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june 2013

the digital society The Newsletter of the Estonian ICT Demo Center

Why You Never Really Learned Math? Conrad Wolfram of ComputerBasedMath. org claims that the way we’ve learned math for centuries is no longer relevant in a world full of computers. Estonia is to be the testbed for his ideas. » Read PAGE 3

Recipe For IT Export Success What is required to break through on international markets and what should be avoided? Nortal, NetGroup and Fortumo share their advice. » Read PAGE 4

foreword

Location Does It Matter? Location-based services guide the way for people all over the world, but how international are the companies developing these services? » Read PAGE 6

Juhan Parts, Estonian Minister of Economic Affairs & Communication

The Digital Society is the quarterly newsletter created on the initiative of the Estonian ICT Export Cluster. Subscribe to our e-newsletter at e-estonia.com

Top 5 e-Services in Estonia in 2013 Estonian Information System’s Authority elected 5 best Estonian e-services from among 77 projects. Which projects came out on top? » Read PAGE 7

ICT Demo Center Lõõtsa 8 Tallinn 11415 Estonia info@demoestonia.com

8 Estonian IT Headlines Here are some of the top headlines from the recent months, highlighting the latest accomplishments in the Estonian technology sector. » Read PAGE 8

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The Newsletter of the Estonian ICT Demo Center / june / 2013

Foreword The Tiger’s Triple Jump Foreword to e-Estonia newsletter The Digital Society by H.E.

As a result of the years spent creating a number of e-services in Estonia, our present-day knowledge would allow us to upgrade these services to be simpler and user-friendlier. This simplicity and user-friendliness also needs to be available in cross-border services. We need to work together with our close neighbors to create mutually compatible e-services and sit behind the negotiation table not only as a listener, but also as a leader.

In the second half of the 1990s, Estonia introduced a program called Tiigrihüpe (Tiger’s Leap), equipping all Estonian schools with computers connected to the Internet. That was the first big leap that became the foundation for Estonia’s fast development in the field of IT.

With all the work and effort, what’s most important is that we would be able to use all these services. Although using the Internet and all its possibilities comes naturally for the younger generation, it is vital for an e-society to make sure all our citizens take part in it.

Today, nearly 20 years later, we ask ourselves why the tiger won’t “leap” anymore. However, we have gathered worldwide fame with our IT solutions — if that’s not a leap forward, then what is? Thus it seems that our beloved tiger hasn’t nodded off, but is preparing for a triple jump. The question is what we expect from this new jump? The key to success is not so much in inventing something completely new, but in implementing existing technologies, knowledge and skills smartly and quickly to foster economic growth and social development. Therefore, in the next seven years an example of what we need to focus on is building high-speed Internet connections to make sure our outstanding e-solutions are accessible in every corner of Estonia. We also need to implement ICT in other fields of life and increase the value added by each working Estonian.

Juhan Parts, Estonian Minister of Economic Affairs and Communications

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The Newsletter of the Estonian ICT Demo Center / june / 2013

Why You Never Really Learned Math?

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Estonia declared test bed for new kind of math education After that, it almost came as no surprise when in February 2013 ComputerBasedMath made an announcement. They declared Estonia to be the first country to test the organization’s rethinking of math education in a project to build a new school statistics course. In his TED Talk, the founder of ComputerBasedMath Conrad Wolfram claims that in the real world math consists of four steps. In Step 1 you need to pose the right question; in Step 2 you need to translate your question into the language of mathematics. Step 3 – calculation – is usually handled by computers, and the mathematician then applies it to the real-world problem to verify the solution in Step 4. All good, right?

Conrad Wolfram of ComputerBasedMath claims that the way we’ve learned math for centuries is no longer relevant in a world full of computers. Did you happen to rebel against your math teacher in your early teenage years, arguing that the formulas you were being taught in school would never be of any use in the “real world”? It’s likely that your argument was overpowered by the teacher’s authority in the classroom and the simple fact that “it’s always been like that”. Would you have thought a realworld mathematician would eventually stand up and support your argument? The problem of innovation in education The link between the level of an education system and rate of innovation may be indisputable. We accept that education is a necessary component in creating an environment that fosters innovation — the most notable example being the symbiotic relationship between Silicon Valley and Stanford University. However, education itself seems to resist innovation — at least that’s the claim of an organization called ComputerBasedMath. It was only last year when Estonia took the world by storm by announcing that it will start teaching first-graders how to code. The program (called ProgeTiiger) does not actually intend to start 7-year-olds on Java or C++ but is rather meant to encourage them to start thinking like programmers, with tasks appropriate to their age.

