Ñnninen at Microsoft HQ Gordon Kelly

Pride and diversity. Dependency and acquaintance. Pride and nostalgia. Sun and moon.

These are the answers given by Nokia's vice president of software, the research director of ETLA -- the research institute of the Finnish economy, Finland's Minister of European Affairs and Foreign trade and the CEO of Jolla -- now Finland's new smartphone hope. The question was: use one word to describe Nokia's historic relationship with Finland and one word to describe it in the future. For those of you confused by the last answer, it is to do with which orbits which.


The trend is striking, even from Nokia itself. The company that built a country has lost its aura and relinquished the controls.

It is telling these answers come one month after Nokia sold its phone division and a decade's worth of patent licensing to Microsoft for €5.4 billion (£4.5 billion). They are no longer knee jerk responses, but calmly considered replies to the biggest and most significant economic deal in Finland's history. "The morning the deal was announced the mood was 'we have to save the country, everything is being taken away from us'," says ETLA research director Petri Rouvinen. "As a foreigner it is almost impossible to appreciate the status Nokia enjoys in this country.

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Finland became global with Nokia and Nokia was what made us recognisable internationally."

Rouvinen is not exaggerating. Exaggeration is a character trait frowned upon in a country of just 5.5 million people which prides itself on rationality, modesty and a love of salty liquorish.


Instead Rouvinen is highlighting the consequences of a remarkable country and company relationship unlike any other in the world.

How a company built a country

For a start Nokia is older than Finland. Much older. It was founded in 1865 while Finland -- after over 700 years of Swedish rule and 109 years of Russian rule -- only attained its independence in 1917. The Nokia name appeared in 1871 when founder Fredrik Idestam renamed it after a small nearby town and over the next hundred years it grew by continually switching industries. It moved from paper to rubber to robotics to chemicals and eventually electronics and telecommunications in the 1970s. Yet where company and country bonded was with a mutual crisis.

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In the late 1980s Finland deregulated the money market, international loans increased, exports virtually dried up with the collapse of the Soviet Union and in 1991 industrial output alone fell nine per cent. At the same time Nokia was fighting for its life after over expansion in the 1980s. The full extent of their troubles was outed very publicly when group head Kari Kairamo committed suicide in 1988. Nokia tried to sell up to Ericsson in 1991, but the deal collapsed when Ericsson wouldn't take the whole company.


With country and company struggling both gambled in throwing their weight behind the GSM mobile standard. Nokia developed it, delivered the first domestic GSM call using Finnish operator Radiolinja, Finnish prime minister Harri Holkeri made the first commercial GSM call in Helsinki over a Nokia supplied network using a Nokia prototype phone and the first GSM phone on the market was the Nokia 1011. Nokia signed the world's first network roaming agreement with Vodafone in 1992 and GSM went on to become the world's dominant network standard.

Nokia drives Finnish GDP

In the eight years that followed Nokia's rise was unstoppable and it carried Finland along for the ride. By 2000, Nokia accounted for a mindboggling 4 per cent of Finnish GDP, 70 per cent of Helsinki's stock exchange market capital, 43 per cent of corporate R&D, 21 per cent of total exports and 14 per cent of corporate tax revenues. It was and still is unprecedented. Internationally the massive company from the tiny country peaked in 2006 taking 41 per cent of the mobile phone market worldwide.

Finns get emotional when you talk about Nokia. It was a marriage founded on adversity which transformed company and country. But the marriage is over

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For its part Finland was pulled out of the most severe economic crisis in any OECD country since World War II. It was transformed from one of the least information and communication specialised countries in the world to the most specialised. Finland heavily invested in Nokia with Tekes (The Finnish Funding Agency for Technology and Innovation) financing 26 per cent of the company's projects in the 1990s and Nokia gave back to Finland with huge tax revenue and an insatiable demand for highly skilled workers. The latter drove changes to an educational system whose schools are now ranked the

best in the world.

Finland workforce specialisation

"Our success story of the last 25 years has been pretty much defined by Nokia," argues Alexander Stubb, Finnish Minister of European Affairs and Foreign trade. "We used to be a top 30 country in the world out of 200, now when you look at international standards and measures of education, competitiveness, GDP per capita, we're top 3. We became a very affluent nation with the rise of Nokia."

