How digital systems make business easier

The real success of Estonia is that digitization is about technology only, it's about removing work that never should have existed in the first place. Welcome back to the Art of Digitalization. This month we're looking at the ease of doing business. What actually makes it simple to start, run and scale a company in a digital society. And today's guest knows this world inside out. I'm joined by Ivar Merilo, a serial founder who has built and digitalized everything from event management tools to logistics platforms like Waybiller. So he has worked with government, heavy industry and startups giving him a rare hands-on view of what helps and what hinders business innovation in Estonia. Welcome to the podcast Ivar. Thanks for having me, great to be here. It's great to have you. This was a very short interlection. You have a lot of experience. Could you tell us a little bit more about yourself and how you became a serial entrepreneur? Sure. If I had to summarize my career in one sentence, it would be this that I keep finding processes that waste people's time and then I try to fix them. So I originally started in software through a company called Torgate where we worked a lot with traditional industries, especially forestry and timber. While digitalizing logistics there, we noticed something interesting. The Estonian state forest, namely was already using electronic waybill or digital waybills. And timber transport worked with far less paperwork, fewer disputes and much clearer data. And that raised a very obvious question. If this worked for timber, why it doesn't it work for other bulk goods like aggregates, grain, wood chips, concrete. And that question eventually became waybiller. So the reason this even felt possible is very Estonian. I grew up in Estonia, digital identity, digital signatures, online registers are just very normal here. So when I see paper-based workflow, my first reaction isn't this, this is normal, not that this is broken. So yes. Wait, so when you see paper, it feels normal or do you get like goose bumps and feel weird it out? Well, if I see paper, I constantly think whether we can digitalize it. Cool. Okay. I keep saying that. So you mentioned waybills, though. And this may not be the most familiar word to some of our listeners. I mean, I had to Google it. So could you please explain what you mean? What is this thing? Yes. So waybill is a document that is showing where the delivery is picked up, who is transporting, where is it going, what is in the load, what is the weight of it. So it's basically a transport document. In Estonia, it's required by the law. So if you transport anything, you need to have a waybill if you drive to the road. And it used to be all on paper. So on paper, it worked like that, that there were three copies. Shipper received one copy, gave two copies to transport company or driver, then driver delivered the load to destination and left one copy there. So there were three copies. And in every company, like Shipper, Carrier, and Receiver had an accountant who entered the same data eventually to their whether they excel or to the ERP. So basically three people did the same work and it was extremely inefficient. I can imagine the amount of mistakes that is actually possible. Exactly. So, first thing is that they entered this data and then they start comparing this data and there can be yes mistakes. So somebody entered number one, number seven, for example. And then they argue and try to identify who is right. Exactly. And this is the second part that is extremely inefficient. So what we actually did or what we thought is that you don't need three copies. You need actually a single copy or single dataset. And this is what we started solving with webillar. We created a single dataset of webill and gave permissions to different parties to access it. And yes, and now it's not just a digital document, it's a single source of truth actually for the delivery. Well, coming from Estonia, it makes total sense. I mean, we have the X-road which allows us to reuse data which is held, they'll store it in a single source of truth though, very, a very stonian approach indeed. Yes. And to move on from there, first we we resolved this issue actually. We had innovative companies or early adopters who took this ewebill and started using it and found out that yes, it's much more efficient to do it like that. And then there were some parts on the webill that were still inputted manually at first. One of them is weight because usually every webill and transport in bulk transport includes weight and weight is the basis, weight is usually used to invoice between each other. And this weight when we started was inputted also manually but what we did was that we started integrating with scales. So truck scales, loader scales to get this data directly from there. And by now we have integrated with nearly 200 scales all over Estonia and not only in Estonia but also in Norway and Poland in Latvia. Yes, and the data is not inputted manually anymore, it's coming directly from the scale. How do you build a scale for a truck? I mean, did you have to build a scale for a truck or were they already built and you just digitalized the scale? Yes, scales were already there. Even now we see that they are there, they have been there for 15 years, sometimes even more, sometimes some scales are very old. They are gold also way breaches like the truck scales where truck drives them on them. And they are also loader scales that are attached to the loader so loader when they load it. And yes, scales were there. We worked out the device that we connected to the scale and got the data from scale and added it to webill and now we can connect this device with any scale in the world. Lovely. Tell me about the role of the regulator in that scenario, so logistics is famously paper based. You've been able to help some entrepreneurs in Estonia and in the neighboring region. But how did the government, did they help you? Did they consult with you? Because there's a push towards real-time economy in Estonia, the one last thing that we need to digitalize roughly. So were they part of the process? Yes, government was extremely supportive from the beginning. So when we had an idea, the great waybiller, we approached government already at that time and asked their feedback whether it makes sense to do it like that. We didn't only visit government, we