Against using people as slower versions of computers “Here's the funny thing. We insist that the entire population learns how to do Step 3 by hand,” says Wolfram. In his words, 80% of doing math education at school is Step 3 by hand and largely not doing Steps 1, 2, and 4 — all this regardless of the fact that computers can handle calculation far better than humans and have been able to do that for decades already. It’s Wolfram’s idea that we should be using computers to do the calculating for us, and instead we should be teaching kids how to apply math thinking to real-world problems. Wolfram Alpha is a search engine that can receive questions or problems in natural language and then dynamically compute the results for you. It’s especially suitable for solving math problems. “Wolfram Alpha is able to solve most of the questions from your high school final exam in math,” says Kristjan Korjus, the Estonian project manager for ComputerBasedMath. If a computer can do in five seconds what you learned to do in 12 years, what’s the value of this education? Why do we teach math the way we do? Breaking old habits is hard. “If you ask a math teacher why some particular math concept is in the curriculum, the probable answer is 'that’s what we’re told to teach'. And if you ask the same question from people responsible for the curriculum, the most likely reply will be 'it’s always been like that'. No one knows why we learn math like we do today,” smiles Korjus.

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ComputerBasedMath has been busy with “curriculum mapping”. In this first phase of the project, the task of the people in the project is to try to forget everything they know about how math is being taught. The idea is to come up with 20 storylines that describe real-life situations where you need to apply math concepts. Each storyline poses a main question that the students will set out to solve. The use of computers is allowed, although not always required. After the teaching resources – handbooks for teachers, textbooks for students, problems to solve in classes, tests and exams – for the new curriculum have been created, it’s time to move on to testing the new curriculum in real life. Starting in 2014, 30 schools all over Estonia will be learning statistics and probability in a completely new way. Spreading the new way of thinking "In the last century, we led the world in connecting classrooms to the Internet. Now we want to lead the world in rethinking

Recipe For IT Export Success

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education in the technology-driven world," says Jaak Aaviksoo, Estonian Minister of Education and Research, referring to the Tiger Leap program that provided Estonian classrooms with computers in the 1990s. Being a physicist himself, Aaviksoo can clearly relate to the issues of connecting science studies with real-life problems. If the project is successful, what’s next? “If Estonia’s example proves to be successful, we will certainly try to expand the extent of the new way of learning in the current math curriculum. ComputerBasedMath is also interested in taking on other countries that are keen on reforming their math education,” says Korjus. All things considered, there will always be students who dislike math. However, if ComputerBasedMath succeeds, even those students will be better equipped to step into the so-called “real world” — all thanks to math.

Net Group, Nortal, Fortumo and NOW! Innovations are four ICT companies with an Estonian background whose achievements on foreign markets are catching more and more attention. Looking closer at these export success stories, common elements emerge of what is required for a breakthrough and what should be avoided. 1. Exporting is mandatory You should target your creations to the global market right from the start. “A well-designed ICT service, product or team does not need to be restricted to Estonia and will not be as profitable when operating only in Estonia,” says Üllar Jaaksoo, the managing director of NOW! Innovations — a company that innovates in the area of smart parking and recently entered into a strategic partnership with the German car company BMW. 2. Don’t assume immediate success It is common knowledge that first attempts tend to fail. In Jaaksoo’s opinion, short-term plans are often overrated in favor of long-term plans. “The first contact always happens as a mix of chance, dedication and clarity/reach of your message. After the first contact is made, the following process of creating understanding, trust and prerequisites for matching business interests is even more important,” adds Jaaksoo. However, you should never assume that success will come overnight. To err is human, and every mistake should be followed by a plan for how to move on. When Net Group, the software company led by Priit Kongo, launched their exporting activities from Northern and Western Europe, it soon turned out that the markets very highly competitive, and it was not easy to gain access »4«

