Every Estonian entrepreneur, especially in manufacturing, could make a New Year's resolution to stop selling so cheaply. Now, some readers are likely furrowing their brow at this, wondering what "cheaply" even means, when customers are already constantly complaining and asking for lower prices. Yet the Finns and Germans sell their work at higher prices than we do. So why shouldn't we do the same?

All this economic theory talk about higher added value, position in the value chain, innovation, and so on simply comes down to, in plain language, that you charge a higher price and the customer will be willing to pay it. But the customer is willing to pay only if you solve their issues faster and better than before. Or, instead of a small problem, you solve a bigger one.

Looking at successful Estonian engineering industry companies in recent years, three different ways can be identified to gradually start charging higher prices. Without any fancy deep tech or artificial intelligence or anything like that, but simply by deploying common sense and, step by step, doing a bit more, and more efficiently.

Doing the same things, just more efficiently

The most straightforward way to charge more money for the same volume of work is to make your work more efficient. The fewer human work hours it takes to produce the same amount of output or service, the more expensively you can sell per hour. This is exactly where the first steps toward the higher added value we are looking for derive from. Yet even this is not yet the goal, but only a means.

Greater efficiency in existing work creates the preconditions for having the time and opportunities to start climbing up the value chain step by step. First, alongside simpler work, you can start doing more complex work as well. Then only that, and eventually sell a product instead of labor.

If you produce one component very well, you can just as easily produce them all

Picking an Estonian industrial company at random, in four cases out of five you can be sure that it will be producing components for foreign clients, who then assemble them into a more complex system and sell that on at a higher price. But why don't we produce that whole assembly ourselves?

For any manufacturing company whose clients mainly come from one sector and which has been operating there for even a couple of years, what happens next to its products or what else the same client needs is not actually difficult to grasp.

Estonian industry has a strong reputation in Europe. We are known for quality, speed, and keeping to our word. And if a supplier with a reputation like that suggests: "Do you want me to make the next stage for you at the same known quality, or instead of a component, the entire subsystem?", then quite often it is feasible to get a client to the table. With new levels of production, however, also of course come new price levels.

Step by step and by following a simple logic, companies like Tech Group have developed their work to be highly valuable. Their prices are high. They were recently awarded the title of Company of the Year. But of course there are many more examples, as this approach is within reach for many.

Transform an issue into a product

The sweetest way to charge much more money for the same amount of work is, of course, the much-discussed development of your own product. But this, too, is actually much simpler than is often assumed. Simply build a machine that solves an issue that has arisen in your own operations. Quite surely, your company is not the only one which has encountered this problem. But if you get the machine working well for your own needs, it can probably be sold to many others as well.

One of the coolest recent Estonian examples is Dipperfox's tree stump drill. As Dipperfox's head of development Tiit Talvaru put it: "Those stumps just got on my nerves!" Tiit's other company deals with land improvement. While uprooting thousands of stumps, the idea arose of how to do so much faster and better at that scale.

Now the drill, invented to crush annoying stumps in Pärnu County, is being sold, for example, in the U.S. and Japan. Naturally at a proper price, as customers are always willing to pay for measurably higher efficiency.

So, opportunities to do something more, faster, or more efficiently can be found in essentially every industrial company. In other words, there really aren't many excuses to not sell your work at ever higher prices. If you lack the stamina to hike prices by a full 10 percent per month, then 10 percent per quarter would certainly be a reasonable New Year's resolution.

A concrete example is another Pärnu County company, Sparker. Sparker's business is very simple: They cut metal, but they do so ever more efficiently, outshining many competitors on both sides of the Baltic Sea. They have been buying up modern laser cutting machines, so one specialist is enough to operate five machines at the same time. With the same costs, they can offer much more of a service. And, ultimately, charge a better price.

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