How a country outgrew a company

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Crucially Finland has also remained an affluent nation with Nokia's fall. Like everyone else, Finland saw it coming. "If this had happened 5 years ago it would've been a completely different story," admits Samuli Hänninen, vice president of software program management for Nokia's Smart Devices business. "Nokia was the first Finnish multinational global company. Nokia made us feel proud to be Finnish, but it also gave us the confidence for other ambitious Finnish companies to be born."

As Nokia began shedding jobs the Finnish government responded with programmes to drive small businesses. Tekes had its annual budget for funding new and innovative businesses increased to a remarkable €550 million (£464 million) (proportionally equivalent to €6 billion (£5 billion) in the UK). The Finnish Ministry of Employment and Economy launched Vigo, a start-up accelerator in 2009. Another key Helsinki-based startup event, Slush, attracted $40 billion (£24 billion) worth of venture capital investors in 2012 and expects 1,000 startups this year.

By 2013 VentureSource announced Finland had become the third largest country in Europe for equity financings with a 12 per cent share of all investment into European VC-backed companies. Success is rubbing off on the youth of Finland too. In 2010 students created the now highly popular Startup Sauna to get new businesses off the ground and 30 per cent of the 19,000 students at Helsinki's newly formed Aalto University are members of 'Aaltoes' -- the Aalto Enterpreneurship Society.

None of which takes into account the relatively recent global success of Finnish companies Rovio, creator of the Angry Birds franchise, and Supercell, creator of Clash of Clans, which has been dubbed the " fastest growing game company ever". It is not lost on Finns that both companies found their success thanks to the rise of Android and iOS, the platforms which brought down Nokia.

In fact such has been Finland's rise from Nokia's initial sling shot that in 2010 an Aalto University software industry survey found 77 per cent of tech sector respondents believed Nokia's further decline would not be a threat to their business. That figure held so steady in subsequent 2011 and 2012 polls that in 2013 Aalto stopped asking the question.

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The fall

That all this happened was vital. In the last 10 years failure to keep up with Apple, Google and Samsung has cut €200 billion (£168 billion) from Nokia's market value. Its percentage of Finland's GDP has fallen from 4 to 0.4 per cent (up from a negative in 2012), its share of exports has more than halved and its share of Helsinki's stock exchange market capital has plummeted from 70 to 13 per cent.

It is said job cuts, which released over 10,000 of Nokia's overwhelmingly R&D based Finnish employees into the job market since 2006, also hasn't done Finland's start-up industry any harm.

Yet to only see it this way does Nokia a disservice because on its way down it started throwing out numerous life rafts. April 2011 saw the start of the Nokia Bridge incubator programme which awarded up to €20,000 (£16,000) to each redundant staff member with a credible start-up idea. It allowed up to four employees to club together for a €100,000 (£84,000) fund with further financing of up to €50,000 (£42,000) per startup.

For a company facing so much bad press cynics argue the cost was worth the good PR, but for a company haemorrhaging money there is a strong counterargument and it is another reason why Finns still carry Nokia so close to their hearts.

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The reach of Bridge has been phenomenal. To date more than 1,000 companies have begun through it, 400 of which were in Finland. By far the most interesting is Jolla, which picked up the rights to develop the promising MeeGo operating system Nokia unceremoniously (and some would argue incorrectly) dumped when it teamed up with Microsoft to exclusively develop for Windows Phone.

Jolla will release its first handset before the end of 2013. It runs 'Sailfish', Jolla's custom version of MeeGo, which it has also made compatible with Android apps. Jolla claims to have pre-order interest from over 100 countries as well as a deal in place with the Chinese retailer D Phone. "If Nokia had kept MeeGo Jolla wouldn't exist," says Jolla CEO Tomi Pienimaki. "It wanted a clean break so didn't fight us over IP or ideas." Along with capital, Nokia also kept Jolla supplied with N9 smartphones, the only MeeGo handset it ever released.

Except for Pienimaki, almost everyone working for Jolla is a Nokia employee who worked on MeeGo, but he says staff are far from bitter. "Nokia's legacy is not just as a company, but in shaping an entire country with the kind of knowhow that is capable of the incredible startup scene we have today. It has shaped a workforce which has recently attracted Huawei, Samsung, Intel, Google and now Microsoft to make major investments here."

Pienimaki has a point, even though the Finnish government will lower the corporate tax rate from 24 to 20 per cent in 2014, companies don't setup in Finland because of cheap labour and running costs.