The Newsletter of the Estonian ICT Demo Center / june / 2013

as an unknown company. So instead, they decided to focus on regions that are still emerging in terms of IT — the Middle East, Africa as well as Eastern Europe. “We consider these first steps as expensive tuition payments. Today’s strategy has clearly proven to be more effective,” says Kongo. 4. Play to your strengths and bet on simplicity Jaaksoo says that the first large-scale contract for NOW! Innovations came when competing against two well-known companies in Belgium. The victory was sealed by their quality, speed and price propositions. “The platform’s reliability was built up creating the pilot solution, and the team’s trustworthiness was based on their experience in handling big systems,” Jaaksoo comments. Knowing their strengths and playing to them skillfully is what he considers to be the key element of NOW! Innovations’ success. In the last six months, the international mobile payment provider Fortumo has added many remarkable feats to their portfolio, including the partnership with Microsoft to start offering mobile payments via Windows 8 and Windows Phone platforms, as well as with Barnes & Noble and their NOOK tablet devices. In addition to sales in the USA, they have benefitted from Fortumo’s product being extremely developer-friendly. “This means that the integration process will be rapid, and a single integration will enable receiving payments all over the world,” explains Mattias Liivak, Fortumo’s communications and marketing manager. 5. Personal contact and local presence are obligatory In countries with high potential for attracting customers, you need to travel and be on location personally. For example, Fortumo’s services are easy enough to be taken into use in a matter of minutes, but an Eastern European startup that only sells via their home page and e-mail will not be taken very seriously in Western markets. “Currently we are attending on a monthly basis events in the USA, Europe, Russia and Asia, where you have the chance to meet the customer face-to-face, show how the product works and answer potential questions. To win big customers, personal contact and trust are very important, especially if you operate in the field of financial services,” says Liivak. You also need to take into account different cultures globally and visit your target markets to acquaint yourself with the nature of the people and refine your approach before you even attempt to do sales. 6. Collaborate If you don’t have any contacts on your target market, it pays to attend big IT conferences and seminars. “These are events where you should be present no matter what; it’s rarely a waste of time,”

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Kongo shares his experience. Estonia’s biggest hurdle as an ICT exporter – the size of the country – can be overcome by creating business clusters and collaborative export initiatives. “For example, Net Group has visited Oman together with the Estonian Minister of Economic Affairs and Communications. However, in these instances you are usually building first contacts that require further sustained efforts and investments,” adds Kongo. 7. Pick your target region carefully Nortal, the Baltic region’s leading ICT exporter, plans its activities based on the needs of different regions for new systems. For example, it’s difficult if not impossible to offer a full solution to Western countries in the field of state finances, since they have already developed their working systems. However, this is absolutely possible in developing countries. “One example is Africa, where the World Bank has been focusing on leading the countries to a path of less corruption, which usually starts with fixing a country's system for managing state finances,” says Andre Krull, a Nortal executive. While many companies give in to the mantra of focusing on the USA or Asia, it often pays to look around in the neighboring region. “Estonian and Finnish markets are on a path of convergence in the next 10 years, which means that budgets 30–40 times that of Estonian companies will become accessible to our ICT providers. In a way, this means an expanding home market that in turn should make export easier,” Krull suggests. 8. A job well done means a positive spillover effect Nortal’s project of modernizing the management of state finances in Nigeria – Africa’s most populated country – elicited interest from other countries of The Dark Continent. For example, Botswana turned to Nortal with a request to build the country’s new tax board solution. According to Nortal’s example, in order to make use of the positive spillover effect, you need to finish the job well and not keep it under wraps. “In Oman, our first project was to optimize their old commercial registry. In this project, we managed to improve efficiency metrics by more than a couple thousand times. Oman received global awards for improving their e-services,” explains Krull. Nortal currently has four domestic markets: Estonia, Finland, Lithuania and Oman. They plan to expand to other countries mainly from these bases. 9. Play on being an Estonian Krull claims that Estonians tend to spit out the truth in the sales process, even if it’s not what the potential customer expects. “The main advantage for Estonians is our technical adeptness and extreme pragmatism — the mentality of creating a solution with limited resources and doing it more efficiently than a large corporation would,” adds Krull.

