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Estonia’s next big challenge: the transition from e-state to e-industry

Information technology is transforming the face of industry by creating a quiet revolution and changing the way factories function forever.

Industry and IT are no longer separate and discrete sectors from one another. ‘Just as the educational landscape is moving in the direction of interdisciplinary learning (ICT and economics in every field of study), industrial sectors are interlinked with ICT,’ says Anneli Heinsoo, Chair of the Board of the Estonian Association of Information Technology and Telecommunications (ITL) and Manager of Tieto Estonia AS.

According to Anneli, there needs to be a developmental leap in industry, with the key words being information and putting it into smart use.

‘The greatest industrial nations of the world, such as Germany, the USA and China are taking positive steps in this direction. Through the integration of IT and production processes, a great volume of valuable information can be made accessible and analysable,’ explains Heinsoo. She believes that the Estonian ICT sector is of a high quality and is a valuable partner for co-operation with industrial enterprises in Estonia and abroad: ‘Through joint projects we can lead the way with the best in the world,’ she says.

Estonia is renowned as an e-state. We have been the first to offer outsiders e-Residency as well as many other internal services – for example participating in elections without needing to get up from your desk. The state information system, called X-Road, was created by the Estonian company Cybernetica and brings together people, authorities and companies. Its decentralised nature enables a similar model to be used by industrial enterprises. Estfeed is a project from the Estonian network company Elering which links energy producers and -consumers with each other, offering innovative services.

Investments in ICT are the key to success

Heinsoo says that the fourth industrial revolution or Industry 4.0 necessitates a radical change in thinking. First and foremost, the managers of industrial enterprises need to ask themselves if they are happy with the current state of resources, reliability of work processes, productivity and security of provision: ‘Does the market require more flexible and faster product development, are they able to compete with their products considering a personal approach to customers and rapidly changing needs; is the accessibility of raw materials rapid enough; is production quick enough within the whole supply chain and without any setbacks, and so on,’ she says, citing some examples.

All of this requires investment. Whereas up to now, industrial enterprises have invested in capital equipment, Industry 4.0 requires investment in IT. This would include Information technology solutions or data management, the monitoring and surveillance of processes, a higher level of automation and integrity monitoring, all of which would enable the saving of costs on equipment.

‘The Estonian state has the opportunity to support the digitalisation of production through its industrial policy. If Estonian industrial enterprises are ready to invest in innovation and development activity and to reach their goals successfully, then Estonia could set an example right up there with other successful industrial countries in the world. It would definitely increase our visibility globally and would provide an impetus for industrial enterprises and ICT companies to increase exports,’ believes Heinsoo. It would also attract interest from large corporations who would see Estonia as a viable investment environment for production and product development.

The necessary spectre of change in companies is vast. Heinsoo says companies should start with analysis and bring in experienced IT companies as partners. The purpose of such collaboration is not dealing with specific concerns, but longer-term cooperation.

Estonia as a ‘smart production’ state

It is vital to understand that nothing will change without the training of employees – smarter jobs require training and re-learning.

What will happen to jobs is a question which receives a different answer depending who you ask. According to research by the World Economic Forum, 7.1 million jobs will disappear, mainly ‘white collar’ and management jobs. At the same time, about 2.1 million new jobs will be created, mainly in the fields of mathematics and engineering. At the same time the research company Boston Consulting Group predicts that whereas some jobs will disappear as a result of this ‘industrial revolution’, an equal number of jobs will be created in information technology and data science.

Heinsoo says that jobs are declining in the processing industry even without the fourth industrial revolution. At the same time the average salary in Estonia is rising each year – the gross monthly salary of the third quarter in 2015 was 1045 Euros, or 7 per cent higher than the year before.

Changing markets create the need for re-training

As a result those industrial enterprises which need a cheap labour force as their main criteria, are moving away from Estonia anyway. ‘Estonia is not interested in being an outstanding state for its cheap labour force, but a state which stands out because of its smart production. Our aim is to increase added value in industry by creating smarter jobs, and it is our ambitious plan to retrain people according to the requirements and needs of the new market,’ Heinsoo says. This is where the state and companies have to work closely together. New smart jobs are created and relevant re-training programmes assist in this process.

Many activities in the name of smarter jobs are already underway in Estonia. The Estonian ICT sector is actively investing in cooperation with universities and promoting technological education from as early as primary school age. For example in March this year, the ICT sector organised a focus month ‘Success through science subjects,’ during which they made presentations in schools about the importance of studying sciences and its links with potential future careers. In April the Estonian IT sector representatives are due to provide students with an overview of what they are looking for in their employees.

‘Of course this is far from being the whole story, but we have made a start. We rely on universities with the capacity to accept foreign students to study ICT and we are trying to create the opportunity for those students to stay to work in Estonia for at least five years,’ says Heinsoo.

Attracting talent to Estonia

The state is also supporting those moving to Estonia. Enterprise Estonia has initiated the programme Work in Estonia, which introduces Estonia and our favourable working environment in target countries. The first campaign took place in Finland, where we presented working opportunities to IT sector specialists. Another target country is Ukraine, where over 60 per cent of new residents came from in 2015.

‘It is a great initiative for foreign ICT specialists and of course for other fields for recruitment by local ICT companies,’ says Heinsoo. IT companies such as Pipedrive, Playtech and Relax Gaming as well as Tieto, managed by Heinsoo herself, have been looking for employees through this programme.

According to Heinsoo the Estonian ICT sector has shown great initiative in bringing international know-how and experience into Estonia, in order to raise the awareness of industrial enterprises about the new industrial revolution. They have been working for three years on this goal.

‘Interest usually increases when you can show success stories and share the practical experiences of industrial enterprises. I believe there is interest and the industrial sector clearly sees that future success depends on an innovative approach and the courage to make investments in development work. But there is still a lack of a clear and complete picture of what the concrete activities should be,’ Heinsoo adds.

In order to find answers to the question of how this is to be done, the ITL, The Estonian Union of Electronics Industry, Enterprise Estonia and the Embassy of Germany in Estonia are for the second year in a row introducing the opportunities and best practices of industrial digitalisation to industry leaders at the Industry 4.0 in Practice conference, which brings together experts from Estonia, the Nordics and Germany. The conference will take place from 2-3 June 2016 in Tallinn.

Find out more here.

What is Industry 4.0?

Industry 4.0 or the ‘fourth industrial revolution’ is a relatively new term, having been coined in Germany, whose government used it in the sense of bringing production and IT closer together. Half a billion Euros was invested in this. The term was first used publicly at the 2011 Hannover fair. Different countries use different names for their industrial revolutions and their goals also vary. For example, the Chinese have ‘Made in China’, which aims to innovate the labour force, production, management and quality control; the Dutch have Smart Factory; the French have l’usine du futur, and the British have the High Value Manufacturing Catapult. Private enterprises have created the Industrial Internet Consortium. Whilst the names and approaches differ, they all share a similar aim.

Industry 4.0 is not a new technology or a business model – it is about doing things differently, in order to raise competitiveness, productivity and the security of provision. For example, it includes Internet of Things (IoT), analytics and the automation of production. It enables us to raise the quality of management and to improve the supply chain, to produce more cheaply and to be more flexible.

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