Esko Aho steered his country through rough financial waters when he was Prime Minister of Finland in the early 1990s. Now a senior executive at Nokia, he recently spoke about the rapidly changing telecommunications business in which he sees innovation as essential as the added value is coming more from services than from the device itself.
Esko Aho is the former prime minister of Finland and now executive vice president of corporate relations at Nokia. After taking part in a session on "New Strategy Paradigms" at the Global Alumni Reunion, he took time out to talk to IESE about the challenges the telecommunications industry faces in a rapidly changing market, as well as discussing the advantages of being a small country in a global market.
The full interview appears in the most recent edition of the IESE Alumni Association quarterly magazine.
"My advice is roughly the same as my advice was in government," he says. "When you are hit by rapidly changing circumstances, you need to cut costs, but cost-cutting is only one tool. In addition, you need long-term investments. Sometimes you have to reduce costs and make investments at the same time. Governments and companies that don't succeed are the ones that forget that you cannot eat your seed corn. But R&D spending is not enough, you have to be more efficient as well."
In the article, Asko discusses Finland's siutation in the early 1990s, when it faced the same type of crises that many other European countries confront today.
"First, you have to stabilize your financial system; secondly, you need to control public spending and cut costs, which can be quite painful. But these two will never work without a third pillar, which is growth policy.
From the start, you have to see where the growth is coming from and create an ecosystem to encourage it. I'm a bit worried that in Europe we are putting too much emphasis on the first two and forgetting the third. If we concentrate on growth, the other things, like controlling the deficit, become easier."
"As we move from mobile devices to providing services as well, local factors become more important," he said. "Services and solutions are more localized than manufacturing. The challenge for us is to understand these local needs. If we succeed at this, it is an opportunity not only to do good business, but to do good as well, to promote social, economic and environmental development."
He equates part of Finland's success, in which Nokia has played a key role, to it being a small country.
"Small countries have to look out in order to survive. That is the secret of their success. I think our Finnish DNA makes us better placed to understand and identify these local needs. It's no coincidence that small countries have been globalized. It's about a capacity to adapt."