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The Newsletter of the Estonian ICT Demo Center / june / 2013

Estonian history is also something that should be kept in the back pocket. “We see the Middle East being where Estonia was 15 years ago, and Africa can be compared to Estonia 20–25 years ago. We have come through transitional changes within the last 20 years, so it’s time to tell others who face the same situation how to handle it. Estonia can market itself through being an e-state,” Kongo is convinced.

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you should be financing your riskier ventures with proceeds from your stable business. For starting companies, I would recommend moderatism — in their plans of getting to positive cash flow, they should multiply that estimation by at least a couple of times,” Krull from Nortal proposes. To discuss export cooperation with Estonian ICT companies, view the page with company profiles, competences and details here.

10. Balance out stability and risk To achieve success, you need to find a balance between a stable cash flow generating business and riskier enterprises. “Ideally

Location — does it matter? Guiding the world’s way from Estonia

this type of solution in Saudi Arabia, setting up a mobile positioning service that assists pilgrims in reaching Mecca. “If a mobile operator has plans for an LBS initiative, it’s quite likely that we will be asked to partner,” says Teet Jagomägi, the founder of Regio. This confidence is a product of years of experience, and the pilgrim project goes to validate these words. The service that helped to position the movement of 90,000 pilgrims towards Mecca was launched within an extremely short time frame — just a few weeks. While it’s common for Regio to operate in foreign markets through Ericsson, this was a project that Regio took on by itself. In 14 years of operation, two good reasons to stay in Estonia The question why Regio is still based in Estonia stirs up controversy in Jagomägi — there are moments when the location seems an obstacle, yet Estonia repeatedly proves itself as the absolutely right spot.

Location-based services can guide the way for people who are thousands of kilometers away from the birthplace of the ideas for the services. Don't be amazed when the applications that assist pilgrims in reaching Mecca or guide disoriented tourists in the Yaroslavsky railway station turn out to be the handiwork of Estonian engineers. Estonians’ own pilgrimage Geographical information systems and maps provider Regio is proudly considered to be Estonia’s flagship company in the field of location-based services (LBS). Since the turn of the millennium, the company has been a key partner and global associate for the Ericsson corporation, selling mobile LBS solutions under the global brand Reach-U. Recently they implemented

Entering the mobile positioning business was one of those moments that turned Estonia into the place-to-be. This was due to EMT’s (the oldest Estonian mobile operator) and Ericsson’s decision to make Estonia the place where the first technology allowing mobile positioning would be imported. “If they started to look for a company that could implement the technology and develop the necessary software for the national rescue service, our software solution turned out to be the most fitting,” says Jagomägi. Another one of those moments happened about six years ago when professor Rein Ahas led the University of Tartu’s foundational project for using mobile positioning for analyzing human geography. “Only after the scientists had built up Estonia’s reputation with the project and refined their ideas for six years, we decided at Regio that the time is ripe to offer something to the world. So once again we turned out to be in the best place in the world, since Tartu was and still is the scientific epicenter of this field,” Jagomägi affirms. »6«

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LBS providers are not impartial to the importance of location In daily operation, providing global LBS services for the world from Estonia still has its limitations that stem from cultural differences between geographies. Thus Estonians are not fully capable of feeling the pain of Mexicans, Pakistanis or Arabians. “How do you create a solution that would address their biggest pains? The differences are substantial — we reach for the computer in everything we do online, while most people in the world reach for their mobile phones. The majority of people in the world never access a computer,” Jagomägi explains. This is why LBS solutions need to be developed side-by-side with locals. This creates another set of obstacles, starting with linguistic issues and ending with poor flight connections. “More and more you wonder why the location in Estonia is important at all – if you prioritize understanding the needs of your endusers, there is no rational explanation to that,” claims Jagomägi. As a solution to this, Regio has employed regional experts abroad that are familiar with local settings. “On the markets that you want to operate on you need to have a steady presence, this is the only way you can route assignments and ideas back to Estonia and change the world from here. If you don’t want to be present on foreign markets, you limit your market to the local Karula borough,” Jagomägi believes.

