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FINN.no is Norway’s largest online marketplace. FINN.no is a story of disruption and innovation, and we have a goal of being one of the most innovative companies in the world. We believe innovation is about people and the story describes how we have implemented tools, processes and behaviors to support this goal.
FINN.no is a Norwegian company founded in 2000. The company has 350 employees and yearly revenues of 200 million USD. FINN.no is owned by Schibsted Media Group, one of Norway’s largest media companies founded in 1860. Schibsted’s business is divided into two main parts: “Classifieds” and “Media Houses”
FINN.no is a story of disruption and innovation. In the late 1990’s Schibsted decided to start a new online-company, outside the established organization, to really take advantage of the new possibilities given by the Internet. The idea was to move the newspaper classified ads online, and by that enable new revenue streams and business models. FINN.no was founded in 2000 to be that spearhead, and was given the mandate to cannibalize the newspapers business model. Now, twelve years later, online classifieds are a major part of Schibsted’s revenue and FINN.no is one of 20+ companies in Schibsted Classified Media.
Image 1: Split of revenues and EBITDA in Schibsted Group between online and offline (i.e. print/newspapers)
Today the marketplace consists of several different categories; cars, real estate, jobs, travel, general merchandise and services/craftsmen. FINN.no is Norway’s fourth largest website (measured in unique users) and market leader in almost all categories. Measured in page views, FINN.no is Norway’s largest website with over 800 million page views per month.
FINN.no has also succeeded in establishing a revenue model based on people paying to advertise, whereas various competitors offer such listings for free. As a result FINN.no is very profitable with a profit margin above 47%.
Innovation is a strong part of our company’s history since FINN.no itself is an innovation. However, when we looked at our large market share in 2006, we saw a strong limitation for further growth. We have also seen stronger competition from global competitors like LinkedIn and eBay, and to some extent Facebook. Because the Internet is such an effective distribution channel, the competition is global and highly dynamic. A startup can become a large competitor within a year, a huge contrast to the old industrial economy. Based on this analysis we decided to gear up our innovation efforts.
In addition we are now experiencing a mobile transformation. After 10 years of relative stability in the desktop-world, there is now the whole new ballgame of the multichannel-world. This also calls for a strong emphasis on innovation.
The most important measures we have taken to strengthen our innovation efforts are described in the following:
Culture and Values (2000 - )
Since we strongly believe that innovation is about people we measure and benchmark our efforts in building a culture where innovation can thrive.
FINN.no’s values are Precision, Drive, Spirit and Tolerance. The values are used actively, both as a feedback tool and as a basis for rewards and recruitment. The values are also directly linked to innovation behaviors:
- “Precision” is about learning and improvement
- “Drive” is about execution
- “Spirit” is about creativity and fun
- “Tolerance” is about accepting mistakes and giving feedback
“We have a great diversity here and that demands using the value Tolerance actively. In my sales team I have a heavy rocker and a physiotherapist, not exactly the usual sales background. I find Drive and Precision natural parts of being a good salesperson, but Spirit is also actively used. We do it with humor around here and you can hear bursts of laughter all the time. I started at FINN 12 years ago when we were 25 employees. I remember back then when I thought about what the future would be. Now we are 350 employees but I still feel we have kept much of the same culture”
—Alexander Arvidsson, Sales manager
Twice a year every individual gets feedback based on how they have adhered to these values. Feedback is given by colleagues in the same team and the team manager, both in writing and orally. Oral feedback is given in group sessions facilitated by an external consultant. Every team member gets feedback from the rest of the team on what is good and what should be improved. The value “Tolerance” is used to create a good atmosphere for constructive feedback.
Once a year we organize a party called FINN Awards where prizes are given to teams or individuals in different categories, one being “Innovation of the year”. The values are used as a part of the evaluation criteria in every category.
