Start-ups in Estonia: should society fear or embrace them?

PAIDE - Estonia has long dedicated itself to building a reputation as a haven for all things tech, encapsulated by the witty if tongue-twisting label ‘e-Estonia.’

But have we become slightly too bewitched by flashy interfaces and uber-cool brands to think critically about the exact effects of start-ups disrupting entire industries before governments can even react?

Two discussions at this year’s Arvamus festival, an outdoor event focussed on policy debates, asked just that.

The Festival of Opinion Culture (Arvamus) has dedicated several themes and discussion areas to technological innovation, with several of these taking a long hard look at the wider socioeconomic effects of start-ups on other industries, jobs and regulations.

The phrasing of two such discussions, ‘What’s the Use of Start-Ups to Estonia? in the Enterprise Area and ‘Are Apps Devouring Estonian Small Businesses?’ in the Postimees Area, both bring negative, or at least sceptical, viewpoints to the spotlight.

For a country that promotes itself with a photo of a young woman surfing the internet while sitting on a haystack, this could be a healthy signal that we are getting away from a blind admiration of tech specs and savvy marketing slogans to actually engaging with the close connection between our tech scene and society.

In the Enterprise Area, the focus was on the viability of start-ups for Estonian enterprise culture at large. What is a start-up – and why does it need or want to be called one?

Are start-ups solving problems that call for urgent attention, or are they too infatuated by their own ideas and make up problems to suit their needs, as suggested by one of the participants, Margus Uudam?

Scepticism aside, one take-away from the discussion was that start-ups are delicate creatures, masterminded and developed by ambitious people, but they do not necessarily need to make a profit to be useful for Estonian economy.

Although named even more provocatively than the previous offering, the overall consensus at the discussion in the Postimees Area was equally positive, bringing the discussion back again and again to ‘customer experience.’

This seemed to be less from a love of marketing jargon than a genuine belief that apps have revolutionised traditional industries such as transport and hospitality in the name of consumer comfort and availability.

As Kadri Hansalu from Postimees noted, ‘But at the end of the day, someone must bring about such change in any case.’

However, the newly adopted creed of start-ups, that ‘customer is king’, was not given such an easy pass by all involved.

Are start-ups like Uber and Booking.com middlemen that take income and control away from actual service providers, increasingly reliant on customer ratings rather than accredited regulators?

Do they merely make service less controlled and safe? Then there is the issue of market specificity – Verni Loodma, representing Hotell London in Tartu, suggested that ever-powerful apps such as Booking.com are often far removed from the many markets they operate in, particularly in the case of small countries like Estonia.

Not knowing the market context can in turn lead to factual errors in the app’s descriptions and comparative methods that may harm the popularity of a given hotel. Service providers are left stranded as the process of getting things fixed is often unacceptably slow.

Having said that, the pressure to get better reviews can be conducive to becoming better at what you do, raising the bar for the industry in general.

One thought that echoed throughout the discussion was that a ratings culture works to empower ordinary customers, an update perhaps long overdue.

Enn Metsar from Uber emphasised how important scale is for start-ups: to create a great app, one needs resources and a global market to support further development.

In a similar vein, Tonu Runnel from voog.com summed this up with a jocoserious statement: ‘You can’t make an app in the same way as a chicken hatches an egg.’ And if innovation wants to happen and customers support it, society will need to follow and regulate it in hindsight.

This realisation guided the discussion as Kadri Hansalu emphasised that ‘innovation is in our blood.’ Generation Y is more attuned to the necessity and reality of change, which makes the streamlined but often more personalised customer experience offered by apps appear as a natural and positive development.

While Verni Loodma remained convinced that certain customers will always prefer the comforts of a hotel to new app-enabled services such as Airbnb, the effect of a generational difference on how we like – and more importantly, will like – certain services remained largely unexplored.

Are innovation and their stronghold of supporters simply waiting for all the nay-sayers to catch up?

As Tonu Runnel strikingly put it, while certain popular start-ups may feel like the future now, they will inevitably change and fade with time: ‘Monopolies spring up, grow, and die.’ So, even as we think if we should embrace or fear the start-ups of today, whether as individuals or governments, innovation and change are ongoing and will all the same take us to unexpected places.