EstCoR asked Mr. Gallagher to share his thoughts about strategies and about Estonia 2035 in particular. We are happy to share his response with you

I am pleased to share my thoughts about a strategy for Estonia to maximize its potential going up to the year 2035. The question how to maximize our potential has been on my mind going all the way back to 1994, when I came here from the United States in order to help promote the transition from Soviet to Western orientation of the legal community. I believe that it is a critical question and am grateful that I may be able to contribute to the conversation.

Key points:

* Limited resources, the main goal(s)
* Shared prosperity
* What could we sell?
* Knowledge vs innovation
* Risk management

In general terms, the value of any strategy depends on how well it sets priorities in order to make best use of our limited resources for the purpose of achieving most important goals over time. It is not, therefore, a “wish list”. Nor is it a plan about how to do a given task. Nor is it a “mission statement” that only identifies how we want to be seen. Nor is it just “PR”: strategies are based on critical decisions about where we need to go and how to get there. Using the tool enables us to be more efficient in understanding what must be done, and to track whether we do what is needed. With a strategy in place, we also put ourselves in a position to make corrections. For example, we may not be sure if a given activity will work – so we treat it as an experiment. Whether it succeeds or fails, we have a learning experience that we should record. Without a strategy, we drift. We may or may not end up in a place of our choosing.

If this is true, strategic thinking starts with a decision about what goal merits our attention here in Estonia. What do we need by 2035 that we do not have now? We should not waste our time strategizing about things that are not urgently needed or that we already have. Instead, our strategy should address something we, as Estonians, need most of all, and that we do not have now.

Shared prosperity

In my view, the one thing that we need and do not have is what I would call “shared prosperity”. We might debate about what level of prosperity would be sufficient. But I think it is beyond debate that currently, while some Estonians “prosper”, too many do not. Nor do they have a path to find prosperity for themselves and their children. And if this persists in a small society like ours, we are headed for trouble. We will experience “brain drain” and worse.

If this is our highest priority, the next strategic question is how to achieve it. More precisely, what are the necessary and sufficient conditions for us to bring about this result in a given period of time? If we can identify these, we can step by step walk backwards to where we are today and identify what things we need to do now in order to maximize our use of our resources. In other words, we might invest in things that have no immediate payback, but that we see as essential in our broader strategic thinking.

Prosperity is conditioned on achieving sustainable levels of successful economic activity over time. Success means the ability to sell at “high value-added” levels in a sufficient volume. On the volume point, Estonia has a small population, and this is not likely to change. For that reason, we are not likely to enjoy a high level of shared prosperity only focusing on our “internal market”. It is too small. We need to think globally and connect to global markets in order to generate the type of transaction volume that can meet our larger strategic priority. That is a key strategic condition that will not change. And so, if we agree to adopt the goal, we should be relentlessly assessing our institutional array to ask whether it is up to the task of supporting the needed volume of high value-added global transactions. That array means coordination between business, financial, legal, and educational institutions. I will come back to that point later. This is something we can focus on now.

What could we sell?

But even great coordination between service providers will not give us anything much unless we have something to sell. So, what do we sell that will meet our strategic objective? 

For these reasons, as project ideas come up in these areas – even if they appear to offer profit – they are of a lower strategic priority than others that better fit our country profile.

So once again, what can we sell? As far as I can see, there is but one. Estonia has at least one great natural resource – OUR PEOPLE. Estonians are highly educated and have natural propensities in the STEM areas. This is a potential resource, to the extent that we invest in it to make it productive. And it does not require a large number of high-level knowledge workers to produce high value-added products. This fits our profile of a small and highly educated population.

I am not the first person to have this idea. In fact, I hear many times that Estonia should become a “knowledge-based society”. The problem arises, when we ask the question, how do we get there? How do we upgrade our investments into people to produce a steady flow of high value-added knowledge-based global transactions? Or more bluntly, is this just talk?