To have an external benchmark on how we succeed in building a healthy corporate culture we have participated in Great Place to Work for the last eight years. GPTW measures elements like autonomy, freedom and influence, important building blocks for an innovative culture. We have succeeded in becoming the Greatest Place to Work twice (2011 and 2012) in Norway, and have been listed top 4 in 2006-2010. 95% of all employees say they are looking forward to go to work every day. This serves as a good benchmark, but also as a tool for strengthening employer branding. Feedback given in GPTW is actively used by the management group to adjust and prioritize actions.
Another effect of the emphasis on people and culture is employer branding. FINN.no has succeeded in becoming one of the most popular IT-companies among students. “Innovation” is also the word being mentioned the most when students in a survey made by Universum (fall 2012) were asked to say one word that comes to mind when hearing FINN.no,
“When we started FINN we brought in people with different backgrounds. Since we were going to establish marketplaces for Real Estate, Cars and Jobs we brought in people with experience from broking, car sales and recruitment. This also had an impact on culture and management. We also were rebellious and bent the rules. One prerequisite given by our owners was that we couldn’t hire salespeople. We hired “marketpeople” and used them as sales staff”
—Christian P. Halvorsen - CEO
Principles (2010 - )
To be able to “live the values” on a daily basis we use principles as guidance. To succeed we believe that processes must be linked to principles and principles to values. Principles are context dependent to be relevant (i.e. sales, development, management), but some are common. We are now about to launch a revised list of principles for Product Management, to give managers support in how to “live the values”. The principles are:
- Make goals visible, monitor results
- Prioritize actions that gives value to the user
- Use facts and insight
- Create space for new thinking
- Learn through experiments
- Ensure quality
- Deliver user value frequently
- Improve product and process continuously
Principles 1, 2, 3 and 6 are linked to Precision, 7 and 8 are linked to Drive, 4 and 5 are linked to Spirit and Tolerance
Since 2010 we have implemented principles in product development as a companywide program. The program has been an important building block in defining the platform needed to support our future innovation efforts (see more in the next chapter, “Future growth”). The program is used for all development teams (20 in total) and is based on implementing companywide product development principles, and allowing locally adapted processes. This has been a success, since locally adapted processes gives the opportunity to be flexible and nimble. There is also less resistance to change if people can be a part of defining their own way of working, framed by some non-negotiable principles.
The implementation is run as an internal certification program, owned by organizational development. Certificates are handed out monthly. The implementation-program in itself is voluntary, but has created a pull instead of a push.
The product development principles are based on Lean. We believe Lean and Innovation can coexist, and we use Lean as a mindset for continuous improvement, not continuous cost-cutting. The benefits from working lean are that resources can be freed up and transferred to creating more radical innovations.
Idea Management (2007 - )
Based on our values we want openness and crowdsourcing of ideas to harvest the collective creativity of the organization. In 2007 the decision was made to develop an online Idea Management tool, FINNopp (meaning “Invent” in Norwegian), since buying a tool from a vendor was found to be either too expensive or lacking functionality. The tool was developed with social functionality such as collaboration and voting.
The solution quickly became a success and generated huge numbers of ideas. Transparency and passion for ideas are levers for strengthening the innovation culture since all employees can vote for ideas they want the management group to prioritize. A new category for tendering services was one result, with a turnover of 40 million NOK in 2012, as well as a new brand, www.penger.no. Ideas that are selected are given resources to develop and launch.
Image 2: Screen dump from FINNopp, our Idea Management tool
Openness (2008 - )
One of the success-criteria of FINN.no is the collaboration with strategic partners in real estate and car sales. Several innovations have occurred as a result of close cooperation with industries in chosen categories. Open innovation has been on FINN.no’s agenda from the start.
To strengthen the communication with the users of FINN.no, we launched FINN Labs as a portal for communication and collaboration with the user community. FINN Labs contains information for tech buffs, such as which devices and operating systems are used to access FINN.no, but also for a wider target group. We post ideas about future products and gain feedback from the FINN-community to enhance our product development. Users of FINN Labs also get the opportunity to be beta users. FINN Labs had 80 000 unique visitors in 2012.