also visited many private companies at that time. And they were supportive from the beginning. They said that yes, it improved the transparency and they said do it and we support you. And this was extremely great. Is it just so easy? You just called a bureaucrat, said hi, a house solution. How does it work? Is it that easy in Estonia to cooperate with the government? Yeah, in Estonia it is, extremely easy, you google the phone number and you take the phone and you just call. And people are very responsive and they even like to talk to the private sector because they know that they get input from there and when you're working for the government you don't have to know everything. You have to have this mindset that if I don't know it, I approach private sector and ask from them and even I can go and visit them, I can see how the processes are working. And this works extremely well in Estonia. So public sector actually involves private sector, invites them to their offices, talks to them. So this is all very great. Because it's one of the biggest challenges globally for a government official to be brave enough to admit that they don't have all the data, they don't know everything. We can't expect poor politicians or government officials to know everything about everything. So Estonia is not only 100% digital, it's also a pioneer of co-creation and the involvement of different stakeholders. What else is good? Yes, well we have a great tax system in Estonia, we have zero corporate income tax if you are not taking money out from the company but continue reinvesting it and this is really good, this encourages to think long-term, not short-term, not to take money out right away but to reinvest it so that you can accelerate long-term growth of the company. This is probably one of the reasons we have quite a robust startup ecosystem, I mean we're friendly in all sorts of business-related ways but the zero percent corporate tax really does push companies to reinvest rather than take out dividends. We really do have one of the most competitive, if not actually, the most competitive tax system in the world but that's not the only way we support our entrepreneurs, right? We have Enterprises Estonia that gives out grants to those who want to invest locally, have you ever taken advantage of these grants? Yes, of course, this is also a great initiative that government has, that they have created Enterprises Estonia and sharing those grants and it used to be much more bureaucratic. Now it's like people working for Enterprises Estonia, they have tried to create less bureaucratic like more automated and asking less questions that just take time from the entrepreneurs who apply for these grants because there were times where government maybe didn't realize that the main business or the main goal of any company is to make business and earn money and not to fill in some forms, long forms and papers. That is the goal of real-time economy, right? Yes. To reduce the amount of data that entrepreneurs have to submit even though the government already has that data, we can reduce it by 90 percent. Exactly. Can't wait. So what I've seen is that those application forms are thinner now and there are less data you have to fill in as a company and that also encourages companies to apply for those grants because when we started as a startup, I remember there was a saying that don't apply for those grants because it's so long process and it takes so much time. Now it has changed. I would encourage that when you start a company, try to apply from Enterprises Estonia and the money. It's not so bureaucratic anymore. If you don't know how to do it, there are companies who can easily help you with that and it's not so expensive anymore as well, so take advantage of it. What about procurements? I know this is kind of sudden but then it's the elephant in the room, right? So the state doesn't just give out grants, it also needs help from the private sector, it needs to procure certain things and it is usually quite a complicated process. What has your experience been with procurements? Yeah. Well, the main problem with procurements is that they are in most of the cases, they encourage to accept the company who has the lowest price offer and when you try to, especially in the software development, if you try to provide quality, then this quality is not always the cheapest. So that's why it's important to change those procurements in a way that you don't, you have as a government, you have actually a possibility to accept also companies who are not the cheapest but they have some other qualities or you know that their work is better but they are more expensive because of that because they provide more quality work. It has changed recently. I have seen some governmental organizations who are able actually to put together those procurements in a way that you don't have to choose the cheapest one anymore and this is great. This guarantees that we get better quality products as a government. The second thing is that if you procure anything as a government, you think that you split the work to a smaller chunks so that you are not actually procuring a monster. This used to be also, like I don't know, 10 years ago, there have been such procurements where the government has, they have tried to build a software that is too big. So it takes years to actually do develop and when you launch it, then users actually see that, oh, it's not a software we actually want because it's so big, there are no people are not capable to think like all the details if the software gets so big. So it's important to keep software pieces small, procure in small chunks because as soon as you release it, you start getting feedback from the users. Isn't that the agile mode, basically, the way agile method, basically, so you can ask for feedback and improve as you go so that you don't have to spend years and billions on producing something that actually has no value for the user. So you feel that it has been the practice so far but it's also getting better in that sense. Exactly. It has become better already now and hopefully it will continue like that. One additional thing for the government to think is that you as a government act as a standard decision agency, so that you try to standardize processes and standardize some core concepts that are necessary in the government so that whoever actually develops or can be 10 different companies actually developing