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Micro-soft

When the Nokia deal closes in early 2014, Microsoft will feel the full weight of this. 5,000 of Nokia's Finnish employees will switch companies making Finland Microsoft's third highest staffed country after the US and China. What's more Finns aren't expecting a mass of redundancies. "When we announced the deal we immediately started 26 town halls in different sites," explains Susan Sheehan, head of Nokia communications. At one Steve Ballmer was the headline attendee. "The question [redundancies] came up there. His message was 'we are purchasing a competency we don't currently have, we are Micro-soft' [meaning it wasn't there to make a load of redundancies]. Microsoft has come to Finland and will stay in Finland. Strategically it is key to their development."

Rouvinen agrees. "Half of Nokia's global R&D has always remained in Finland. If Microsoft were to lay off people or attempt to move operations to the US what it has bought would be gone.

Microsoft desperately needs to make its ecosystem fly, it needs Nokia's skilled staff to be a core part of this. Finland can feel secure in knowing tearing it up wouldn't make sense."

Adding further credence to this is Microsoft's subsequent announcement it will invest €200 million (£168 million) on a new data centre in Northern Finland. It confirmed the location was decided after it was able to conclude the Nokia deal.

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Nokia is still HERE

But if the Microsoft mothership has landed in Finland to give the country an economic boost, what remains of the company which put Finland on the map?

Following the sale of hardware and services divisions, Nokia has three of its five core business units intact: the 'HERE' mapping service (built around its purchase of Navteq in 2007), the Nokia Solutions and Networks (NSN) infrastructure arm and its 'advanced technologies' research division.

It was no coincidence that Nokia bought out Siemens from its NSN partnership (formerly Nokia Siemens Networks) in June for €1.7 billion (£1.4 billion). After years of losses and job cuts, NSN has recently become profitable and all three remaining divisions of Nokia are in the black. It also has lorry loads of Microsoft cash. "My feeling is Microsoft may have done Finland a favour as a country and Nokia as a company," says Rouvinen. "Nokia was going bankrupt or at least facing a dismal future. In principle [the deal] is lending real legs to the network side. What remains of Nokia is likely to be better off."

Speculation has run wild in Finland that Nokia will use its newfound wealth to re-enter the handset business on its own terms -- perhaps in a dream team Finnish partnership with Jolla. The talk is unsurprising, the Microsoft deal allows Nokia to sell branded handsets as early 2015 and it could sell phones under a different brand (Jolla?) tomorrow. But for now it seems a hope for the romantics. "We speculate about re-entry, but having been beaten that badly it wouldn't be an easy goal to make," argues Rouvinen. "Re-entry would burn hundreds of millions, if not billions and it is a huge gamble. Nokia has no history of jumping back. My guess is it will turn into a nice, boring, profitable networking business."

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Boring or not, investors approve the new model. Nokia shares leapt 40 per cent in a single day following the Microsoft deal. By contrast the risk taken on by Microsoft saw its shares drop by 5 per cent, but it has far deeper pockets to shoulder the loss and turn things around. "Nokia is not the national team anymore," admits Hänninen, "but it's still a top team."

The success in failure

So what of the future? "People ask me what is going to be the new Nokia. I don't want a new Nokia, I want 100 new Nokias," says Stubb. "We needed to diversify and we are diversifying... there has been a turnaround in the mindset of Finns [in watching Nokia struggle]. We used to have a huge problem with success and failure, both were frowned upon. Now Supercell celebrates failures with champagne and Rovio is very open about the troubles it faced before Angry Birds."


The message is clear: failure is a natural part of business and Nokia's successes and failures are no longer Finland's successes and failures.

Overwhelmingly Finns accept the logic and inevitability of the Microsoft deal, but there is no doubt it still hurts and talk on the streets and in newspapers continue to focus on conspiracy theories and corporate pay-offs. "Look, we are a young nation, we are proud nation," explains Stubb. "Our identity was established under 700 years of Swedish rule then the better part of 109 years of Russian rule. Our independence is only now coming up to 100 years so there has always been that sense of cultural exceptionalism in Finland. Things Finnish mean a lot."

And this is the crux. For a famously stoic nation, Finns get emotional when you talk about Nokia. It was a marriage founded on adversity which transformed company and country. But the marriage is over. Finns saw it coming, they prepared for it and in many ways they have already moved on but, like only the most important of relationships, when time came to break up it still hurt like hell.