The two-person FINN labs team also took advantage of the liberal experimentation mandate given them by the management group. Web developer Erlend Schei elaborates:
«While not being significant on FINN's roadmap, we could play a hunch on mobile apps. Exercising our freedom to experiment, we chose to go all in with iOS development with the iPad launch in 2010. Together with my boss, Eyvind Larre, we teamed up, taught ourselves iOS, and hired two summer interns. Today, the apps team is 10 persons strong, and mobile is key in all development. Our first app released now caters for 12% of all classifieds placed on our bits'n'pieces marketplace!»
Intrapreneurship (2011 - )
To strengthen the innovation culture and to foster an intrapreneurial skillset we have launched two concepts: FINNovation day and Sandbox.
FINNovation day is all about creativity and playfulness. All employees can attend. Everyone is grouped in two main groups: the ones having ideas and the ones with capabilities to develop ideas further. The output can be ideas and concepts that can be implemented, but the purpose of the day is mainly to offer a training ground for skills and behaviors. Either you are trying to “sell” an idea or help nurture and develop an idea. FINNovation day is held twice a year.
Sandbox is a concept that allows employees to develop their own products based on data from FINN.no. FINN.no, being an online marketplace, has lots of user data and Sandbox enables the use of some of these datasets. Employees sign a contract with FINN.no allowing them the use of data. When a product is launched, any revenue is split 70/30 (Employee/ FINN.no). Sandbox may foster competitors to FINN.no, but we believe that the benefits of intrapreneurship overshadow the fear of competition. This fall, the first solution was launched and is available in Apple App Store.
“As a developer I have used Sandbox to build a product called GrabIT. It is now available on Apple AppStore. I believe FINN has a strong culture of a flattened management structure and colleagues eager to help. My five minute drop-in meeting with the SVP of Product Development saved me weeks in waiting time, him an unnecessary meeting and FINN hour of administration, going up and down the organizational hierarchy.”
—Jon Georg Berntsen – system developer
KPIs (2007 - )
Establishing innovation key indicators is not an easy task. All indicators have an inherent risk of creating adverse effects. FINN has learned this the hard way. We have arrived at a set of KPIs that we believe are better balanced and more stimulating than the original setup.
There are primarily two mistakes we have made that are worth mentioning:
- Focus on commercial success. There are two fundamental flaws with this indicator. Firstly, it is a lagging indicator. Commercial success takes a while, and you risk spending lot of resources before you can measure. You therefore need leading indicators to manage innovation efforts earlier. The second flaw is related to the fact that innovation is, by definition, risky. Success is never guaranteed and we will have to take some risk. KPIs related to commercial success will result in more analysis and planning believing that this will eliminate risk. It creates a risk averse organization. Hence - the effect is that the speed of innovation and number of radical projects decrease
- Focus on number of new ideas.It's common to think that innovation is primarily about creating new ideas. The effect is – obviously – that we get a lot of ideas, but not necessarily relevant ideas. A large amount of ideas will make it even more difficult to distinguish between valuable and less valuable ideas. Idea generation is just one of many steps in the innovation process. The abundance of ideas in one part of the process halts the flow in the following steps. We ended up with queues of many stray ideas that were never selected and many disappointed employees who eventually lost the motivation to contribute with new ideas. In the long term this would have undermined the foundation of the innovation culture – highly motivated and creative employees
Commercial success is – obviously – the primary goal for innovation at FINN. However, our new approach to innovation KPIs is about creating a better balance between effect, efficiency and the right activities. The improvement consists mainly of three steps:
- Focus on experimentation and learning. Growth in new, unknown areas involves some degree of uncertainty. The more we learn the less unknown these new areas become, and the chance of success increase. We believe that experimentation and learning is a key activity in the innovation process. Hence the number of experiments and how much we learn from them is a key innovation process indicator
- Focus on doing things right – a lean perspective on process efficiency. FINN has shown that a lean perspective increases the rate of innovation. In early years we radically reduced the release cycle time (by a factor of 4) and improved the technical quality by the same amount through the introduction of agile development methods like Scrum. To optimize the innovation process from a lean perspective, one must first define the entity that floats through the process. The entity is not an idea alone, but a more complex entity that we have called "The Innotainer" - a defined set of five elements: WHO, WHY, GOALS, WHAT and HOW. (This is the core elements of Alex Osterwalder's "The Business Model Canvas".) Increased innovation speed is achieved by improving the flow of these entities through the process. The process begins with setting direction - by defining the WHO, WHY and GOALS. The idea generation should be focused around the WHAT and HOW elements. This will put more productive constraints on the idea generation steps. With this perspective, a large number of ideas will not necessarily be a problem – as long as they are connected to an “innotainer”. This model is also suitable for iterative development, e.g. by the use of agile methods like Scrum
- Improve the set of KPIs continuously. Establishing an appropriate set of KPIs is always difficult, and it is practically impossible to find the perfect set. The way we measure and manage innovation must be subject to improvement based on how well they work in real life. The key is to measure frequently and improve the set of key performance indicators continuously.
