PRESENTATION: Dr. Runólfur Smári Steinþórsson, prófessor, Viðskiptafræðideild Háskóla Íslands.

1. Iceland
In Search of a Path for
Competitiveness:
A study (in process) of a progressive plan
Runólfur Smári Steinþórsson
Center for Strategy and Competitiveness
This presentation is based on different sources and research done by the presenter.
Among the sources is a Status Report on Iceland which was jointly produced by
The Social Science Institute and the Economic Institute at the University of Iceland (2009);
Meltdown Iceland: Lessons on the World Financial Crisis from a small bankrupt island, by
Roger Boyes (2009); information from the World Economic Forum; and information from a
recent report from the European Commision on European Economic Forecast in Autumn 2010,
as well as publically available material on the Program 20/20 in Iceland via www.island.is
Also, there is information that is based on a discussion in a seminar on Competitiveness and
Professor Runolfur Smari Steinthorsson Presentation at the MOC Network Cluster Research Workshop,
the 20/20 program, held at the University of Iceland Dec. 8, 2010.
Iceland – In Search of a Path for Comptetitiveness Harvard Business School, Hawes 102, Dec 12, 2010

2. Overview:
• The collapse of the financial system in 2008...
• The situation in Iceland in 2009...
• The idea of Strategy 20/20 is put forward...
• The Strategy 20/20 Program is defined...
• The scope of the Strategy 20/20 Program...
• The pillars of the Strategy 20/20 Program...
• The intentions of the Strategy 20/20 Program...
• The timeline of the Strategy 20/20 Program...
• The activities of the Strategy 20/20 Program...
• The process and outcomes of the Program...
• Some learning points...
Professor Runolfur Smari Steinthorsson Presentation at the MOC Network Cluster Research Workshop,
Iceland – In Search of a Path for Comptetitiveness Harvard Business School, Hawes 102, Dec 12, 2010

3. Iceland´s Financial Collapse in 2008 (1)
• After an economic upsving and enourmous expansion of
private banks, in Iceland and mainly abroad, sparked
by internationalisation of several Icelandic companies –
the banks collapsed in October 2008...
• This collapse must be considered in the context of the
Global Financial Crisis... ...in that sense the banks
suffered from an international system failure...
• But it has been revealed that the banks and some of the
most aggressive companies had been run and expanded
in a very irresponsible and unsustainable manner...
• ...“God Bless Iceland”... The Prime Minister said on
national television in October 2008...
Professor Runolfur Smari Steinthorsson Presentation at the MOC Network Cluster Research Workshop,
Iceland – In Search of a Path for Comptetitiveness Harvard Business School, Hawes 102, Dec 12, 2010

4. Iceland´s Financial Collapse in 2008 (2)
• Assets of the banking sector had been 1xGDP in 2000,
8xGDP in 2006 and ended in 10xGDP in 2008...
• The Central Bank had mainly focused on fighting inflation,
(interest rates from 5.3% in 2003 to 15.25% in 2007)...
• Warnings came... Iceland was vulnerable and attacked...
• ICESAVE’s “We make a clear difference”... ...ended with
the British authorities activation of the Anti-Terrorism, Crime
and Security Act of 2001 against the Icelandic Banks...
• Public demonstrations then led to the fall of the government
and elections... ...but political unstability has remained...
• Iceland reluctantly adopted an IMF program to reestablish
international credibility and to get loans...
Professor Runolfur Smari Steinthorsson Presentation at the MOC Network Cluster Research Workshop,
Iceland – In Search of a Path for Comptetitiveness Harvard Business School, Hawes 102, Dec 12, 2010

5. Iceland´s Financial Collapse in 2008 (3)
• The Icelandic State (re)established small domestic banks
(over a weekend) to prevent a nationwide caos...
• The currency (ISK) did over time decrease severly (50%)...
• Inflation had increased sharply and remained high for a
considerable time... (18,6% at its peak, January 2009)
• Economic activity and domestic demand dropped sharply
(...leading to a fall in real GDP of 6,8% in 2009)
• An asset price bubble did burst and asset prices melted...
• Many companies lost ground due to the fall of the banks,
now either bankrupt or in the process of being refinanced...
• The accumulated assets in the Icelandic Pension system
are now more important than ever...
Professor Runolfur Smari Steinthorsson Presentation at the MOC Network Cluster Research Workshop,
Iceland – In Search of a Path for Comptetitiveness Harvard Business School, Hawes 102, Dec 12, 2010

