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How Innovation is Reshaping Startup Landscape: Tools of Tomorrow

Building on our exploration of how digitalisation is transforming business landscape, this article continues the series of articles with Laima Balčiūnė – a key figure in Lithuania’s digital innovation ecosystem – returning to share her insights on the digital tools and technologies that empower startups to scale faster and compete on a global stage. 

Which technologies or digital tools are commonly used by businesses to gain a competitive advantage? 

Today, companies are widely deploying various digital technologies in order to gain competitive advantage. Cloud computing is one of the most common choices – moving to the cloud allows businesses to manage IT resources more flexibly and reduce infrastructure costs.  

Process automation and artificial intelligence (AI) are becoming common tools to improve efficiency. Companies are deploying software automation solutions (e.g. robotic process automation in manufacturing or administration), IoT and BigData systems for data analytics. This helps to reduce human error and speed up operations. BigData analysis enables the analysis of large volumes of data, enabling businesses to better understand market trends and customer needs and make data-driven decisions. Businesses are also experimenting with generative AI (artificially generated content) for innovation, as start-ups in the Baltic region are attracting more and more investments (in the first half of 2023 alone, Baltic start-ups raised ~€187 million). 

BigData analytics and business intelligence (BI) tools are widely used to gain competitive advantage. Companies use data visualisation and analysis platforms to optimise their marketing, sales and production processes. Data-driven solutions allow to better adapt to market changes and customer needs. 

Many businesses have moved to digital in sales and customer service over the last years. E-commerce, marketplaces (e.g. Amazon, Etsy), social commerce through social networks – all of these have become commonplace. Companies are adopting omnichannel commerce strategies to reach customers through different channels (physical stores, e-stores, mobile apps). This change has become a necessity, especially during the pandemic, and has remained the new standard. 

Another segment of tools is internal business process digitisation solutions. In the era of teleworking, businesses have adopted project management and communication platforms (e.g. Microsoft Teams, Slack, Asana, etc.), digital document management systems, and HR management systems. While this is more of an internal efficiency issue, these tools also contribute to competitive advantage by enabling faster innovation, more flexible working and better knowledge sharing within the organisation. 

How do you assess the readiness of Lithuanian technology start-ups to compete in the global market? 

In recent years, Lithuanian technology start-ups have established themselves as a dynamic and innovative force capable of competing in the international market. Strengths are due to the rapid development of the ecosystem, the accumulated wealth of knowledge and a favourable environment, while weaknesses are due to certain structural challenges that startups still face. 

Strengths: 

• The Lithuanian startup ecosystem is the fastest growing in the region – over the last ~5 years, the value of the ecosystem has increased by a factor of 7. Startups attract solid investments even in challenging economic times: for example, in 2023, startups operating in Lithuania attracted €292.3 million in investments (although this is ~30% less than in the record year 2022, but still above pre-pandemic levels). Lithuania is now ahead of most Central Eastern European countries in terms of venture capital investment. This financial rally shows that our start-up ideas and business models are attractive to international investors, which provides resources for global expansion. 

• While the talent shortage is a problem, it should be noted that Lithuania has a strong core of IT professionals. Lithuanian programmers and engineers are renowned for their good education, creativity in solving problems. The start-up sector employs over 19,000 people with salaries at least twice the national average, which shows the high value creation. Labour costs are still lower than in the West, allowing Lithuanian start-ups to develop products competitively at lower costs.  

• Lithuanian start-ups are characterised by ambitious thinking – when they develop products, they immediately target the global market, because the local market is small. This means planning for scalability, multilingualism and international marketing from the start. There is also a rapid adaptation to new conditions: during the pandemic, many were able to change their models, e.g. by moving to remote services. In recent years, despite geopolitical uncertainties, start-ups have been able to maintain the dynamism of their sectors of activity and to adapt to market needs. This culture of flexibility and pivot-making is a major competitive advantage. 

Weaknesses: 

• The biggest barrier identified by start-ups is the lack of qualified professionals. While there is talent in general, demand far outstrips it. There is a particular shortage of marketing, sales and analytics specialists – surveys show that these areas are particularly needed to expand abroad. Technical talent is also in short supply. The limited supply of specialists makes it difficult for start-ups to grow their teams quickly, and they have to compete with each other and with foreign employers by offering increasingly higher salaries. This can slow down global expansion – if there are not enough people to localise a product in a particular market or develop new functionality, a start-up may miss an opportune market moment. 

• While capital is usually sufficient for the initial stages (pre-seed, seed) in the Baltics, raising venture capital for the “growth” stages (B, C rounds) becomes a challenge. Startups themselves admit that raising funding is one of the two biggest challenges in scaling up. As the global investment market tightens in 2022, investors have become more discerning and Lithuanian startups have to compete for attention with projects from other countries. It is important for startups to cultivate relationships with foreign investors and to participate in accelerators abroad to ensure that they do not run out of capital for their global goals.  

• The Lithuanian market is small, which makes it difficult for some start-ups to find pilot clients for more complex innovations. For example, if a product is aimed at a large industrial sector or a specific medical field, there may not be a sufficient customer segment in Lithuania to validate the solution. This means that some start-ups have to go abroad immediately with an incompletely tested product, which increases risk. It is also harder to find specialised mentors or advisors in certain niches in a small market, as there is simply no long-standing industry experience in some sectors. 

• We also see that many Lithuanian start-up founders are not sufficiently interested in the evolution of EU legislation that may affect their business models. For example, as a startup grows globally, it needs to comply with various regulations (GDPR, financial market regulations, AI Act, etc.), but not always enough attention is paid to this in advance. This can become a weakness – non-compliance with legal requirements can limit the ability to provide services in certain markets.  

In summary, Lithuanian start-ups are demonstrating the strengths – technological capability, innovation, global thinking and community support – that have made them visible leaders in the region today. However, they still need to work on their weaknesses: developing and attracting talent, learning the intricacies of international business management and actively monitoring the regulatory environment. Given the pace at which the ecosystem is maturing, predicts that these weaknesses will slowly be compensated for, with the government, the business community and the start-ups themselves already taking action (e.g. by creating talent development programmes, regional start-up acceleration initiatives such as Startup_Lab, and strengthening the venture capital ecosystem funding). If this trajectory continues, the readiness of Lithuanian startups to compete globally will only improve. 

Paving the Way with Digital Tools and Global Vision 

Lithuanian startups are harnessing the power of advanced digital tools – cloud computing, AI, automation, and data analytics – to sharpen their competitive edge and expand globally. As Laima Balčiūnė highlights, the ecosystem is rich with talent, ambition, and innovation, but still faces challenges in scaling, accessing later-stage funding, and navigating global regulations. Addressing these gaps will be key to sustaining growth and success on the international stage. With the right tools and strategies, the future for Lithuania’s tech startups looks increasingly bright. 

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