Future growth (2012 - )
The efforts described in the previous section were/are all important parts of our current innovation standpoint. Because of an ambitious 2015 growth target, but also due to a competitive multichannel environment, we have decided to strengthen our efforts even more.
We believe that being a world-class innovation company relies on three building blocks
- Define WHERE our new innovation efforts shall be directed (strategy)
- Implement HOW we shall go about making it happen (tools, process, skills, culture)
- Act on WHAT to create the results (generate ideas, develop and launch)
We have defined a new innovation strategy based on our new corporate strategy. The purpose is to clearly define innovation in a FINN.no context and to give direction to where we shall search for innovations. The strategy also gives direction to which tools and processes we shall improve and which new to implement. The innovation strategy is owned by the top management group. The innovation strategy is tied to the growth targets of FINN.no to give a strong rationale that innovation will fuel growth, both incremental and radical.
FINN.no recently reorganized the whole company. The main reason for the reorganization was to “accelerate the innovation pace”. FINN.no has previously been organized around decentralized teams based on the different categories (real estate, cars, jobs etc.). This accelerated incremental improvements of the current product, but slowed the ability to make radical changes across teams. Now the company is organized around functions such as Sales, Product and Technology. Another result is a smaller top management team and a clearer governance structure.
Another issue is our principle of “Mobile First”. As described in earlier chapters we experience a change in paradigm, much the same as we experienced when FINN was established. Back then the paradigm was about the change from paper-based to digital classified ads. Now we see a change from desktop to mobile. As we experienced then, user behavior shifts more rapidly than business models. Even though: we must adapt to user behavior to have a business model tomorrow. “Mobile first” is therefore not a question of technology but a question of future competitiveness. The change in organization was made to better cope with this challenge.
A team, part of organizational development, has the mandate to implement HOW we shall go about making innovation a part of our DNA. The team is named FINN Way of Innovation. In addition to many of the tools and concepts described in the previous chapter some new actions have been taken:
- Use of Lean Startup. To succeed with future growth we have set a goal of “A fast, forceful and user oriented organization”. We find many of the same dimensions in the Lean Startup methodology and have conducted three pilot projects in autumn 2012 to make use of this mindset as a part of our innovation process
- Use of ?WhatIF!. To succeed in finding more radical ideas we have conducted a pilot project using tools from the innovation consultancy WhatIF. The ?WhatIF! toolbox improves skills and challenges our behaviors; especially playfulness, greenhousing and creativity
- Participation in Startup Weekend. Startup Weekend is a global movement where local startup weekends are organized all over the world. The purpose of a startup weekend is to take an idea to a business concept in one weekend. We have participated with employees eager to learn more about the life of an entrepreneur, taking those skills back to FINN.no acting as an intrapreneur
- Partnering with the Norwegian University of Science and Technology (NTNU). We find partnerships with academia very useful, both as a research partner and as a subject matter expert. We also invite students to write their master thesis on FINN.no -related subjects
- Participate in the Kellogg Innovation Network. To get international impulses and benchmark our innovation efforts with leading thinkers, we have joined the KIN. We also have enjoyed having Professor Robert C. Wolcott, the founder of KIN, as a key speaker at FINN.no events
- Emphasize the importance of experiments. To succeed in building an innovation culture, and to learn more about the unknown, experiments are one of the most important building blocks. Lean Startup is a methodology based on experiments, but we have also defined the prerequisites for an experiment and who is responsible for authorizing experiments
Image 3: The framework of FINN Way of Innovation
Act on WHAT
The direction, tools, processes and concepts described in the previous chapters constitutes the innovation platform on which the organization shall find support to act. The responsibility for understanding trends, users and competitors and to use this insight to generate ideas, develop and launch lies in each business area. The current business areas, made up of all current marketplaces, are primarily responsible for incremental innovations.
