OP is the largest financial group in Finland, offering banking, insurance and wealth management to some 5 million customers. The group employs over 12,000 people and has existed, in one form or another, since the late 19th century.
It’s pretty much part of the establishment in Finland, and as such one of the last places you’d think to go looking for cutting edge startups. Think OP and you’d think suits, not hoodies. You’d think bureaucracy, a rigid hierarchy, not lean methods or spontaneity. But it turns out you’d be wrong.
For the last couple of years OP has been working on OP Labs – a project it set up to “accelerate transformation, boost growth, and prepare for disruption”. It currently employs 150 people, based at 3 sites across the country, in Helsinki, Tampere and Oulu.
The project reflects a growing trend throughout the region in the last few years. DNB has NXT Accelerator, which offers startups up to NOK 1.3 million in funding and a mentor programme. Danske Bank has its 16 week Business Lab programme and also launched TheHub along with various national partners. Nordea has been running its Startup Accelerator for the last few years as well.
Keen to learn more about all of this I sat down with Kristian Luoma, Head of OP Lab, to find out what the bank is doing in this space, their collaboration with startups, and perhaps most interestingly of all, their own internal startup programme.
“The overall project has four different mandates”, Kristian explains, discussing OP Labs mantra to ‘disrupt from within’. “The first is to foster an innovation culture within OP, to spearhead an open innovation platform within the company, that allows people to share and discuss new ideas.
“The second is to work in collaboration with startup focused events, such as Arctic15, the Shift in Turku, Polar Bear pitching in Oulu, Ship in Kotka, and Slush of course. The idea here is to try and be present and visible on the startup scene, not only to support the community but also to source talent.
“The third mandate is to seek out accelerators OP can be present at or partner with, for example Accenture’s Fintech Lab in London or the Plug and Play Tech Center in Silicon Valley. We offer a company-wide programme where people can apply to go startup scouting, to meet with startups and check them out. Working with accelerators brings us into contact with about 200 – 300 different startups a year. It gives us a chance to have a dialogue, a chance to see what is out there and what people are doing.
“The other part of our philosophy when it comes to these collaboration programmes is that we should only partner with startups when we A) identify a problem we want to solve B) decide to allocate resources toward solving that problem. Then we feel ready to engage”, he clarifies.
OP Labs structures this around what it calls its ‘innovation challenges’. Once they have identified a problem they want to solve, they scout for startups they feel fit the bill – usually a shortlist of between 8 to 12. They invite them to Finland for further mentoring and development, then select 3 to continue on the programme. They’re after teams that can come up with a proposition they can immediately fund for a pilot. Or as Kristian puts it “we have the problem, we commit, we give a grant, and take no equity. We then execute the pilot together”.
The fourth part of OP Labs mandate, and perhaps the most interesting, is to work on internal startups. In terms of numbers they currently work with 10 external startups on their various programmes, and they have 30 internal ones they are actively working on. The internal projects represent the bulk of their work, taking up approximately 90% of their time.
“The idea with the internal startups is to come up with new business ideas that will support our new strategy, and there are two things to consider here – first we want to fully digitalise the existing business lines we have, and second we want to work on the slightly more exciting areas around finance. So on top of our financial core we’re trying to go a step toward the customer, based on their everyday needs”, Kristian continues.
Financing for these internal startups also mirrors what happens in the ‘real world’. Validation is a key part of the funnel, and they work on a risk based model to decide what gets funded and what gets killed off.
“Each potential new idea we go ahead with gets €10,000 to validate the concept. And then they get a bigger chunk of money as the case is validated, which is quite atypical for an R+D programme. Scarcer resources tend to breed creativity!”, Kristian says.
The ultimate goal is also that, eventually, these startups should graduate and move on from OP Labs. It’s considered a success to help the startups outgrow the labs, either to integrate into OP’s existing business lines, or to become completely independent (with their own board and CEO).
One of the areas OP Labs is exploring above and beyond the financial core of the bank is mobility. This at first may seem like an odd tangent for a bank to focus on, but when you consider that, as a financial services group, part of their offering includes car financing and insurance, it can also seem like quite a logical step.
In fact you may well already be familiar with MaaS, or ‘mobility as a service’, the brainchild of Sonja Heikkilä. It’s a marketplace for mobility services operated by transport service providers. With this model users are able to use MaaS to search for the best way to get from A to B, be it train, tram, car, bike, or a mixture. A successful MaaS offering would then run on a monthly subscription service akin to Spotify or Netflix ( we previously covered MaaS here).