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A small country as a digital compass Four active projects in Estonia and Norway are currently contributing to the company’s cash flow. However, there are also more exotic and remote projects, such as in Kenya. “In Russia we have created a solution for the Yaroslavsky railway station — it displays the path to your destination the way a person would see it, and then creates a top-down visualization of your path on the screen,” 3D Wayfinder’s marketing and sales director Kermo Mägi explains. In the near future, the company plans to offer a platform for all developers that would like to integrate their systems with 3D Wayfinder. This way, Estonia tirelessly continues to build an image of a “compass country” that guides the way for more and more people all over the world.

Top 5 e-Services in Estonia in 2013

Demand elicits international operations Of the newest mobile solutions that Regio offers, only a few are in use in Estonia. This for the very good reason that applications developed for bigger markets may not have any relevance here. One good example is location-based pricing — looking at Estonia’s telecommunications market, you can’t imagine a situation where home phone calls would be cheaper than the ones made outside the house. In Africa, the practical need is there. The road guide that saves you from getting lost 3D Wayfinder is also an Estonian LBS company (fit to be Regio’s little brother, if you consider their duration and breadth of operations) that has set its focus on global markets. For the last couple of years, the company has been engaged in creating digital indoor guides for large buildings. The software can be accessed in a browser, on a smartphone or an online kiosk. In essence, the goal is similar to Regio’s Hajj application — to guide people to their desired destination. Today, some of the Estonian spots where 3D Wayfinder assists people in finding their way are Tartu Lõunakeskus – a huge superstore in the second largest city in Estonia – and the Tallinn University of Technology where it helps students find the right classroom. The university version of the software enables users to search for professors and lecturers as well as the rooms associated with them, while Lõunakeskus can boast a new mobile app.

For the fifth time, the Estonian Information System’s Authority organized a competition for best Estonian e-services. This year 77 projects participated in the competition, and winners were elected in five categories. The aim of the competition was to introduce innovative e-services and e-solutions, but also their customers and developers in the public, private and non-profit sectors. The winner of the competition will be participating in World Summit Award. Who were the winners? 1. TransferWise — Overall Best e-Service, Best e-Business Service TransferWise is a money transfer service launched by Kristo Käärmann and Taavet Hinrikus. The service allows people to send »7«

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money abroad at the lowest possible true cost, so they can avoid paying considerably big fees to banks for the transactions. In two years, TransferWise has grown to include 36 currency directions and has transferred more than 125 million British pounds of their customers’ money. But it’s not only customers they have attracted, but also very impressive investors. The latest investment round for TransferWise in the beginning of May included PayPal’s and Facebook’s investor Peter Thiel’s Valar Ventures, and the startup received an endorsement by Richard Branson in April. TransferWise’s future plans include expanding their currency coverage and working on mobile solutions in the near future. They are definitely a service to keep an eye on. 2. GoSwift — Best e-Government Service GoSwift – an online reservation system for border crossing – is setting a new standard for border crossing, not only in Estonia but also the whole region. Lithuania is planning to start using the GoSwift system starting in June 2013. GoSwift has been operating the border queues of vehicles at the Estonian-Russian border for almost two years. The GoSwift electronic border queue system has also been successfully implemented in the direction of Russia to Estonia. The GoSwift electronic border queue system was developed in Estonia in 2011 at the request of the Ministry of the Interior. During development, GoSwift cooperated closely with the Association of Estonian International Road Carriers. 3. Ennemuistne — Best e-Culture Service Ennemuistne is a free online game inspired by Estonian folklore that can be used as an entertaining addition to the national highschool curriculum. It is a fun and interactive way for teenagers to learn about ancient times in Estonia and to enrich the knowledge gained from school lessons. The game is still in the development phase, but the creators aim to improve it through feedback from actual players. This way, they’re seeking to better respond to expectations for a game that is educational and still fun to play. Ennemuistne is developed by the videogames company Frostnova, and development started in 2011. 4. TipTheAuthors — Best e-Entertainment Service TipTheAuthors is a platform for selling films online. The idea was first formed at the beginning of 2012 during Garage48 – an Estonian-born startup event where ideas are turned into working services or prototypes within a time limit of 48 hours. The platform aims to provide an easy way of legally buying films online and thus counter the issue of piracy. Hence their slogan — “movie downloads for honest people”.