6. The situation in Iceland in 2009
• More people were moving abroad than to the country...
...both of foreign and Icelandic origin... ...working abroad...
• Unemployment had become a serious problem... ...in July
2009 the unemployment reached 10% at its peak (7,2%)
• Many families and many SME´s were due to the asset
meltdown and the inflation and forex development in a
huge debt-crisis... (2010: Relief package aims to help
around 60.000 people and about 7000 SME’s)
• The economy had contracted severly, the financial sector
was small, the building sector stood still, estate markets
were frozen, investment was down (50%) and consumption
was severly diminished (16%)...
Professor Runolfur Smari Steinthorsson Presentation at the MOC Network Cluster Research Workshop,
Iceland – In Search of a Path for Comptetitiveness Harvard Business School, Hawes 102, Dec 12, 2010

7. The Strategy 20/20 idea put forward
• Iceland and the Icelandic People had been hit badly...
...the financial collapse had led to recession and political
turmoil... ...what could be done about it...
• One of the ideas that was in the air in the Spring of 2009
was to establish a project or program that would focus on
the Competitiveness of Iceland and ways to increase the
prosperity of Iceland... ...this idea was plugged and
promoted especially within the Socialdemocratic Party
(S)... ...it was taken up in the agenda of the New (S-LG)
Government along with many other ideas...
• The 20/20 idea was adopted but probably not in the way
that the idea generators had worked for...
Professor Runolfur Smari Steinthorsson Presentation at the MOC Network Cluster Research Workshop,
Iceland – In Search of a Path for Comptetitiveness Harvard Business School, Hawes 102, Dec 12, 2010

8. Why be concerned about
Iceland’s Competitiveness?
• As well known - a study of a nations
competitiveness both reveals the particular situation
of the country in question and that understanding
can open up for possibilities to enable and enhance
the value creation in that country - leading to
increased prosperity in the country...
– Iceland’s rank on the World Economic Forum list (more than130 nations)
• 2006-2007 14. place
• 2007-2008 23. place Iceland’s Competitiveness has
• 2008-2009 20. place deteriorated considerably
in the last years...
• 2009-2010 26. place
• 2010-2011 31. place
Professor Runolfur Smari Steinthorsson Presentation at the MOC Network Cluster Research Workshop,
Iceland – In Search of a Path for Comptetitiveness Harvard Business School, Hawes 102, Dec 12, 2010

9. The Strategy 20/20 Program defined
• In the S-LG Government agenda a progressive plan
should be developed – taking the following into account:
– First, the PM ministry will mobilize and lead a
collaborative effort that will develop regional progressive
plans for all parts of Iceland in order to strenghten the
basis for employment and industrial activity as well as
quality of life in the future, especially obtain and put
forward a joint vision.
The goal is also to integrate the public plans for
development of infrastructure (roads, harbours, airports;
communication), tourism and remote areas, as well as
plans for enlargement of the activitites of the local
municipalities. Also as part of this effort for integration of
plans all other public plans should be included, including
plans for developing certain areas or clusters.
Professor Runolfur Smari Steinthorsson Presentation at the MOC Network Cluster Research Workshop,
Iceland – In Search of a Path for Comptetitiveness Harvard Business School, Hawes 102, Dec 12, 2010

10. The Strategy 20/20 Program defined
• In the S-LG Government agenda a progressive plan
should be developed – taking the following into account:
– Second, within this project was also an effort to
develop a new holistic employment and industrial
policy, based on equality and ethics with a focus on
sustainability and green industrial development.
– Third, it should be considered how competitive the
Icelandic industries were in international comparison
• At this point ((2009) and maybe still) many and among
them leading politicians in Iceland were very sceptical to
concepts like competitiveness and internationalization –
the orientation was inbound rather than outbound...
Professor Runolfur Smari Steinthorsson Presentation at the MOC Network Cluster Research Workshop,
Iceland – In Search of a Path for Comptetitiveness Harvard Business School, Hawes 102, Dec 12, 2010

11. The Strategy 20/20 Program defined
• A steering group was appointed under leadership of Dagur
Eggertsson, vice chairman of the Social Democratic Party
active in the municipal government of Reykjavik...
• Also in the group were four ministers of the Government of
Iceland, two representatives from local and regional
municipal authorities in Iceland and in the beginning of the
project the rector of the University of Reykjavik...
• Working with the steering commitee were staff from the
office of the Prime Minister of Iceland. The group appointed
a project coordinator, a consultant from the company
Expectus...
• Now in the end of the program, I am told that close to 200
people have as volunteers been involved in the work and
around 800 people have taken part in the many activities
held in the name of the project...
Professor Runolfur Smari Steinthorsson Presentation at the MOC Network Cluster Research Workshop,
Iceland – In Search of a Path for Comptetitiveness Harvard Business School, Hawes 102, Dec 12, 2010