“In the first lean startup project at FINN we experienced that the fear we had that our major customers wouldn’t be willing to experiment was exaggerated. The limited time, effort and cost involved for our partners combined with maximum learning and no commitment to launching the product made it a rather easy sell. We were open about that it was all about learning and that we might scrap the product idea. Another effect was that the speed needed to conduct experiments showed that we needed to improve the interface between sales and development. In the next project we will put more effort in involving sales earlier in the project”
—Adne Skjelstad – Product manager
To succeed with more radical innovations, and enable the right environment, focus, people and processes, a NewBiz-team was established in April 2012. It´s a team with few dedicated people responsible for finding and selecting the best opportunities for FINN.no, building investment cases and through Lean Startup and entrepreneurship ensuring optimal start-up and implementation. An important element is that the team has the full responsibility both in selecting the best cases and building the product and organization needed to take the business case to market with focus on KPI´s related to growth.
“Our experience is that executing radical new ideas in existing departments, with focus on existing business and processes, is difficult. It often ends up as ad-hoc activities. Long-term results from radical ideas were to some extent not a part of the strategy of the existing business. The NewBiz team was thus both a change in strategy, structure and management responsibility. The NewBiz team supports FINN’s long-term growth strategy and some of the business cases have a 5-10 years perspective. We strongly believe that to succeed, it makes sense to place the responsibility in a dedicated unit that focuses on this objective. We believe that searching for future business models require different processes, work methods, focus and people than managing existing and well proven models. From a management point of view managers in existing departments can focus more on incremental innovations and strengthening existing marketplaces, and we can execute on more radical innovations“ —Eyvind Larre – Head of NewBiz
Challenges and solutions of Idea Management
We have found some challenges with Idea management that we have set out to fix.
- Ideas need direction. Idea Management tools must have the ability to combine bottom-up and top-down idea generation to really take advantage of the collective creative power of the organization
- You must train and identify problem owners that see new ideas as something they want, not something that disturbs their roadmap
- You must have an “idea gardener” that facilitates collective idea development
- There are such things as bad ideas. You must train the organization to understand that there is no one-to-one conversion rate between idea and execution
- Radical ideas need other tools and environments. Do not think that an online Idea Management tool is the only source you need
Our fix to these challenges is to take a step back and clarify and redefine processes, roles and responsibilities (especially how we prioritize tasks and resources). We also have piloted offline tools, like ?WhatIf!, to improve skills needed to come up with more radical ideas. As a result of this work we will also revise our Idea Management tool.
Benefits and metrics of Idea Management (figures from 2010)
- 65% of all employees submitted an idea
- 83% of all employees logged on to FINNopp on a monthly basis
- 90% of all employees gave feedback to another idea
- 10% of ideas were developed and launched
Benefits and metrics of Product Development Principles
As a part of the principle of continuous improvement the release frequency for FINN.no was changed from a quarterly to a three-weekly basis. This had two major effects: 1) the fail rate after release was reduced by 75%. This was mostly due to reduced complexity. If product development is forced to release features in smaller batches, the complexity and number of errors in the code are reduced. 2) If features are released with a higher frequency it is possible to get more user feedback. This feedback can be used to learn more about what will provide user value or not. This is particularly important when working on new innovative products. A rapid user feedback can give valuable insight and the possibility to pivot.
