While the collapse of Nokia’s once-mighty cell phone business made international headlines, perhaps no community felt the impact more than Oulu, Finland.
The city was a major stronghold of Nokia’s research and manufacturing. A place small enough that many people either worked for Nokia or one of its network of local suppliers, or knew someone who did. In such a place, the titanic shifts in market share or mobile technologies were not just abstract chitchat about disruption, but a potentially fatal blow to the community.
Which makes the current state of Oulu somewhat miraculous. Rather than crumbling, Oulu has staged a remarkable reinvention. More than five years after the worst of the Nokia layoffs, tech employment is higher than ever thanks in large measure to a growing number of startups that have taken root here.
That resilience was the result of an aggressive response that brought together local government officials, universities, and entrepreneurs. It’s a model worth understanding for other regions that have faced, or will inevitably face, the tumult that comes when digital shifts upend legacy economic engines. In Oulu, the result of this swift action has led to a conventional wisdom that would have been unimaginable six years ago.
“Without the story of Nokia and mobile phones and how it ended, we would not have this mobile industry here,” said Juha Ala-Mursula, director of BusinessOulu, the city’s economic development agency. “Today we can say that Nokia’s problems were the best thing that could have happened to us.”
Nokia’s fall from grace
Oulu is Finland’s fifth most populous city, sitting on the eastern edge of the Baltic Sea and just south of the frozen frontier of Lapland. With about 200,000 residents and a slew of technical universities, the city has played a central role in the evolution of several generations of wireless technologies.
While Nokia, the pride of Finland, had its headquarters just outside Helsinki in the city of Espoo, the city of Oulu, about an 8-hour car ride to the north, became its second largest outpost. For much of the 1990s and early 2000s, that was a particularly good thing for Oulu. Nokia’s digital cell phones were the largest selling in the world, accounting at one point for about 40% of all mobile phones being sold.
About 15 years ago, Nokia had about 4,800 workers in Oulu and connections to about 2,000 subcontractors. Oulu was one of the main development hubs for feature phone software for the company. One Finnish economic institute estimated that Nokia was responsible for about 25% of Finland’s growth over the course of a decade. This booming consumer business, coupled with the other half of its business, selling networking and telecom equipment to carriers, made the company the pride of its homeland.
This Finnish miracle hit a wall in 2007 when Apple introduced the iPhone. In what seems like the blink of an eye, Nokia went from cell phone king to digital also-ran. Layoffs started and gathered force. Then in 2013, in what would turn out to be a terrible move for all concerned, Microsoft agreed to acquire Nokia’s consumer business for $7.2 billion. Meanwhile, Nokia was scrambling to right its telecom equipment business, which had also softened.
The Microsoft deal was bad news for Nokia employees right from the start. In 2014, Microsoft announced it was cutting 18,000 employees, including 12,500 former Nokia employees, as it absorbed the new business. A year later, it added another 7,800 layoffs to that total, mostly in its phone business.
Microsoft had also fumbled the shift to mobile, and was hoping that making its own cell phones would jump-start its own mobile operating system. No such luck. By 2016, Microsoft had all but shut down the Nokia business it had bought while writing off the entire purchase price.
On the ground in Oulu, the shockwaves never seemed to cease.
“We spent long nights trying to figure out what to do,” said Ala-Mursula, a former Nokia employee himself. “We wanted to move forward, and not back. No one else was going to save us.”
There is a Finnish word, “sisu”, that refers to the culture’s perseverance in the face of hardship. The word is often invoked in reference to the Russian invasion during World War II. But it continues to resonate in situations like the one facing Oulu.
As Nokia imploded, local university, business, and political leaders began meeting to lay out a practical plan for recovering.
The comeback: digital health
In taking stock of its strengths, regional leaders very quickly hit on two assets.
The first was the deep bench of talent in the area of radio signal engineering, a cornerstone of mobile technologies. And the second was the large base of life sciences and health care research being conducted in the region. The pair seemed to form the ideal foundation to encourage digital health startups that would need people with medical experience as well as connectivity experts.
The city pulled in players such as Oulu University Hospital (OYS), the University of Oulu, and various local research centers and initiatives already under way. Together, they created a broad program dubbed OuluHealth.
“People want to lead healthier lives,” said Minna Komu, network director of OuluHealth. “We have the skill set in this city to do that. So why not provide and tools and the toys they need?”
The goal was to shape and support a defined ecosystem around digital health. Among the programs created: Oys Testlab to test products that use 5G and 3D virtual technologies in a hospital setting; OAMK Simlab for testing and getting feedback on products from health care providers; and the Oulu Welfare Lab for demoing products in social and residential environments.
This also included initiatives such as the Biobank Borealis of Nothern Finland, which houses a huge amount of medical samples that are available to researchers. And OYS has announced plans to invest €500 million through 2030 to transform itself into a digitally driven “hospital of the future.”
“We can now analyze huge amounts of data with the help of AI,” Komu said. “That’s going to enable personalized health care on a large scale.”
There are already about 60 startups participating in some part of OuluHealth’s programs. Perhaps no company illustrates this momentum as well as QuietOn, which makes noise-cancelling earplugs to help people sleep better.
One of the company’s founders, Janne Kyllönen, was working for Nokia a few years ago and found his noise-cancelling Bose headphones too big and unwieldy. After Nokia closed one of its local offices, he teamed up with another Nokia refugee, Matti Nisula, and together they launched the company to use their backgrounds in signal processing to develop a more compact product.