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According to Margus Pala, one of the creators of TipTheAuthors, a successful e-service has to create value for the users and answer their needs. And even in the case of fierce competition on the market of selling and streaming films online, it’s the flexibility of a small company that might lead to success. In the near future, TipTheAuthors is hoping to offer their services on different movie downloading sites where users are already used to downloading content. They are also constantly working on increasing the number of movies in their catalogue. 5. Hooandja — Best e-Involvement Service Hooandja is a crowdfunding platform for creative projects, borrowing it’s idea from the US-born Kickstarter. It’s a place where good ideas meet consumers/clients. Every project on Hooandja presents itself with an introductory video that clearly explains the purpose and requirements of the project. A project can gather funding for 2–8 weeks. However, one of the main rules of Hooandja is the requirement to achieve 100% of the targeted funding — if the project fails to gain that support, all the money is given back to the supporters. Hooandja has been in use since summer 2012. Since then, they have managed to fund creative projects totaling over 100,000 euros. These projects have included books by local authors, CD or vinyl albums by local musicians, but also theatrical events and design projects. Crowdfunding is clearly becoming a trend within the creative community. It also creates a new way of communication and closeness between creators and their audience.

8 recent headlines from the Estonian ICT sector Here are some of the top headlines from recent months, highlighting the latest accomplishments in the Estonian technology sector. 1. Estonia becomes a space nation with the launch of ESTCube-1 ESTCube-1 was rocketed off to orbit the Earth on May 7th, making Estonia the 41st nation to have a man-made object in space. Around 100 students and scientists contributed to the creation of the roughly one-kilogram satellite. »8«

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2. Estonia presents awards for best e-services; TransferWise wins grand prize The winner of Estonia’s best e-service contest was TransferWise, a provider of international payments and currency exchange services. TransferWise will also be representing Estonia at the World Summit Awards, a worldwide contest of e-services held in Sri Lanka in October 2013. 3. ZeroTurnaround completes its first foreign acquisition Java software tools maker ZeroTurnaround acquired Javeleon, a Denmark based startup that produces a tool that allows developers to incorporate changes to code in a running Java application. Javeleon's product is closely related to ZeroTurnaround's popular JRebel dynamic Java class-reloading tool, making it a strategic acquisition of know-how and talent. 4. Nortal secures two landmark deals Estonian software development solutions provider Nortal secured contracts for restructuring public finances in Nigeria as well as for supplying new taxation software to the Finnish Tax Administration as part of Fast-Nortal consortium. The overall price of the procurement for the latter contract is around EUR 226 million, making it one of the largest Estonian ICT export deals of all time. 5. Navionics opens a development center in Estonia Navionics is the world's leading sea maps producer. The company is in charge of the world’s largest database of marine and lake

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charts, covering the salt waters of the entire planet as well as tens of thousands of lakes and rivers. The newly opened Estonian office will complement the company's offices in the USA, Italy and India. 6. Fortumo raises capital from Intel, partners with Telefónica and Telenor Just a couple of months after the Estonian mobile payments provider Fortumo announced a new growth round in the region of $10 million, led by Intel Capital and Greycroft Partners, the company revealed a partnership with leading operator groups Telefónica and Telenor to bring Fortumo’s direct carrier billing services to 460 million additional subscribers worldwide. 7. Mobile app Kids OS wins Ajujaht, Estonia’s largest business ideas contest The winner of Estonia's largest business ideas contest – Ajujaht (Brain Hunt) 2013 – was Kids OS, whose winning idea was a design for a mobile app for concerned parents to position and monitor kids and their activity at all times. 8. BMW announces a strategic partnership with NOW! Innovations Estonian parking solution provider NOW! Innovations secured a partnership with the German car company BMW with the intent of starting joint development on their ParkNow system that would enable drivers to search and pay for on-street parking.

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