12. The scope of the 20/20 Program
• The Strategy 20/20 Program became already from the start
somewhat of an all-inclusive program based on volunteers...
• The choice of the people in the steering group clearly
indicated both a wide scope and high ambitions...
• The program was devided into three pillars:
– Progressive plan 2010... ...including central integration of public plans
and reorganization of public service, reporting on demarkated regions,
arranging open meeting in regions and a closing conference...
– A vision and employment/industrial strategy... ...including status reporting,
scenario planning, grassroot national assembly, conferences and
collective work towards a joint agreement on a strategy proposal...
– Competitiveness... ...including studies and information gathering on what
determines national competitiveness, reporting on Iceland’s WEF ranking,
expert group studies and recommendations...
Professor Runolfur Smari Steinthorsson Presentation at the MOC Network Cluster Research Workshop,
Iceland – In Search of a Path for Comptetitiveness Harvard Business School, Hawes 102, Dec 12, 2010

13. The Pillars of the 20/20 Program
Steering Commitee
Adv. Council
Project Groups Project Groups Project Groups
Get an overview Iceland 2009 What determines
of different plans Status Report nat. competitiveness
The country A conference
devided in regions Scenarios
on WEF ranking
Reorganization National Expert groups
of public service Assembly studies
Progressive plans Employment/ Recommendations
for regions Industrial Policy Proposals
This picture is taken from the Proposal to the Parlament, document 476. Translation of headings to english is done by RSS.
Professor Runolfur Smari Steinthorsson Presentation at the MOC Network Cluster Research Workshop,
Iceland – In Search of a Path for Comptetitiveness Harvard Business School, Hawes 102, Dec 12, 2010

14. The intentions of the 20/20 Program
• To have the Icelandic Parlament agree on that the
Government of Iceland would develop a Progressive Plan...
• The main aim would be industrial development and
prosperity in the society... ...for a leading position...
• A special focus would be on Iceland’s Competitiveness in
the long term... ...investment in HC, Infr, Ed, Inno, Env, Soc.
• Special employment/industrial policy... ...diversity, equality,
business ethics, green industries and sustainability...
• Integration of public investment plans and reorganization of
central public service and develpment of regional service...
...for efficiency and increased cooperation across sectors...
• Focus on the country and regions...
Professor Runolfur Smari Steinthorsson Presentation at the MOC Network Cluster Research Workshop,
Iceland – In Search of a Path for Comptetitiveness Harvard Business School, Hawes 102, Dec 12, 2010

15. Some of the Providers to the Program
• The Social Science Institute at the University of Iceland and
The Economic Institute at the University of Iceland provided
a 2009 Status Report...
• The Innovation Center Iceland was involved and assisted in
the development and conduct of the Program...
• The Center of Strategy and Competitiveness, at the
Universty of Iceland was assigned a temporary role in
helping the expert groups to find relevant information and
material on competitiveness. The Center also provided
some secreterial assistance to the Program.
• The Government, via different ministries, was intended to
be in the lead in many activities...
Professor Runolfur Smari Steinthorsson Presentation at the MOC Network Cluster Research Workshop,
Iceland – In Search of a Path for Comptetitiveness Harvard Business School, Hawes 102, Dec 12, 2010

16. The timeline of the 20/20 Program...
...until May 2010...
June October - November January - March
The program is informed The project group on Regional “national February - April
about the the plans for a Developing Employment assemblies” held in 8 Regional status
grassroot (ant) inittiated and Industrial Policy different regions of reports provided
national assembly appointed Iceland (70-150 by Expectus
May
participants in each)
Expert group
June September October - January January conference on key
The steering Project and expert groups Project & expert groups Conference on str. issues for
committee on competitiveness on competitiveness future issues for Iceland’s
appointed appointed (ir)regular meetings Ind. and Society Competitiveness
June May
2009 2010
June October December February
July - August April
The steering Scenario Iceland 2009 The Strategy Conference on Conference on
committee´s status report 20/20 project reorganisation
Planning the results of the
first meeting is presented presented in of public service
sessions regional assemblies
the Parlament
June September November January February
Iceland 2009 Conference on The ants Strategy assembly Student‘s
status report competitiveness National Assembly with ministers clusters projects
is asked for and WEF ranking (1200 participants) and key players introduced
(world café approach)
Professor Runolfur Smari Steinthorsson Presentation at the MOC Network Cluster Research Workshop,
Iceland – In Search of a Path for Comptetitiveness Harvard Business School, Hawes 102, Dec 12, 2010

17. The activities of the 20/20 Program
• There was a big emphasis on mobilizing very many
people on a voluntary basis in a steering group, advisory
council, project groups, expert groups, conference-
workshops, regional workshops, national meeting...
• The program was connected to and apparantly made as
some kind of an umbrella for reconsidering the national
investment plans as well as reorganizing the public
service – with public administrators working on that...
• Project coordination was in the hands of a consultant,
the consulting company did also prepare regional status
reports and did some international comparisons...
Professor Runolfur Smari Steinthorsson Presentation at the MOC Network Cluster Research Workshop,
Iceland – In Search of a Path for Comptetitiveness Harvard Business School, Hawes 102, Dec 12, 2010