An early version was embraced by Finnair, allowing them to ramp up production. Now a second version has been released to target sleep-deprived consumers. Those founders brought on another ex-Nokia employee, Pekka Sarlund, to be CEO.
“I started my Nokia career in ’86, and finished in 2010, after 25 years,” Sarlund said. “In that sense, the area is not that big, and we know each other.”
Indeed, many other QuietOn employees have Nokia on their resume. The founders got a helping hand from their former employer, thanks to the Nokia Bridge program which provided generous exit packages based on the person’s time with the company, and another $28,000 if they were going to start their own company.
Interestingly, QuietOn also got an assist from yet another group of Nokia alumni who had started design firm Haltian. Founded in 2012, Haltian was created by a group of former Nokia employees who had been working together on an internal project when they were shut down and it became clear their project had no future.
Though the project died, the team enjoyed working together, and so they created Haltian to help other companies design products, particularly connected hardware.
“We were working together in an internal unit of Nokia,” said Haltian cofounder Ville Ylläsjärvi. “Even back then, we were focused on developing new ways of creating products.”
They played a role in some QuietOn design work, and also in connected health ring Oura. Along the way, the Haltian team created the Thingsee IoT platform to manage large-scale industrial deployments of connected devices and raised a $5 million round of venture capital in December 2018.
The bigger picture: 5G and beyond
The construction of the digital health ecosystem is an example of the blueprint Oulu is trying to follow under a broader umbrella called the Oulu Innovation Alliance.
For example, a second pillar under the OIA is Information and Communication Technologies, another obvious legacy of its Nokia history, to build on that foundation of radio signal talent and experience. The goal is similar: create a well-defined ecosystem around ICT startups.
Those efforts are helped by the fact that researchers at Oulu University and Nokia played key roles in developing the 5G technology now being deployed around the world. The city is highlighting the fact that it has more than 500 local companies making some kind of core wireless product. Oulu also struck a partnership with Finnish carrier Telia to begin early 5G deployments in places like its port and the local hockey rink to allow the city to become a testbed.
“We estimate that the first applications of 5G can be found in an industry where automation, remote process management and versatile real-time data usage benefit from the minimal delay and top speed of 5G,” said Janne Koistinen, 5G program director for Telia Finland, in a statement last November. “Oulu’s strong ecosystem and the operators’ open-mindedness in the introduction of new technologies accelerated our decision to continue the deployment of 5G in Oulu.”
Those efforts are also getting a boost from Nokia itself. While diminished, the company still has 2,300 employees in Oulu, which remains home to its 5G radio design and innovation team. Beyond that, the company produces 5G base stations here, and has turned the facility into a model for its Factory for the Future. That includes installing sensors everywhere, using better data analytics to improve productivity, and introducing robots to build increasingly complex products.
“We have our own factory here,” said Jani Leskinen, head of Nokia’s research and development in Oulu. “Why not use this as a playground?”
But with other Nokia talent having walked out the door, companies such as ARM, Altair Semiconductor, and Mediatek have opened offices in town the past few years to attract those coveted engineers. Some of them have even located themselves in former Nokia buildings, which have been reconverted across the city to labs and workspaces for startups.
The city also established the €35 million Northern Startup Fund, a mix of public and private money that’s managed by Finnish VC Butterfly Ventures. The Finnish government’s Regional Capital Investment Strategy (RCIS) also jumped in last year by announcing a series of targeted tax breaks and incentives for ICT companies that move to Oulu or expand there.
Finally, Oulu scored another coup when Finland designated the city the center of its fledgling 6G efforts. Dr. Ari Pouttu, a professor at the University of Oulu who was influential in the evolution of 5G standards, has now turned his attention to this next challenge, which is just getting underway.
The program runs over the next eight years, and is valued at about $285 million, with about half coming from public funding and the other half to be raised from industry partners.
“The industry doesn’t want to talk about 6G because it is diluting their message about 5G and their ability to make money from 5G,” Pouttu says. “We heard a lot of ironic comments about our efforts one year ago, because everyone thought it was too early. And then we heard China was going to launch a 6G program, and then Korea. Now attitudes are changing because no one wants to get left behind.”
Oddly, now the region’s biggest problem is promoting this growth in order to attract talent to a place that is not likely to be high on the list for European engineers and entrepreneurs considering their next move.
Such efforts included organizing annual press trips to explore the tech system. But it also includes such events as Polar Bear Pitching, one of coldest and craziest startup pitching events on the continent. Each year, a dozen or so startups are selected to come to Oulu, where they climb down into a hole cut in the frozen Baltic Sea where they can pitch as long as they can stay in the water.
The idea started six years ago with Mia Kemppaala, when she was working in the Oulu University startup hub Business Kitchen.
As the Nokia tragedy unfolded, she began thinking about how she could promote the region’s other tech assets, something that would draw on residents’ reputation for mischievous humor and could help Oulu’s startups as well.
“It was really pessimistic,” Kemppaala said. “But when it’s difficult times in Finland, people really come together.”
She said that while entrepreneurs in Oulu seemed to have great ideas, they weren’t very good at explaining them. When it occurred to her to mix in the local custom of taking icy swims, the concept for a pitch contest began to form. What better way to make someone focus their presentation and show they can deal with hardship than sticking them in near-freezing water?
“This is what’s great about Oulu,” she said. “When you have a crazy idea like this, people embrace it.”
(Disclosure: VentureBeat’s travel to Oulu and accommodations were paid by BusinessOulu as part of a media tour of the region’s tech ecosystem.)
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