Under The Hood

Leading Continuous Digital Transformation

Customer Experience, Digital Agenda, Digital Strategy, Digital Transformation, Leadership, Service Design

OP Financial Group, Disruption in the Finance Sector

OP Financial Group, the leading financial service group in Finland, works in every field of financial services from private and corporate banking to insurance.

Harri Nummela, Executive Vice President, Banking, Private and SME customers at OP Financial Group, explains what digitalisation and such changes mean in the Financial sector. He also shares how OP Financial Group chose the digital direction and what lessons have been picked up along the journey between the years 2011-2016.

Digitalisation in the finance business took its first significant steps in the 1970s but did not become fully fledged until the latter part of the 1990s. After the financial crisis of the early 1990s, banks had a pressing need to work more efficiently and effectively and the solution to this was to increase the level of self-service by customers with the help of information technology.

In 1996, OP Group launched its online banking solution, as the first bank in Europe and the second in the world. Up to that point, banking services were available only by visiting a physical bank, so the step was truly a leap forward.

The second step in digital banking was taken in the early 2000s with mobile banking solutions and applications being developed. Considering the small screens and text-based services available at the time, it is hardly surprising that they did not really take off.

By 2011-2012 we saw the start of modern mobile banking services, enabled by modern smart phones with large, accessible touch screens. At the same time, online banking services experienced a rapid development phase. This brought on a lot of new competition, and the number of service providers began to grow very quickly.

In the OP Group’s 2012 strategy, the customer experience was put into focus. Naturally it has been emphasised as a central element of our work ever since, and improving the customer experience has become one of the cornerstones of our company’s ideology.

Truly engage your customers with development work

One of the main turning points for the OP Group towards customer-focused digital services was the foundation of our development unit in Oulu by the spring of 2011.

We ended up with Oulu as a location, as it was very difficult to recruit top developers of mobile and digital services in the metropolitan area at that time. At the same time, Nokia dispensed with the Symbian operating system, which freed a lot of resources in the Oulu region.

This provided us with much technical knowledge and skills from outside the financial sector, and also people who had experienced a higher clock-speed than the finance sector had at the time. There were, naturally, clashes of working culture as people from different working environments started working together. All in all, our experience of those coming from outside the financial business have been positive. We learned in particular about customer focus and how customers can be engaged in the development work towards better services.

Years 2011-2012 can be seen as the culmination of the digitalisation of the whole Finnish banking sector. Up to that point, the focus had been on increasing operational effectiveness, but now enhancement of the customer experience became the target. Better customer experience was enabled by the development of new, high-end devices, faster transfer speeds and a drop in the price of digital transmission.

Furthermore, customers began to demand better and more customer focused digital services. We in the financial business were left in no doubt that the demands for higher service levels was spreading across the borders between different business areas. Once customers enjoyed a good experience and great digital services in one sector, they began to demand them in other sectors, too.

At that time, OP Group, as did the whole financial business sector, began to understand what the effect of the customers becoming more powerful would mean in practice. Because of this, we began to take as big steps as possible in developing customer focused thinking in our products and services.

In our organisation, which is owned by our customers as we are a cooperative, there has always been a natural connection with our customers; but we understood that there was still a need to shift gears. In everyday work, one of the main development steps was to gradually implement agile methodologies. At the same time, our customers were becoming a part of our development work more than ever before.

Ever since, the meaning of customer experience and its presence in our thinking, has increased for the OP Group. We are all more aware that because of the constant evolution of digitalisation, it is more and more the customer who is leading us.

Service design driving the change in internal culture

Even if the OP Group has done much in the past few years to engage our customers more than ever, we know that there are still many things to do. In practice, this has resulted in us hiring dozens of service designers. Thanks to this, our customers have been a part of development in the planning stage, which in turn has increased our level of customer understanding.

Skills and knowledge in service design are areas we know that we need to maintain in the future. Service design is tightly linked with digitalisation, along with technical expertise e.g. big data and analytics.

These days, customer experience is measured from as many angles as possible. We use, as an example, Net Promoter Score and constantly develop our methods of measuring with that. On the whole, measuring the customer experience has gained more and more importance as a leadership method. Along with financial measures, the indicators of customer experience are the most important of all essential measurements.

One additional and important angle relating to customer experience are questions about how we are organised. There are thousands of people working in the global development organisation of the OP Group and we are constantly thinking about how to stop people from forming silos. Silos are a fact of life in big organisations, but that should in no way be visible to the customer or have any negative impact on the customer experience.

The OP Group development philosophy has elements that ensure networking. As an example, I could mention the active network of customer experience developers. This network is the torchbearer of customer experience, and is a trusted information channel.

We also have lot of internal cooperation. We gather together sales managers from different branches at networking events, share experiences and envision new and better ways of working. This is how we spread methods of enhanced customer experience inside the OP Group.

