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Estonia - the start-up country

When it regained its independence from the Soviet Union in 1991, Estonia had to completely re-invent itself. In many ways, the country had to think and act like a start-up. In this, it was aided by Estonians’ entrepreneurial spirit, which had survived centuries of domination by the Danes, Germans, Swedes, and Russians. Resilience is deeply embedded in the culture of this country.

The most obvious shift was by making e-services core to government, which began two decades ago and was led by the government itself. The average age of an Estonian cabinet minister back then was 35, so it shouldn’t come as too big a surprise that the country’s leaders had already realized the opportunities that the World Wide Web presented and moved quickly to capitalize on them. Estonia was not burdened by legacy systems—only by “legacy thinking,” as Toomas Hendrik Ilves, Estonia’s current president, is fond of saying. For example, rather than upgrading their old analogue phone system, the government replaced aging exchanges with digital ones. There was no land registry—so the government created a paperless one. “We just skipped certain things—Mosaic [the web browser that is generally credited with popularizing the Web] had just come out, and everyone was on a level playing field,” recalls Ilves.

That maverick sensibility continued to help the government evolve. In 2000, Estonia’s legislators adopted an “e-Cabinet” system to streamline the decision-making process. E-Cabinet is a multi-user database and scheduler that keeps relevant information organized and updated in real time, giving ministers a clear overview of each item under discussion. Before weekly cabinet sessions begin, ministers access the system to review each agenda item and determine their positions—clicking a box stating whether they have any objections or would like to speak on the topic. Weekly cabinet meetings have been cut from four or five hours to just 30 to 90 minutes, and thousands of pages of documents no longer need to be printed and delivered. In 2007, Estonia became the world’s first country to allow online voting in a general election.

The emphasis on digital interactions has also, of course, had a huge impact on Estonia’s 1.3 million citizens, who use electronic IDs to access everything from local buses and the tax system (filing an annual return online now takes about five minutes) to their own electronic health records, which are stored in the cloud.

Where does this leave ordinary citizens? Well, unfortunately, although Estonians benefit from the highest level of internet freedom in the world, this does not automatically mean that all of them are properly served. There are many who fall through the cracks. In a country where the average monthly wage is $1,340, the percentage of citizens who have access to fixed broadband coverage is only 87.5%, while the EU average is 95.5%. There are still 300,000 people (23% of Estonia’s population) that still does not actively use the internet. The Digital Agenda for 2020, a government white paper on Estonia’s digital future, is clear that digital skills and motivations must be much higher in order for Estonia to meet its objectives. And that technology alone will not be sufficient. One of the conclusions to be drawn: Design, and design thinking, will help this Baltic tiger leap into the 21st century.

Service design in the public sector

Once again, the Estonian government is taking the initiative. In 2013, the Government Office put out a call for bids to deliver hands-on training in the methods and tools of service design to a select group of senior civil servants across government. Three Ministries (Social Affairs, Interior, and Finance) each volunteered a service within their department that would serve as a “guinea pig”. The bid was won by the Estonian Design Centre (EDC), headed by Jane Oblikas, who had contracted the author to develop a proposal for a series of workshops that would guide the civil servants through the process of designing services, from initial concept to prototype, over the course of six months.

The program consisted of five hands-on workshops delivered at six-week intervals that walked the teams through customer journey mapping, service blueprinting, proposition refinement, service prototyping, and service measurement. The workshops provided theoretical knowledge, relevant case studies, tools, and exercises designed to reinforce that day’s theme. Homework, in the form of an independent development assignment, was given at the end of the workshop, to be presented and reviewed in the subsequent session. Each workshop built upon the previous session’s assignments, helping the teams to understand their trajectories and where they might be headed in the development of new services, or at the very least in the improvement of existing ones.

Three seasoned Estonian designers were engaged to coach the teams throughout the process: Janno Siimar, Ants Lusti, and Hede Kerstin Luik. They provided professional design assistance to the non-designers in the teams, helping to manage not only the strategic decisions taken by each team, but to assist in the embedment of the tools and experiences of the workshops. They worked closely with the teams to co-create solutions and were essential to the success of the program, acting as literal translators of design terms as well as interpreters of design ideas.

At the outset, some of the civil servants did not really know what to make of “service design”. There was skepticism and even some resistance when the very first task was assigned: identify your users. A few could not get their heads around the task because, as they said, “Every Estonian is a user of our service—how can we even start?” Slowly, they came to understand that directing empathy and engagement towards even a somewhat narrow selection of users would provide them with valuable insights into how they’d need to configure their services. As the weeks went on, the teams developed a deep understanding of how they will use design to move Estonian e-government to truly engage people in the co-creation of services.