“For us ‘mobility’ is an umbrella term we are trying to put together”, Kristian explains. “We have a couple of ongoing startup collaborations in this space. One with Urbi, an Italian company that works as a mobility aggregator. We’ve been working with them for about 4 or 5 months, after they took part in the Smart Mobility Program.
“We’re also working with an Egyptian startup called Raye7. They do ride sharing, but they have a different take on the concept. They use social circles to source rides, the logic being that people are a lot more likely to share a ride with someone they know as opposed to a complete stranger.
An internal project that OP Labs has also developed on the mobility front is OP Kulku (which roughly translates as “OP Movement”). It offers Helsinki residents access to electric cars for a flat monthly fee, in other words ‘cars as a service’. The logic here is that by having one monthly cost that covers everything related to running a car, the service is designed to make understanding and managing finances related to transport as easy as possible. There are even options for monthly packages that include unlimited car washes. Though no numbers are currently available on uptake, the service is market leading in electric vehicle registration and soon plans to expand to Tampere.
On a slightly separate track, but still linked to mobility, OP Labs recently partnered with DriveNow to launch electric car sharing in Helsinki. Since the start of the project in May they have received over 8,000 registrations, and it’s estimated that every DriveNow car taken into use replaces at least 3 private cars. In terms of infrastructure OP has also doubled the number of charging points in Finland. “We believe in electric vehicles as the future of transport”, Kristian confirms.
As well as looking forwards, it is just as interesting to look back. Because although OP Labs was born out of a specific need to accelerate OP’s move towards a new strategy, one as a multi-service provider, it took some convincing to get the bank’s top management on board. And the most important precursor to the launch of the labs was the Pivo app.
Designed as a mobile wallet for the bank’s users, the app categorises all expenses a user has. It shows what proportion of money is spent where (on eating out, clothes, travel, etc). It also allows users to join loyalty programmes and to forecast what future spending might look like.
It proved to be a huge success, and soon after its launch in 2013 it jumped to the top of the Finnish app store. There has also been several Pivo spin-offs launched in subsequent years, including Pivo Junior – an app that helps younger people manage their money, and Pivo Alfred – an AI powered financial advisor that links up with the original Pivo app to offer users spending advice.
So to what extent does Kristian feel Pivo’s success paved the way for OP Labs?
“I think it’s like raising a child. You hope the birth goes well, and that they will then grow into a healthy adult. Pivo was an open experiment, but it’s one that had some ambitious goals right from the very start. Our pitch deck openly stated that we were hoping to be able to serve 1 million Finns, and that is exactly what we did.” Impressive stats when you consider that Finland’s population is not much over 5 million.
It’s also important to note that though OP’s head office is in Helsinki, Pivo was developed in Oulu, in the North of the country. This not only provided a physical sense of distance, but also allowed the team to feel more like a startup, free of the bureaucratic constraints and rigid processes that come with large financial institutions. And a large part of the labs still remains up in this northern part of the country.
“Physical distance gives you the isolation you need with a half baked idea”, Kristian explains. “It gives you the armour you need to withstand the heat. We’ve taken this learning and done that successfully here [in Helsinki] by creating a bubble too.
“The corporate arm of the business is generally interested in the overall success of projects. But they often ask questions for information that isn’t yet available. These projects need time and space to develop. Physical distance gave us that. Ultimately it facilitated top management sponsorship and different ways of working. But of course, we still always need to undergo major checkpoints and success criteria”.
What initially drew me to write about this was the meeting of two worlds. On the one hand the old traditional world of banking, and on the other the dynamic and disruptive world of startups. But is OP Labs really something unique in this space (consider the other banking projects listed earlier on)? I put the question to Kristian.
“We’re not, by any account, unique,” comes his reply. “Lean is fairly common in corporate innovation hubs, I know a lot of other hubs that operate in a similar way. However, we do have several things that set us apart. We have lots of funds available, and we have a good user base in Finland. This gives us a good platform to try out new things, for example in the health and wellness space. So in that sense we’re one of a kind.
“Another unique thing is how we’ve approached startup collaboration. We seek solutions to problems we’ve identified, then look for startups that solve the problem. This is different to an accelerator, where you start with an open-ended question. We also feel that Finland is a great market for startups that have graduated from an accelerator and are looking for a test market – Finns are a mobile active, tech savvy bunch of people”.