18. The process and outcomes of the Program...
• In the beginning of the Program there were both interest
and support. Many people joined in on a voluntary basis
and took on roles but when it came to the actual work many
did not attend meetings or deliver...
• Some formally abandoned the Program, others more or less
dissappeared, others staid on and did their piece...
• The work of the Program went on as can be seen in the
timeline, intensified by the work of Expectus and the staff...
• The outcomes of the Program, apart from the more or less
successful mobilization of people, the wide scope and the
many steps completed in the process are two final
documents: a) Report with the results of the Program, and
b) Proposal based on the results...
Professor Runolfur Smari Steinthorsson Presentation at the MOC Network Cluster Research Workshop,
Iceland – In Search of a Path for Comptetitiveness Harvard Business School, Hawes 102, Dec 12, 2010

19. The timeline of the 20/20 Program
June January - March
October - November
The program is informed Regional “national
The project group on February - April
about the the plans for a assemblies” held in 8 Regional status
Developing Employment
grassroot (ant) inittiated different regions of
and Industrial Policy reports provided
national assembly appointedIceland (70-150 by Expectus
May
participants in each)
Expert group
June September October - January January conference on key
The steering Project and expert groups Project & expert groups Conference on str. issues for
committee on competitiveness on competitiveness future issues for Iceland’s
appointed appointed (ir)regular meetings Ind. and Society Competitiveness
June Des
2009 2010
June October December February November - December
July - August
The steering Scenario Iceland 2009 The Strategy Conference on Final report from The
committee´s status report 20/20 project reorganisation Steering Commitee
Planning
first meeting is presented presented in of public service and a strategy
sessions
the Parlament proposal to the
June September November January April Government
Iceland 2009 Conference on The ants Strategy assembly Conference on
status report competitiveness National Assembly with ministers the results of the
is asked for and WEF ranking (1200 participants) and key players regional assemblies
(world café approach)
Professor Runolfur Smari Steinthorsson Presentation at the MOC Network Cluster Research Workshop,
Iceland – In Search of a Path for Comptetitiveness Harvard Business School, Hawes 102, Dec 12, 2010

20. Learning points – so far...
• The 20/20 Program was both for
good and for bad pushed as a
Income and activity driven
intermediate organisations voluntary relations driven activity...
The Private Sector The Public Sector • The Program was expanded during
A: B: the process, despite obvious lack of
Companies Government resources and often very mixed
* driven commitment by participants...
* Relations
intermediate organisations The Program suffered due to lack
•
of resources and it seems that it
C:
was not ranked high in order of
Stake driven Policy driven
intermediate organisations NGO’s/nonprofit
organisations
intermediate organisations priority by many stakeholders...
Analytical model based on work from • Some of the activities do not seem
© Runólfur Smári Steinþórsson,1995.
The Third Sector
relations driven, but rather more
public or even politically driven...
Professor Runolfur Smari Steinthorsson Presentation at the MOC Network Cluster Research Workshop,
Iceland – In Search of a Path for Comptetitiveness Harvard Business School, Hawes 102, Dec 12, 2010

21. Learning points – so far...
• The 20/20 Program was put
forward as a proposal in Parlament
Income and activity driven
intermediate organisations but has not been taken to votes...
The Private Sector The Public Sector • There are many things that indicate
A: B: that the Program’s development
Companies Government has somewhat been of an
* driven emergent nature...
* Relations
intermediate organisations The Program’s leader actually said
•
in September 2009 that a Program
C:
like this was doomed to be a
Stake driven Policy driven
intermediate organisations NGO’s/nonprofit
organisations
intermediate organisations failure...
Analytical model based on work from • A question arises – was the
© Runólfur Smári Steinþórsson,1995.
The Third Sector
Program intended more as a
process than producer of results...
...or...
Professor Runolfur Smari Steinthorsson Presentation at the MOC Network Cluster Research Workshop,
Iceland – In Search of a Path for Comptetitiveness Harvard Business School, Hawes 102, Dec 12, 2010

22. Concluding remarks
• The Strategy 20/20 Program is one of many activities and
projects that the Government of Iceland has initiated in the
aftermath of the collapse of the banks and the crisis...
• It is fair to say that the Government of Iceland has been in
the last two years more or less in the role of fighting fires and
dealing with one crisis after another...
• This study of the Strategy 20/20 Program has just been
started, it is a part of a wider research project that aims to
uncover the initiatives and activities that together reveal the
path that Iceland is and has been on towards enhancing
it´s competitiveness...
• The Ultimate Goal is to be able to contribute more to that
development...
Professor Runolfur Smari Steinthorsson Presentation at the MOC Network Cluster Research Workshop,
Iceland – In Search of a Path for Comptetitiveness Harvard Business School, Hawes 102, Dec 12, 2010