Andres Oopkaup, the leader of the Statistics Estonia team (representing the Ministry of Finance) went through a profound personal transformation during the program. He was open to change, but didn’t expect to see the results that he did:

“These activities have been remarkable. The preparation of the interviews, the tools we have developed for interpreting the data, all have helped us to really stand in the shoes of our customers. The prototype testing has been eye-opening—it’s where we really see not only what our clients think, but what our clients do. All of this has put us in a much better place to make the case for additional funding.”

Statistics Estonia collects and elaborates data from businesses to support the Estonian business community in its growth. Oopkaup’s team, with the help of their design coach, Ants Lusti, began their project by interviewing current users of their service and uncovering a mismatch between customer expectations and what the bureau offered. By analyzing gaps in their customer journeys, identifying opportunities for new business models, creating personas, and elaborating a new service proposition, a new service was developed that would finally provide businesses with relevant information, that they might even be willing to pay for. They developed a 3D desktop prototype of what success might look like and then went into development of the actual interface. By quickly mocking up a coded (but not quite designed) version of the interface, they gained valuable insight into the viability of the proposition. There was a lot of push-back from test subjects, but this all helped the team to iterate and improve the experience, almost in real time. Oopkaup concluded, “Through this project, the team has changed the way we work. We are very excited to take this work forward.”

The Social Insurance Board team (from the Ministry of Health) led by Juta Saarevet, had a similar experience. Specifically, they needed to re-invent one of their services, which provides help to a group of customers that are frequently unable to help themselves—the mentally disabled. Within the current system, it takes up to two years to diagnose and define the support systems needed for the individual in question. This can be an arduous journey, full of false starts and dashed hopes for caregivers and families alike. Turning the care model on its head— by concentrating on delivering care, rather than debating what care is most needed—allowed the team to determine that the diagnosis process could be started online within five minutes, rather than two years down the road. When the team began to prototype this concept with actual case workers, they got not only their full agreement that it would be possible to completely re-invent the admissions process, but had their active participation in the development of the concept. “It was if the administrative persoannel woke up to a new way of doing things. Once we asked the right questions, there was no stopping them,” said Ms. Saarevet.

The EDC service project allowed senior civil servants to experience the power of design firsthand. This knowledge is already starting to be shared within government, and other governmental departments are reaching out to the EDC to help them re-craft their services. There is even talk that design thinking will become part of the platform that Estonia will bring to the Presidency of the EU Council when it assumes its six month term in 2018.

The private sector

The path the Estonian government blazed two decades ago has paid dividends in the private sector as well. According to the European Commission’s Innovation Union Scoreboard 2014, Estonia led Europe in innovation growth, making the biggest jump in innovation (3.7 percent). The country sits in the second of four European innovation tiers. The first is occupied by Innovation Leaders Denmark, Finland, Germany, and Sweden. Tier 2, Innovation Followers, and includes France, the Netherlands, and the UK as well as Estonia.

One reason for this success is that in Estonia it takes five minutes to register a firm online, and as a result, the country has the highest percentage of start-ups per person of any country in the world. It seems that everyone is trying to become the next Kazaa (a popular peer-to-peer file sharing application) or Skype (the Danish/Swedish/Estonian digital success that was sold to eBay in 2005 for $2.6 billion and subsequently to Microsoft), creating a mini-class of Estonian venture capitalists.

Taavet Hinrikus, who was Skype’s first employee and one of the primary beneficiaries of its sale, is one of those investors. Three years ago, he started-up TransferWise, a foreign exchange service that boasts rates for sending money overseas that are 90 percent less than for conventional banks. TransferWise combines a clever peer-to-peer business model with an easy-to-use front end that completely disrupts the cosy position international banks have enjoyed with their foreign exchange services. In mid-April of 2014, TransferWise announced that it had passed the £1 billion ($1.6 billion) mark in cross-border payments, but the company was coy about confirming that it was a Facebook acquisition target.

The tech boom in Estonia is not limited to e-businesses, although many start-ups use connected products as the basis for their offer. developed a virtual fitting room, complete with a robotic mannequin, that enables fashion retailers to show prospective online customers precisely what a garment would look like on their own bodies, thus reducing costly returns. Click and Grow is a technically sophisticated flowerpot that utilizes sensors to provide just the right amount of water and nutrients to grow perfect herbs. Shaka is a tiny weather station that plugs into your smartphone’s audio jack to give you immediate readings of temperature, wind speed, barometric pressure, and humidity in your current location. All three companies use sophisticated technologies to help solve niche challenges.

The dark side

A few analysts have argued that the types of niche solutions described above do not, in the end, provide much value to the Estonian economy. According to Mark Adomanis, in a feature on Estonia published in Forbes in July of 2013, “The great majority of Estonians will never start a business or try to attract venture capital funding. Their first economic priority, like everyone else, is to find gainful employment: it doesn’t matter how quickly the government processes your paperwork if you’re unemployed and don’t have any money.”[2] Despite the success of Skype, Kazaa, and now TransferWise, Estonia has no significant capital of its own to invest, except what it gets from public sources: i.e., taxpayers. Of the $28.6m of venture capital that was invested in the country in 2012, nearly $23.8m was foreign money. This does point to a potential bubble and the need for Estonia to rely on a more homegrown approach to innovation.