Value Networks are the future

There is a lot of talk about digitalisation as well as wide reaching change: and for a good reason. The financial sector, at least, is undergoing a deep transformation that is revolutionising the whole industry.

Inside our organisation we have had many discussions about how our business will look like in the future. At the moment, the service packages are – more or less – product-based. Going forward, it is likely that businesses and service packages will be more tailored to the needs of customers. At the same time, borders we see now between industries will vanish. I believe that this will improve the overall customer experience.

The building and construction business is a good example. It is traditionally closely linked to the finance business. Traditional products, such as mortgages and home insurance look likely to be unsatisfactory for the customers as separate items. Customers will probably require a more comprehensive service package in line with their needs. It is easy to foresee some of the new services on top of those from the financial sector, such as services related to moving, repairs and home improvement.

Transportation is yet another industry undergoing significant change. Financing car loans as well as car insurance is a big business for the finance sector today. And yet, already, we can see how people will move around in the future is going to change. At least a segment of those who now own a physical car will be ready to accept a model where the car is seen as a service rather than a possession. The change from owning to using a car as a service will challenge all parties involved to renew their way of thinking in order to adapt to this new manner of transportation.

Digitalisation also opens up new possibilities, and enables, at the same time, new types of competition. There will be new ecosystems with fierce rivalry over taking the top spot. There is likely a number of parties who think they will be entitled to run the ecosystem and will themselves build the partner network for the ecosystem.

In the world of ecosystems everybody has to rethink their position. This involves risks as well as opportunities.

Through digitalisation, business will become international. In banking and insurance businesses there will, in the long run, be no national league anymore. In the past, when customer service was provided in the physical space of a building, things were naturally very different. Today, in order to be competitive in the international market, you also need to be competitive in the national market. One has to set the bar very high to meet the innovative digital services offered by the start-ups.

How can you lead innovation?

The finance business is most likely experiencing the biggest change in its history. Only time will tell whether this is true even though the grounds for this belief are solid. Understanding the operational environment, as well as identifying trends of change, are now of critical importance if we are to succeed in the future.

There are many activities in the OP Group that are aimed at making sure that every single one of us understands the change that we are facing. At regular intervals, we focus on thinking about how we can be leaders in this change and on the other hand how we can be sure that we have the correct image of the change ahead of us. Furthermore, it is important to take care that our strategy not only consists of words, but exists in concrete actions.

We need to constantly challenge ourselves to see how we could do things differently. It is important that new ideas should be tested and piloted as soon as possible. This means there will be mistakes and missteps taken, especially during the first attempts. We need to learn to be resilient to our mistakes and of course make sure that we learn something new from each and every failure.

During our latest round of strategy, we concentrated heavily on the future. We engaged a large number of our personnel in this work, people from all different facets of our organisation with the target of identifying the trends of change in our operational environment. This, however, is not the only way that we consciously try to renew our thinking.

If there was ever a time for leaders to invest in finding their direction for the future and their new strategic thinking, then it is now. I believe that in the coming years, small-scale development is not going to be enough, but there is, without doubt, a need to change operative models with investments that will enable them. So, we must now make bigger, more far reaching moves than those demanded in the past.

A large part of leadership is creating and facilitating direction, and this requires constant communication. To this end, we have, inside our organisation, opened up our vision of the future as much as possible and communicated it to all parts of our organisation. It is important that everyone, no matter what their role or task in the organisation, can understand the scope of the historic changes of which we can be a part. We have also encouraged every single employee to renew their everyday ways of working. For a corporation, each employee that innovates towards developing our operation, is a massive source of advantage.

When it comes to our actual innovation, the central role is in our Accelerator Unit (“Kiihdyttämö”). It has been tasked with advancing and supporting our internal culture of innovation and managing our concrete innovation projects. A special task of the Accelerator Unit is in finding bigger and more radical innovative openings.

In line with the need for more radical ideas, we have also recruited new personnel from outside our company to work in our Accelerator Unit. What we have looked for, in particular, as a recruitment criterion, is the ability and willingness to see things differently and to act accordingly. Through the Accelerator Unit, we have gained new tools for innovation and managed to spread this innovation-centric thinking right through our organisation from top to bottom.

Innovation as such, is, to my mind, systematic work; and needs a process of its own. On the other hand, even the large corporations need to work like start-ups when it comes to innovation. In our case this has meant that we have, in our investment decision-making, implemented models more familiar to the world of start-ups. This means, to give an example, that an idea gets funding for research up to a certain point only. After that, the project then has to seek out further funding which will require results that will enable the project to get a go-ahead decision.

Read the latest article of OP Enterprise Wide Agile.

This article was originally published on 2017 in the Digimuutos.fi book.

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