Untitled - socium.ge

Silicon Valley and Finland 79100090080070060050040030020010001985198619871988198919901991199219931994199519961997199819992000Telecomminications Financial services Public servicesmanufacturingSource:ETLA (The Research Institute of the Finnish Economy)Figure 2.15 Labor productivity growth in Finland (1985 = 100)So far, the state has invested in the Finnish capacity for innovation that hasmade high growth in manufacturing productivity possible. However, it has notbeen a two-way street. The state is not renewing its own structures or encouraginginnovation to increase productivity and make totally new things possiblealso in the public services. Figure 2.15 shows this well. While productivitygrowth in telecommunications manufacturing has been phenomenal, there hasbeen practically no growth at all in public services.While it is more difficult to increase the productivity of services, the significantgrowth in productivity in the financial services sector shows that it ispossible. The real issue about the low level of productivity in public servicesis not a lack of IT infrastructure: Finnish public-sector expenditure (administration)on ICT is already the third highest in the European Union. The mainissue is that there can be no increase in productivity just by the addition of ITwithout organizational renewal, which is possible only through a new managementculture. This has been shown for private companies, and we can safelyassume that this is also the case for public services. In fact, what is needed isproduct innovation combined with organizational innovation which bothrequire a culture of innovation and entrepreneurialism.The low level of start-up entrepreneurialism and the low level of productivityin public services are linked problems. As the Finnish population ages, thecosts of the welfare state will rise and become unbearable unless there is newinnovation to increase productivity in the public services and new start-up