Finland's largest companies intend to invest considerably in digitization this year. Improving the quality of management is viewed just as important.
Some glimpses of light are offered by the survey on major Finnish corporations, carried out now for the fourth time. The survey provides unique insight into the views held by the top executives of Finland's largest corporations, as most of the respondents are CEOs and CFOs of major companies.
Particularly bright news relate to investments in digitization, which the survey estimates to grow this year by more than 10% from last year. Services and manufacturing will especially focus on digitization while retail trade will surprisingly remain more cautious, the responses suggest.
“Increasing investments in digitization shows how large companies are shifting the focus of their investments from material into immaterial assets. Digitization has indeed raised high expectations in terms of growth and efficiency, but the risk is that it will be considered as a magic silver-bullet solution”, says Dr. Pekka Mattila, Professor of Practice, Aalto University School of Business, and Group Managing Director of Aalto University Executive Education.
The annual survey of large corporations covers 250 largest Finnish companies and it is carried out by OP Financial Group and the Nordic Institute of Business and Society (NIBS), a think tank set up by professors of the Aalto University School of Business.
Developing Management and organization in strategic focus
For several years, large corporations have tended to focus on achieving greater operational efficiency and more effective management. This remains a powerful trend. It was evident from the responses that the development of new leadership models received less attention. New models would, however, be invaluable for companies in order to be able to break away from competition.
"This raises concerns about whether large companies are able to genuinely reform their business models, if less attention is paid to reforming leadership systems in a bold manner than to polishing the old ones. On the other hand, it may be a consequence of the weak economic situation," says Pekka Mattila
No fundamental differences in leadership and organizational development focus emerged between large companies with Finnish roots and foreign subsidiaries operating in Finland.
Slight rebound expected in investments
According to the survey, particularly the companies headquartered in Finland have improved their earnings performance and their profitability levels already outpace those of international groups' subsidiaries in Finland.
“The responses suggest that Finnish companies have regained their spirits and intend to clearly focus on growth-oriented development projects,” says Mattila.
Compared to last year, the surveyed companies estimated that they will reduce their material investments, i.e. investments in, for example, sales premises or ICT systems. By contrast, they expect to even increase their immaterial investments – such as investments in product or service development – from last year.
Hence, there is some optimism in investments, too.
“The survey forecasts a rebound in investments but, so far, it is just planned, not reality. Increased efficiency but no growth bodes no good for the future. To Finnish companies, I would say 'Go for it!' Let's start investing and put Finland on a new growth path," says Hannu Jaatinen, Executive Vice President, Banking at OP.
Finland's top 250 companies employ less and less people. While at the beginning of 2013 large corporations employed almost 922,000 Finns, the figure is only 860,000 now. The companies headquartered in Finland estimate that their headcount will continue to decrease slightly in Finland but grow abroad.
Intending to keep some production in Finland, the companies' subcontracting investments will mainly be directed abroad. Almost one-third of the responding companies plan to transfer part of their operations to foreign countries whose legislation is more favorable to the company.
“The most important driver of employing people internationally is that growth is considered to be more probable elsewhere. Finland is by no means attractive from the employer's perspective. Even patriotism cannot convince decision-makers to overlook the grim economic facts,” says Mattila.
In the autumn of 2015, the OP and Aalto University survey of large corporations received a record number of responses, as the questionnaire was answered by 155 key executives from 109 major companies.
For more information, please contact
Dr. Pekka Mattila, Group Managing Director, Professor of Practice
Aalto University Executive Education Oy
Tel. +358 40 738 7221
Hannu Jaatinen, Executive Vice President, Banking at OP
Tel. +358 10 252 2874