The Danish miracle

Denmark has overtaken Sweden as Europe's most innovative country. It is also the world's second Internet-savviest nation (after the USA) and, according to the World Economic Forum, has an excellent regulatory environment, together with the government's leadership and vision in leveraging information and communication technologies.

There are traditional rivalries, even in peaceful regions of the world. When I told friends in Sweden that I was going to write an article on Danish innovation, they mused: "Danish innovation. You mean, innovation in the bacon industry?"

These friends will be choking on their ecological breakfast yoghurt, for Denmark is in fact one of the most innovative nations in the world, according to the European Innovation Scoreboard. And it heads up a lot of other statistics: the lowest effective unemployment; the best IT networked (see panel over page), according to the World Economic Forum; best business environment, according to the Economist Intelligence Unit. Oh - and the happiest, according to another survey.

The Danes are also richer per capita than the Swedes: one thing Swedes do know is that the 1.5 Danish kroner to one Swedish krona relationship has been unfavourably reversed - as any Copenhagen restaurant bill will unpleasantly remind them.

Copenhagen University has been the big European riser in the global university rankings in the last decade: it is now the eighth-best university in Europe, surging ahead of all its Swedish and even German rivals. Its success has been attributed to a big rise in the number of students studying engineering and natural sciences. The students are said to have been attracted by innovative and witty government recruitment campaigns. They include the website [new window], where users choose an engineer avatar and navigate their way through a series of problems, a means presumably to nab the 'World of Warcraft' generation to make them thinking engineering is sexy.

Swedes always tended to attribute Danes' wealth to the Danish talent for getting the best deal - a nation of pig farmers, talented at market haggling - who, having ripped off generations of Swedish tourists, have applied these same talents to Europe and its generous agricultural policies for 30 years in order to surge ahead.

The idea that Denmark is a savvy, highly technologically innovative country seems to many Swedes an absurd proposition. Where are the famous Danish inventors who - like Swedes - invented dynamite, the zip-fastener, the artificial kidney and the artificial respirator? Where are the big Danish industrial concerns with powerful in-house research units that go on to make products that sell around the world, like Swedish Ericsson, maker of phones, SKF, which makes ballbearings, ABB, the engineering firm?

Where are the Danish Saab and Volvo and the Danish defence industry, ask the Swedes, who are the world's largest per capita defence exporters, ahead of Israel.

Small companies in big markets

The answer is that the Danish model, based on flexibility and adaptation of other country's inventions, may be better suited to this globalising era than the centralised, big industry Swedish one.

I am talking to Finn Madsen from Vestas, the world's largest manufacturer of wind turbines, which is indeed Danish. He is convinced that working for the company is an exciting proposition for young engineers: the wind turbine involves numerous engineering specialisations; wind power is the most mature sustainable industry; it provides 20 per cent of Denmark's energy requirements. Denmark produces half the world's wind turbines. Britain has a huge under-utilised capacity for windpower: the depressions that spin across the North Sea and blow across Denmark making it a windy place affect Britain first. Add to that the dwindling North Sea oil, and you have yourself an industry.

He emphasises that Vestas is a global company with worldwide career opportunities, competing with Microsoft for the best brains with the most attractive packages. Though in Denmark the research base is attractive too, with good quality of life and tax breaks for professionals who come to live here: the 55 per cent tax rate is not one of the most popular aspects of Denmark to outsiders.

All this is very interesting, but in the context of the Danish model in innovation, what is remarkable is how untypical Vestas is - a world leader in its niche, with powerful in-house research capabilities, much like Nokia in Finland or Ericsson in Sweden.

Denmark, unlike its neighbours, is not dominated by industrial giants who invent a lot of their own stuff. Rather, the Swedish stereotypes are, to some extent, correct: it is a country dominated by small firms - and a huge food industry - whose own research is often minimal.