PISA ≠ innovation

High value-added knowledge-based transactions fall under the general term “innovation”. It is critical to understand that developing more knowledge and accelerating the rate of innovation are not the same thing. Knowledge is a necessary but not sufficient condition to produce innovation. And if we are thinking about a goal of shared prosperity, we are talking about accelerating innovation (salable ideas turned into products and services). To be more precise, we are thinking about maximizing the return we can get from locally based innovation. That should be a focus point in addressing where we invest our time, energy, and assets to make them more productive.

What do we know about this process at this point in time? Two bits of knowledge have emerged that are critical in understanding what is possible:

1. it is clear that rates of innovation are not “ad hoc”. The rate of innovation in any given location will vary according to various factors. Investing in those factors can accelerate the rate of innovation. That does not mean importing a “one size fits all” model (like creating an Estonian Silicon Valley). It means identifying what happens during the process that produces innovation and investing in critical components of that process;
2. thinking through strategies to accelerate innovation on a systematic basis is an emerging area. As a result, we can “master the game” as quickly as other players around the world, especially when we focus on the types of institutional relationships needed. Being small in this regard is an advantage.

Another point is worth noting. The 21^st century is already being called the “knowledge century”. We all are crossing our fingers that innovation will offer us solutions to our global problems, climate change to name but one. It would be wise to embrace a national strategy that fits into this global context. To “go with the flow” could mean forgoing developing certain markets that might offer short term profit but add to global problems, especially environmental problems. Instead, we can sell ourselves as “the little nation that can” solve huge problems, not make them worse.

If we agree on that model, we can begin to look at what we need to make it work.

For example, what type of education would meet this type of need? I would note Sir Ken Robinson‘s concern that curricula generally in use in the Western World were not developed to promote creativity (a key aspect of the innovation process). So instead of looking at curricula as fixed, we might do better by looking at curriculum reform in light of what our children need to master in order to thrive in our innovation-oriented society.

Where to get these ideas? With no disrespect intended, it is not from educators. They are needed to implement our curriculum but do not have the expertise in producing systematic innovation in order to know what to teach. We need to get those ideas from the best people in the world who are actively involved in the innovation process at the highest levels.

I also mentioned the “institutional array” that we need to promote innovation and connection with global markets. We can and should start looking at our current institutional array to assess how well they help us take new ideas to global markets. Critical questions that need answers:

• Do young “innovators” have access to mentoring and training about how innovation works?
• Can we provide access to global partners as needed to take an idea to a prototype and product?
• Do we have the requisite legal, business, financial and marketing expertise to match our innovation needs? 

We should also take a close look at the career paths that our innovation model offers. What types of career paths offer the most value to our system? Do we build incentives for people to take those paths and produce at high levels? In that regard, one notes with dismay at the ongoing complaints that stipends for researchers have not increased for over a decade. This is just one example of what we may need to re-assess if we want better strategic results.

No doubt there are many more questions that would arise if we take this path. I will not attempt to elaborate those here. The key point instead is to ask

1. whether we agree that the goal I suggested is critical, and
2. the approach to moving towards it has promise.

If we agree on both, we can then see more clearly how to move forward together. We can begin to experiment in order to learn as quickly as possible from what we do and share that learning.

Risk management

One last point – some years ago, the Finns asked Steve Blank to come to Finland in order to advise them in how to build a “start-up hub” in Helsinki. Steve agreed and spent time there to understand the challenges better. At the end of his stay, he gave a presentation to sum up his thoughts. One of those thoughts was this “A start-up hub must embrace risk taking. It requires a high-level understanding of managing risks”. Unfortunately, the audience he spoke to were all “salaried people”. None of them were in the business of taking risks. Just last year, I asked a Finn who was involved in organizing that event if anything had changed. He said “no”.

My point – embracing innovation also means learning how to manage risk at high levels. But given where we are in our history, I think we need to embrace that aspect of the process as well. We will not always succeed. But our failures will help us learn, as long as they are just experiments, not a failure to set a strategic objective.

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