Benefits and metrics of using Lean Startup in NewBiz
One effect of using the Lean Startup Methodology is that the process of funding new ventures gets very lean. The last idea for a new category, generated in the New Business Development team, took three weeks from initial idea to approved funding by the board.
Some key lessons learnt:
- Innovation is a result, not a process
- To succeed in making innovation a part of the DNA, innovation must be demystified and decoded. Inspired by Doblin, we have defined innovation as “A viable new business concept”. We want innovation to be broader than product innovation and have used examples from FINN to clarify what “other than product innovation” means. It is difficult because revenue models, brand, processes and customers are more difficult to grasp than a product with features and attributes. Product development, which is in charge of innovation, also has had a product feature perspective on innovation. One key activity we have started is to involve sales and make them feel more involved in the innovation process. The sales department has now established a Concept-team responsible for customer involvement (open innovation) and crafting out ideas that goes wider than traditional product development. We have also hired a person in the business development team in charge of pricing and revenue-models. He is used also used as a sparring partner to broaden the perspective of new business models. The role of FINN Way of Innovation is to make sure that all these stakeholders and contributors are involved in our innovation process at the right time. Another way of decoding innovation is to talk about problem-solving and user needs, not innovation. We aim for an organization that solves user needs and problems better than anyone else. Some of the needs and problems calls for innovation, but not everything we do will be defined as innovation (based on our definition). We work with tools like A3 and “5 why’s” to find root causes and solve problems and work with change management to be able to cope with a rapid changing environment. Not all root causes calls for innovation, but problem solving gives the organization skills and behaviors that can be used in the innovation process.
- Innovation can be enabled by technology, but must be achieved by people. Even if we are a part of a tech-intensive industry we firmly believe that technology alone cannot achieve what we aim for. FINN has 100+ developers, but also 100+ salespeople. Even if we attract the best developers our competitive advantage in many ways lies in our ability to build face-to-face relations with our customers and truly understand their needs. The internet is a highly effective distribution channel, but it also enables users to migrate to other solutions quickly. Relations cannot only be made and managed online. In addition to all the company-wide efforts described in the previous chapters, we therefor see our sales staff as a tool to succeed with innovation.
- The prerequisites for innovation must be understood by managers on all levels. Management principles must support innovation. As described in previous chapters we see a link between values-principles-processes. Previously we had an organizational structure that amplified suboptimal behaviors. In this perspective there was a wide range of management principles and behaviors. This was a good strategy in a growth-phase, but the profound challenges we now face calls for a stronger “FINN first” principle than before. We now have a smaller top-management team with more intertwined goals, and a smaller level 2 management group with more defined responsibilities. By implementing the revised product management principles described earlier we hope to get a stronger focus on a common set of management behaviors that support innovation.
- The problem is not the lack of ideas or creativity, but the ability to execute
- Idea generation needs direction. If you want ideas with impact you need a clear problem definition and a clear problem owner that can take ownership for execution
- Strong focus on cost is a barrier for innovation. Some years ago FINN organized its development in a company called FINN Tech. The company was owned 50% by FINN and 50% externally. The background was internationalization and the plan was that FINN Tech should export and manage the FINN-platform based on a licensing model. This failed, much due to the fact that the setup was made to save cost, not to drive growth
We believe that many of the measures we have described are context-related and many of them are intertwined. Other companies will experience other effects and have other lessons to share if they implement the same measures.
Running Lean by Ash Maurya - http://www.amazon.co.uk/Running-Lean-Iterate-Works-OReilly/dp/1449305172/ref=sr_1_1?ie=UTF8&qid=1357207499&sr=8-1
Startup Weekend - http://startupweekend.org/
?WhatIF! - http://www.whatifinnovation.com/
Kellogg Innovation Network – Professor Robert C. Wolcott
Harvard Case Study N9-707-474, April 04 2007 - Schibsted