Small countries face a big challenge, says Bengt-Åke Lundvall, economics professor at Denmark's Aalborg university and a world-leading expert on innovation. These nations must seek to compete head-on with the research power of, say, the US and China - just like Sweden has done. The key to meeting this challenge is realising that Sweden's model is not the only answer. Finland and Sweden always top EU rankings on research per capita: nearly 4 per cent of GDP - well in excess of the 3 per cent goal that the European Commission sets as its benchmark in order that Europe can remain technologically competitive. In fact, Swedish and Finnish R&D levels exceed even those of the US. Sweden is held up by the European Commission as the model of research intensity against which less virtuous societies must compare themselves to meet the challenges of the 21st century.

The Danish model for business success

What the Danish model teaches us, Lundvall says, is that innovative societies don't have to invent lots of stuff themselves: in fact, this news must come as rather a relief to many smaller countries around the world: the Danish miracle is easier to follow than the Swedish model, which has always been almost Soviet in its centralism and ambition.

What aspiring wealthy states have to do is to rapidly identify clever inventions by others and sense where they can best be fitted into current society. Many legitimate innovations founder because no one knows how to commercialise them or slot them in with current production processes.

The Danish model requires an educated workforce and educated consumers. Lundvall says it requires a population willing to communicate needs with each other, to learn about technology all their lives. There must be good relations between managers and staff, so that the latest changes do not pass decision-makers by.

Lundvall says Denmark has all these things, because the structure of its society is flat: there are no great income and class differences, no great hierarchies in the workplace. In fact, to an outsider, it is often difficult to tell managers apart from the workers. They have informal, easygoing relations. Relationships between strangers are characterised by a high degree of trust. This makes for a quick and rapid dissemination of good ideas around the country.

Some of these qualities, such as the flatness of hierarchies and high degrees of trust, are shared with other Scandinavian nations.

Further, says Lundvall, the Danes are more commercial and communicative than the Swedes, being historically the nation of trading merchants and haggling pig-farmers as opposed to the woodcutters and engineers of their northern neighbours. There is the famous Danish gemutlichkeit (which they call hygge), which promoted an exchange of ideas.

Spaghetti management at Oticon

I visit Oticon, the largest hearing aid manufacturer in the world. The company's management is so laid back, hands-off and employee-empowering it's almost a parody of the Danish approach.

Some 20 years ago, a new chief executive introduced what he called 'spaghetti management', an innovation that earned many column inches in the international business magazines: workers had no desks, no offices, no chairs, just a small set of drawers with wheels. They would push these wheels around and coalesce around groups of their choice in open-plan offices; they were allowed to start on any project that took their fancy.

These days they have reined it in a bit, at the request of the workers who still sit in open-plan offices and have laid-back bosses. I am greeted by the chief engineer, Morten Falk Reventlow, in the beautiful, classically Danish designed modern offices on a windy plain outside Copenhagen.

He produces a small hearing aid the shape of a diamond and the size of an earring: this is a fashion item, costing $1,600 and with a tiger-striped option. He then shows me a hearing aid from just ten years ago, which looks like an NHS medical instrument - very visible and ugly - and explains just how much work has gone into making the hearing aids.

"It is a job of continuous, fine-tuning and incremental improvement," he says. "We work closely with designers, marketers and others in the industry. Our strength in Denmark is continuous, incremental technical improvement through communication with our suppliers and customers," he says, adding that Oticon has been in the business for over 100 years.

Dynamism and equality

As I leave, walking down to the train stop, I reflect on the observations from Bengt-Åke Lundvall, who has been studying Scandinavian innovation since 1973, to which I would like to add some of my own.

Like many UK-based Scandinavians, I sometimes get frustrated with the hierarchism and vicious relations between management and staff of British workplaces, but admire managers' aggression, ability to communicate, and commercial instincts.

In Sweden, on the other hand, there is equality and personal trust - which I find much more appealing - but also there is sometimes a sense that "we know best, not the customer". Swedes can be a bit socially awkward; the Danes are always game for another beer. Sweden produces an enormous amount of science and technology for its size, but the nimble Danes have overtaken them.

There is a dynamism and equality about Denmark, with a lower profile in the world than either Sweden or the UK, but wealthier than either. It seems to combine the best of the British and Swedish ways of things which befits a country in a direct line of travel between the two.

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