software, they all use the same standards. Because then you can, it's again about the quality, then you get a better quality products. I'm not an IT person, so let me just try to ask you something. If everyone develops software according to specific standards, does that mean that technically we could put a puzzle together whichever way we want with those components because they're compatible? Exactly. One example of this is a design system, like government can have single design system and then you can have 20 different companies building products for you but they all follow the same design principles. So in a sense there are strict rules how you build something but the old products look basically the same so it feels like it's built by the one big company but actually not you have 20 teams who have actually built it and yes? We've already touched on this quite a few times, like we've talked about digitalization mentioned, the X-road and the you started from digital signatures when you were introducing yourself. So how big of a role does this digital state play in making doing business in Estonia easier in your opinion? Yes, that's a very good question. I think it plays important, very important role. When we think about Estonia one core, one thing that Estonia is very well known are digital signatures for instance and when you're asking what role does it play, it plays extremely important role because when we used to have digital signatures on paper it made the whole economy so much less efficient because everybody, you couldn't sign something in seconds like it took time to actually sign, maybe sometimes you had to go somewhere. I guess younger Estonia and even they don't even know how it was so they are so used to actually doing everything digitally and I have some foreign friends and they have also mentioned that oh, I chose to stay in Estonia because here it's so easy like whenever you want to do something, you have some appointments you need to do or you have to, anything you have to deal with government, you can do it online without leaving home and if you're a parent for example and you have small children at home it makes your life so much easier to do, so you can do so many things without leaving your home which is great. At least more time for doing business or enjoying family time which is the point of the digital society but yeah, I know quite a few people from different countries who become e-residents in Estonia so that they could simply sign things digitally from the comfort of their home wherever that may be, alright, so e-residency is also a great concept that Estonia has actually developed. So, I've been hearing thoughts about possibly using the infrastructure or the philosophy behind e-residency and apply it to AI, like AI residency type of thing, I'm just trying to switch to a very hot topic obviously, AI, which needs to be a research further and we don't want to give AI agents a legal status so they could compete with human entrepreneurs but if we don't go into like futuristic mode, do you use AI in your work? Does it help you, might it help you in the future, what is the situation in your business? Yes, I am using personally a lot, like I'm using it almost for everything so I have even, I have developed myself thinking every time I need to do something, I think whether it can be solved with AI and if the answer is yes, then I use the AI which is great and for me AI is productivity at all, so it actually helps you to do things that you used to do an hours, now you can do in minutes which is extremely awesome concept if you think about it and it's not only about me, the whole world actually does it like that and I see that in a couple of years or something people who are not using AI they will stay behind so because you are doing things slower than your competitors or any other person who is working in the same field. So basically you lose on competitiveness? Yes, you lose on competitiveness which is actually like optimizing these processes manual processes, I think it's going to become even more and more topical in a situation where the population of the world is about to start decreasing rapidly. So we need to become more efficient even if we live in a large economy because Stonia has had to deal with that problem from the get go, like where a million people is going to be less in a couple of decades, so but that's a problem that's very international. So AI could do a lot of the things that humans used to do and we can just keep being productive I suppose and keep up the economy running. Currently AI is used to solve smaller problems. I see that it would be really interesting to see when it starts solving huge problems like global problems that people have. We will see whether it happens or not, but yeah, currently in software development for instance it's extremely great to use so it helps you to write a huge chunk of code that you previously wrote manually from the scratch. What about hallucinations? Isn't that an issue? You don't want that in your code? Well, they definitely happen and most probably they will continue to happen. That's why I would say that AI doesn't take away the work or jobs. So it just changes how people do the work. So when social media actually came, social media also actually changed a little bit how people work. So AI is, I would say, a little bit comparable like it changes the way people work. So yes, you always, anything that AI produces, you as a human being need to verify, need to read it through and need to give more input to AI to actually make it better. So this will not go away, I am pretty sure. Speaking of humans, not everyone uses social media, not everyone uses digital technologies. What is your experience with humans in your industry, the truck drivers or the people operating the machinery? How well are they coping with the new digital tools that you've introduced to make their lives better? Yes, that's also a good question. There are younger people who are used to using technology, so they have used smartphones. For them, it's normal, they even ask for it every day like why we are doing it on paper, we would like to do it digitally. But there is a little bit older generation who didn't grow up with smartphones and with the whole technology we have nowadays and for them, it's difficult. So we as a waybiller, for example, we have a customer support and every day we are dealing with teaching them not only