4S program (Mercury Business) speeds up this development by creating methods that improve the flexibility of businesses.

The Internet has become the most important marketplace in the world. Even transactions with public administration take place primarily online. Therefore it is not surprising that software development has become the most important source of quick innovations. However, one of the problems of IT companies is the management of software products. It is often complicated, because it covers software development, publishing, marketing and support services. In addition, the companies’ unnecessary focusing on processes slows down their adaptation to new circumstances, and may cause them to lose new business opportunities. Time should also be spent on collecting new information about customers and the market.

Today, the success of companies requires software development to be done also in real time with the help of customer feedback. This is possible only by being flexible. The aim of the Mercury Business work package is to get companies to actively seek new ways of managing their current business operations, and to give them the ability to transform like mercury into entirely new business operations. This results in new products and services as well as start-ups that are created both inside and outside the companies.

Ilona Nevalainen, Ericsson

Ilona Nevalainen's job at Ericsson involves coaching Ericsson employees in goal-orientated thinking.

“We can research, experiment with, and finally discover a very capable, flexible and cost-efficient product development concept that can be constantly customized for our business activities. What is particularly interesting about the Mercury Business work package is that the entire product development apparatus is adjusted towards a business that doesn’t exist yet. This makes the work package challenging and multidisciplinary in its approach”, says Ilona Nevalainen from Ericsson. Nevalainen works for Ericsson as a coach, assisting Ericsson employees in directing their thinking towards goals. In the N4S program, Nevalainen is responsible for the management of the Mercury Business work package.

Nevalainen lists the key themes of the work package: change, skill and business model.

“Change affects everyone and requires a permanent change of attitude. This allows one to recognize weak signals and accept surprises.” Nevalainen believes that surprises are a part of everyday life and may contain information that has significant common ground with a company’s business operations.

“The most important question after this realization is ‘Why not? Let’s turn that into our business!’ The recognition of weak signals may therefore also happen through surprises. When they are studied with curiosity and seen as opportunities, the studying can also be fun!”

Skill must also be analyzed: What do the companies already have, and how can competences and learning be raised to a level that allows the new business idea to be introduced to the organization? What is needed then is a business model.

“It is essential to create a cost-efficient (business) model that can be reused from one organization to the next and created according to the needs of the business idea, and to create new ecosystems.”

Elastic companies

In 2012, the American researcher and entrepreneur Nicholas Vitalari and the Irish economist and sociologist Haydn Shaughnessy wrote an impressive manifesto about the business revolution they call elastic entrepreneurship. They believe that politicians usually do not understand the direction of change in the modern world. They use old-fashioned language of economics and are trapped by it. But we live in a world where business is run through complex global ecosystems. In these ecosystems, only versatile, flexible companies can succeed.

According to Vitalari and Shaughnessy, from 2007 onwards a small number of companies reached exceptional growth. Not only were the companies successful, they also managed it differently from other companies. Vitalari and Shaughnessy call such companies elastic. Elastic companies do not follow the same traditional working model as other companies. In these companies, there are no constant games or distributions of tasks that eventually destroy all individual creativity. Elastic companies buy know-how and services flexibly from outside the companies and create opportunities in large ecosystems of creative people. At the same time, these companies create new markets.

The researchers of the universities participating in the N4S program support the companies’ work by applying methods suitable for the situations the companies are in, such as business modeling and the building of ecosystems, as well as the mapping of new business opportunities and experimentation with new business operations.

Elastic companies buy know-how and services flexibly from outside the companies and create opportunities in large ecosystems of creative people.

“Through a survey for companies, we seek to find models of operation that allow companies to survive and grow in changing markets by finding new business opportunities. The indicators and models of operation discovered will be implemented as recommendations directing the companies’ operations”, says Professor Pasi Tyrväinen from the University of Jyväskylä.

The researchers’ recommendations are aimed at ensuring the sustainability of the companies’ operations.

“For example, with some companies, we study product development debt – in other words, when and why companies apply simplified solutions in software development to hasten their introduction to the market. Such shortcuts may lead to increased workloads in the long term”, Tyrväinen remarks.

A special section in the Software Industry Survey 2014 collected information about 500 Finnish software companies and studied their flexibility. The results were unambiguous: Companies experimenting with new businesses and constantly collect information about their customers were more flexible in adopting new customer needs and creating new products and services.

“Flexibility doesn’t necessarily need to show in business models as a characteristic, but in the changing of models or the creation of new ones for new situations.”

Software Industry Survey is a research project the Aalto University and the University of Jyväskylä have been working on since 1997. An annual survey produces statistical information about the current state of the Finnish software industry. The survey themes vary each year, but the main focus has always been on the study of growth and internationalization. Software Industry Survey is one of the most cited sources of information about the Finnish software industry.