The Estonian Design Centre recognizes this and is doing its part. Over the last two years, the EDC-run Design Bulldozer program, developed in conjunction with the author, has helped build innovation muscle inside 10 Estonian companies, providing them with the knowledge to identify opportunities for innovation, the tools to translate insight into profitable products and services, and experience in using design methods to realize their ambitions. The program, initiated by Enterprise Estonia, works at the grassroots level to help Estonian companies pull themselves up by their own creative bootstraps. Interestingly, the biggest impact common to all the participating companies has been an organizational one. By re-examining their values and their purpose and by granting their employees much greater autonomy in doing their work, companies such as Proekspert, which develops software for a range of industrial applications, have rediscovered their entrepreneurial spirit and taken big steps to renew themselves.

By focusing on people—both inside and outside of the organization—Proekspert moved from being process-oriented to client-oriented. A complete organizational restructure, aided and abetted by Design Bulldozer, created teams that took a cross-functional approach to solving client issues, replacing the process-heavy “problem funnel.” Extensive interviews were conducted with the most change-resistant staff members to make them feel a part of the new era, engaged in the creation of a new company. The new, service design-led organization increased Proekspert’s ability to handle new and existing clients and led to an additional 44% in EBT for 2013.

When Alpaka, an Estonian-based producer of high-end wool and fur products made from Peruvian alpacas, entered the Design Bulldozer program, the company’s owners were unaware of the role design could play in creating not just a brand, but a story. As they gained familiarity with the tools of design, the owners learned to engage their customers in a much more direct way, to better understand their needs and desires. Alpaka’s communications shifted from being product-oriented to lifestyle-oriented, positioning the company in a more premium segment of the market and allowing them to charge more for their products, with sales increasing by 18 percent over the previous year. They are currently on the second iteration of a re-brand and expect even greater results in the coming years.

For the Port of Tallinn, another participant in Design Bulldozer, the issue wasn’t so much about boosting revenue, but rather on how to provide cruise ship passengers with the best experience possible when alighting in Tallinn. The Port is the gateway to Estonia, and welcomes half a million cruise ship passengers every year. However, the pathways that lead from the docks to the city do not make a brilliant first impression. How could the Port focus the necessary resources to make those first steps into Estonia really memorable?

The team struggled at first, fighting organizational resistance to participation in the program, so the first order of the day was to win the hearts and minds of their superiors. This was achieved through a series of internal workshops that helped to co-create a collective vision of what the Port should become in the future. This was followed up by a shadowing exercise that provided hard evidence of the poor experience that passengers had when getting from the Port to Old Town, the medieval heart of Tallinn. This was an eye-opener. Ahto Ader, the manager of the Port’s team, notes, “There are now always two questions in my head: Have I sufficiently involved my co-workers, and have I been taking a people-centered approach to the problem at hand?” By keeping in mind these two questions, Ader is certain that the initiatives underway to improve wayfinding in the Port will be successful and will pave the way for future developments.

The future of design in Estonia

There are many cross-currents in which Estonia will find itself in the coming years, and design will play an increasing role in navigating these waters confidently. The small size of the country will prove to be both a positive and a negative. Smaller is nimbler and it will be easy to try things out. Iteration is a central tenet of design and the Estonian attitude is flexible and can-do, and this will make experimentation possible. But a wider, more international vision must be maintained, as the home market is too small to support ambitious endeavors. This will lead to challenges with scale, as companies try to crack international markets. Clear visions and compelling stories will be essential, as both the public and private sectors try to make sense of the Estonian reality. Design will be instrumental in fostering this. Economically, the basics will need to be sorted, but not by sacrificing the promise of the future. Rather, it will be the long-standing resilience of the Estonian people to endure that will enable progress. Continuing with technical developments will be essential, as long as they are married to the human qualities that design emphasizes: authenticity, transparency and meaning. Organizations such as the Estonian Design Centre will be key to building this capacity through the delivery of practical programs that ensure the focus remains on the human experience.

[1] There is, of course, a downside to so much digital interaction, and issues with cybersecurity are a large part of that downside. There have, for instance, been cyberattacks on Estonian government servers. Steps were immediately taken to prevent such attacks from occurring in the future, and now electronic war games to test firewalls, encryptions, and other vulnerabilities are the norm.

[2] Mark Adomanis, “Estonia and the Department of Meaningless Statistics,” Forbes, July 13, 2013.

The text of this article was also published in the DMI Journal, Summer 2014

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