waybiller, but teaching them how to use technology at all. Oh, like digital literacy 101? Yeah, kind of yes, and we see it also great because we are bringing or increasing the digitalization level of everyone, so not only that we provide software to people who can use digital tools, but we are making people who have never used digital tools to use technology and maybe they start using something else due to that. Do you know that this is such a cool illustration of what we actually do here like in our society in Estonia? We teach one another how to use technologies. It is actually quite a common thing, but it's so cool to see an enterprise spending investing time into employees or colleagues, even though you know that this may not directly benefit you, it will benefit society in general. Now about building an AI agent to serve these people, though, let's automate that process. Take the human out of the loop, imagine all of the time you could see if an AI agent could teach them basically digital literacy. I think that teaching needs human involvement, so it's great to have a teacher who actually shows you things, especially if you are new to technology at all, like then you are not maybe you're not picking up things so easily, so it's very good if you have a person who explains you that push this button, go there, do that. When you have just AI agent doing that, okay, AI agent can also talk nowadays, which is great. I don't know, this concept has to be tried out, I'm not really sure about it whether it would work, but why not? We've talked, now we're talking about teachers and I actually, I want to ask you about that this new AI leap thing that we've launched in Estonia, right? We are not just teaching digital literacy to the young people, we are now teaching them how to use AI ethically and efficiently and so that they don't lose their creativity and their critical thinking skills in the process, which is a big, big thing for the generations, all of whom digital tools are just very, very normal. You said that the teachers are very important, how do you feel about supplementing a teacher with AI because this is what is happening in the AI leap program, we're not replacing teachers, we're supplementing them or at least that's the goal. As an interpreter, how do you feel about having a workforce in the future that is AI literate, not just digitally literate? By the way, my mother is a teacher, so yeah, I think, my mother has actually told or given the insight from the school and one of the problems that AI brings is that, yes, as you already mentioned, it takes away the creativity and this is something that needs some guidance, I would say. You need to change the processes at school as well a little bit, for example, if you give some homework then previously it was like that that children actually completed this homework at home and by doing it themselves. Now what happens is that they enter it to the chat GPT and get a sensor, so they don't even need to think and they haven't even developed thinking that, okay, I verify it, what it actually wrote, me, and this is a problem and I think that somehow this needs to be also teached how to do it. You need to separate somehow, you need to do more work at place or at school, so you cannot leave much to do at home because yeah, otherwise say. This is not going to give the same result, actually what we're talking about is a complete rethinking of how we teach generally because in the era of AI there is absolutely no point as you said, to give children homework the way we used to do a decade ago or even just five years ago, it is completely pointless. Yet we know that we're trying to cater to, the idea of introducing AI literacy into schools came from the private sector as a lot of great ideas in Estonia did and they're partially paying for it and we're trying to solve this problem of how to teach children AI literacy because we know that entrepreneurs, businesses, expect their future employees to have these skills we cannot ignore the need. Exactly and this is very important to actually start teaching it when children are at school already at that time, they need to learn like how to use AI and what are the dangers there and this all needs to be taught to them. So yeah, I fully support it that when the world changes what the AI has actually brought is that world has changed. Then there are changes done also in the education system and everywhere else where it's needed also at workplaces, yes and this is happening in Estonia which is great. Do you think we're going to get as far as having self-driving trucks in the streets that are going to take you out of business potentially? I mean obviously they're going to use your technology but still, since we're on the topic of AI anyway. Well, if you have a self-driving truck, it's still need a waybill so it doesn't take away waybills. Yeah, but this is a future that there will be definitely self-driving trucks. They are tested at the moment. Most probably at first they start driving on certain routes only so you have it very well on controls like bigger roads and some if you ask whether all the trucks will be replaced by self-driving trucks, I think no, like it will never happen. It's probably going to be drones anyway, it's going to be transporting stuff in the future. Okay, I was just thinking about introducing waybills for drones but that's just me thinking about how to do next. Speaking of what to do next, what is the next challenge for you? I mean, if you need one obviously because you keep looking for things you can optimize. Right? Have you had any ideas lately? What is the next thing that you're going to tackle? We'll see, currently my time goes to waybillar because we are in a place where we are where we yes, we have a working product, we have customers in Estonia, a waybillar is kind of a standard in bulk transport. So what we are currently doing is that we are scaling it and we are trying to make the product also more and more and more scalable. So we're taking away parts that are not scalable so optimizing to product a lot, making it better for all the users and this is an interesting challenge to tackle and of course I keep always my eyes open if I see something else where people spend a lot of time and energy. Of course, I find a way how to digitalize it, yes, we will see what the future brings. But let's talk about a little bit about scaling because actually this is an inherent part