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Digital transformation calls for a different way of thinking and traditional Nordic corporations are increasingly doing this by collaborating with young technology companies.
While the Nordic region is a hotbed of IT startups, traditional businesses in the region have been slow to work with them.
Inka Mero is the co-founder of Pivot5, a Finnish accelerator focused on bringing together corporations and startups. She said large corporations in the region have been slow to collaborate with startups compared with the US.
“It’s happening more and more, but we are still a bit behind. Corporations are not yet as effective in tapping into the startup field as they could be,” she said.
But Mero expects this to change quickly, big businesses are now adopting new ways to work with innovative digital startups. The approaches can vary from startup competitions and open application programming interfaces (APIs) to setting up their own accelerator programmes and venture capital arms.
You don’t have to look far for examples. In 2015, Nordea, one the Nordics’ largest banks, launched a fintech startup programme in co-operation with Finnish accelerator Nestholma to develop digital services.
Meanwhile, in Sweden media conglomerate Bonnier has backed finanical technology (fintech) focused investor NFT Ventures since 2014, in addition to running its own venture capital arm.
“I think corporate venturing is here to stay,” said Mero. “Before it was more of a trendy thing, but now we are at a stage where even traditional industries are becoming digital and they have to build these kinds of [collaborative] vehicles.”
Read more about startups in the Nordic region
- The Nordic region is a hotbed for IT startups and, while it is better known for consumer-targeted creations such as Angry Birds, there are more and more startups targeting businesses.
- Nordic startups are targeting the mobile market with software to help customers create apps as demand from businesses in their home region and beyond grows.
- A UK network that supports the IT startup community is attempting to emulate its activities in the Nordic and Baltic regions.
Raoul Grünthal, executive vice-president and head of Schibsted Sverige, the Swedish arm of the Norwegian media group, said the situation has changed significantly in the past two years.
Schibsted began startup acquisitions 10 years ago to expand digital business in the group, but the field has become increasingly competitive. Deals need to be closed at earlier stages and startups have become more international in their approach.
To react to these changes, Schibsted is building facilities for closer startup collaboration.
“[This new initiative] is much more about taking care of all the different parts of a new company from the very early stages,” said Grünthal. “Before this, we were more focused on helping companies in one specific area, such as marketing.”
Age is no barrier to innovation. Founded in 1910, Finnish lift manufacturer Kone was experimenting with startup collaboration two years ago.
Now its startup strategy includes innovation challenges, open APIs for developers and hackathon weekends for startup teams, all aimed to boost Kone’s plan to build an ecosystem of digital services around its lift and escalator business.
“It is clear we cannot be the leading expert in everything, but we want to find innovative partners whose ideas can complement the machine systems we bring into buildings,” said Jukka Salmikuukka, director of new business concepts at Kone.
In addition to new services and new ways of thinking, Salmikuukka cites a “born digital” attitude, agile processes and rapid market entry as just some of the areas where traditional industry players have a lot to earn from young tech companies.
Through collaboration young entrepreneurs get to tap into a corporation’s industry knowledge, networks and test their products in real-world environments. A large firm can help a startup enter a market and gain access to their customer base, typically the main problems for any new company.
A recent example of this is Kone’s collaboration with Estonian startup Indoor Ninja. Kone provided coaching and APIs for the startup to develop a digital receptionist system for visitor identification and access control in building lobbies. Ultimately, Kone will add the product to its portfolio of cloud customer services.
Hacking the industry
Despite these positive steps, most Nordic corporations are still experimenting to find the best ways to work with startups and developers. In Finland, a popular solution has been IndustryHack, a startup company which aids corporations by setting up weekend-long hackathon events around the industrial internet.
Each event is organised in conjunction with an industry partner. The partner sets the focus area for the hackathon and works together with IndustryHack to pre-select startup and developer teams to participate in the event.
For its part, the partner company makes its experts, technical tools, databases and APIs available to the teams. The winning teams are awarded prize money and are given the chance to continue developing their idea with the industry partner.
“These kinds of hackathon events can be very cost effective. You might get 100 ideas over a weekend, which would take six months to develop internally,” said Mero.
Steer away from conflicts
While collaboration between corporations and startups can be good for both parties, mixing two very different company cultures will create some clashes.
“Startups are very agile and fast and, from their perspective, bigger companies can’t always match their speed. That can cause challenges,” said Salmikuukka. “You need to take steps to meet them halfway and try to understand how startups think and operate.”
“You need to bring the realities to the table from the start, so no one is under the wrong illusions. If the expectations and reality do not meet, it can be a critical situation for a small company,” he said.
Grünthal, who has overseen several startup acquisitions, believes the biggest mistake a corporation can make is trying to mould a new company in its own image. “[The startups] cannot be too close to the legacy business or you aren’t letting the entrepreneurs be entrepreneurs,” he said.
“At the same time they must not be too far away from the business because all the companies in an ecosystem should feel they are part of the same culture. That’s always the most difficult part, getting this balance right,” Grünthal concluded.