One of the partners in the N4S program, Avaus, also listed the 30 most elastic companies as a part of the Mercury Business work package. The “Smartest companies in Finland” study is a list of innovative, data-driven, forward-thinking, tech savvy and bravely experimenting companies in Finland. Avaus used seven building blocks, which – according to Avaus – are the ingredients of success in today’s competition. These are smart vision, experimental culture, data-driven decision making, evolution in the value chain, the Internet of Things, using API’s (application program interface), band connectivity and enterprise mobility.

The list includes both big Finnish companies operating globally, as well as small innovative startups to get a broad overall look at the landscape of Finnish companies utilizing smart methods. According to Avaus, some Finnish companies are taking the initiative to be the frontrunners in the new digital economy. The top five companies on the list are Supercell (mobile games), Kone (elevator technologies), Kemppi (welding technology and software), Rovio (mobile games), and Vaisala (environmental and industrial measurement).

Kimmo Lehtonen

The “Smartest companies in Finland” study is a list of innovative, data-driven, forward-thinking, tech savvy and bravely experimenting companies in Finland.

According to Ilona Nevalainen, the N4S program has understood well the additional value of research in creating new business activities.

“Building a new business platform outside the strategy is a challenge for researchers as well as IT companies, and one can’t do it without the other.”

Nevalainen wants to build an “ecosystem of thought” that would highlight the silent knowledge and weak signals of companies and research institutions.

“The charm of the ecosystem of thought could be the fact that it’s formed by a group of companies from different fields and a myriad of research institutions, which would allow the bouncing of ideas between different areas of business and academic fields. The strength of such an ecosystem is that by default, an idea is received with curious scrutiny. An ecosystem of thought could produce business ideas, and they could be experimented with on a rapid test schedule.”

“We can research, experiment with, and finally discover a very capable, flexible and cost-efficient product development concept that can be constantly customized for our business activities.”

A new reference model as a tool for N4S partners

According to Nevalainen, collaboration between companies and research institutions can be seen as a goal-oriented “hand-in-hand” approach to the companies’ business models and research themes. An example of this is experimentation with a new business model in a company, its analysis, discussions about change and new experiments.

Ilona Nevalainen on Mercury Business

“Our goal is to get a researched and tried model for the new businesses of Finnish IT companies. It can be created in collaboration by IT companies and research institutions. Together, we can bounce ideas and thoughts off each other, experiment and test, and at the same time, advance with determination towards our goal of creating new business outside our current strategies.”

Real-time action is one important goal of the N4S program. The Mercury Business work package creates a reference model tool that allows the modeling of a company that is agile and capable of quickly moving into new areas of business.

“It is a frame of reference against which a company can study its own operations and make changes in the right places. The model offers three approaches: A concept, i.e. why the company needs to change its operations towards real-time business thinking; visualization that illustrates the critical variables analyzed; and tools for making and measuring changes.”

The aim of the model is to help companies in radical rethinking that allows them entry into new markets. The model allows them to discover things that set the company apart from others. The idea is to work transparently and in real-time within the N4S consortium, allowing the company to quickly receive information about the experiences of others. The result is a toolkit that describes the techniques used in different methods.

The reference model has been created by nine partners in the N4S program: Ericsson, F-Secure, Elektrobit, Avaus, the University of Helsinki, the University of Jyväskylä, the Tampere University of Technology and the Technical Research Centre of Finland. The model can be used by the partners in the program and other companies.

Descom seeks growth through flexibility

One of the software companies participating in the N4S program is Descom. It is a growing company specializing in omnichannel commerce solutions. Through flexibility, Descom has expanded its know-how and supply.

“We are heavily bound to the technologies of our partners, which is why networking is essential for us. We constantly monitor the development of our customers to be able to respond to changing needs. We can’t lull ourselves into thinking that only our current areas of expertise and currently available technologies will bring us growth”, says Descom development manager Outi Ihanainen-Rokio.

As part of the N4S program, Descom has studied analytics tools. For monitoring customer experiences, they use IBM’s Tealeaf software. “We can, for example, monitor the customer traffic of a web store in real time using Tealeaf. If a problem appears repeatedly, the software tells us at what stage of the process the problem appears. The reason could be, for instance, that a text on a button on the web site is misunderstood by the user.”

Typically, the challenges in the development of the know-how in Descom’s own software production are posed by tight schedule requirements. Therefore, the utilization of a testing community from the very beginning has been an important area of development.

“The basis of the N4S program has been good. The program has helped us change the different areas of our software production to better support our strategy of growth. There is still a long way to go and changing attitudes will take time, but flexibility and speed in the organization are key goals for us as well.”

Ari Turunen
October 27, 2014