of an Estonian startup. You plan to export, you plan to scale even before you start coding, right? Because there is no internal market. And yet the ease of doing business that we find very normal in Estonia does not necessarily translate into international environments. So you want to scale your product, but then you're facing with a lot of bureaucracy and maybe other obstacles. How do you manage this? Yes. So, yeah, it's a thing with Estonia is that Estonia is small so startups building here, products, they start from, they think about going global from day one and it might not happen in bigger countries where people build products. And why is it important is that something that works in Estonia doesn't necessarily work in Latvia or doesn't necessarily work in Poland or Germany or US. So it needs some changes and needs adoption. And if you start thinking about it from day one, then you already, from day one, build global products. It's easier to scale when you're ready for it. So have you been able to penetrate international markets because the waybiller technology is being used by thousands of drivers who are operating in the Nordic. Tens of thousands. Tens of thousands. That is an unimaginable scale when we're talking about Estonia numbers so that clearly involves someone outside of Estonia. So how easy has the process been so far? Yeah, we are not only operating in Estonia. We have customers in Norway, in Finland, in Latvia, in Poland. So yes, in the US as well. So yes, we are already global product like we are not Estonian based product. In Estonia we started, we tested our product, it worked really well, it's, as I mentioned, it's kind of a standard in Estonia. And we are now expanding it in all other countries to make a standard also there. Did you have to also involve public authorities in other countries or since the product has also, like it's an MVP, it's been verified in Estonia, it works nicely, that you could skip that part maybe and just focus on the B2B part. We are doing both. So we are talking to governments in all those countries and we are talking to businesses. Pretty much the same thing that we did in Estonia. We saw it worked well. In Estonia it was so much easier than other countries. So getting contacted to the government, talking to them, it's much more difficult. In some countries we have even received a feedback that we cannot talk to you directly. But we need to have multiple similar companies and then we can talk to you because otherwise we are talking to a single private company and this can be considered as a corruption. Which is a little bit weird, I would say that you should still talk to anybody. You can talk like talking is not the corruption, like a corruption is something else. What about competition? Is there a competition? Do we need to help you get competition in other countries so you can actually talk to governments? Our biggest competitor is paper. So we are moving companies away from paper. And of course, yes, there are companies who are building similar platforms. It has become more active recently, mostly because of EU laws. EU is introducing FD, Electronic Freight Transport Information, which should apply in 2027 and this FD, what does it bring is that every EU country has to accept digital document. So currently what happens is that if you drive, sometimes if you are a drug driver, you drive over the border, some countries require you to have paper. So you cannot have, even if you have a digital document, driver still has to print out document, drive over the border so that if police stops you, you can give the paper. What FD brings is that it's very good for a waybiller as well because what happens is that countries who are not so digitalized, they still have to accept only digital document. And this is great because they start thinking how can we check it, how can we check it on the road. They start maybe developing some products for that. It all actually facilitates digitalization, which is great. There's a massive push towards digitalization in Europe. I mean, the EU digital wallet, for example, for Estonia, it's kind of a nuisance a little bit. I mean, we don't need it necessarily, but then there are countries who have not addressed digital identity at all. So for them, it's a big push forward, could waybiller be integrated with digital wallets, for example? Why not? Just a thought. Yeah. So basically, you are at the right place at the right time. The European Union is going to basically need your technology, you are right there to provide a solution. Yes. So I imagine you're talking to all of the European Union governments. Well, we have a small team, so we cannot talk to everybody. So we have still made our choice which markets we choose and which markets we target. So waybiller actually existed before the EU started doing that. So we were already digitalizing before there was any information about FTE coming out. And Estonia started doing it even before waybiller, because in Estonia, its digital waybill started from the timber industry and that was pushed by the government, by Estonia and State Forest. So they started doing it, they did it effectively, then private sectors, so that's great. And they followed, then other bulk transport sectors, also so that, oh, we also want efficiency like that. And they also followed with waybiller. So now EU followed, so it's all like a logical step-by-step process. And we will see where it ends. It sounds like it's really interesting times for you. So lots of work ahead, lots of markets to penetrate. If you were to give our discussion some sort of a summary, maybe some final thoughts, what would you say? Well, if I summarize everything we have learned with waybiller is that, first is that one shared dataset is much better than three people doing manual work, which is great. Then we talked about public-private cooperation. This is essential for real digitalization inside the country. And last takeaway is that digital systems should be built in small, replaceable pieces, not as big monstroms. So yes, and real success of the Estonia is that it made all of this very normal. And digitalization is about technology only, it's about removing work that never should have existed in the first place. That's a great summary. Thank you so much for coming to the podcast. And I hope that you managed to infect the rest of the world with your efficiency and drive for automation. I hope so. Thank you.