Scaling in the new market will most likely shake your company and can even push you to the brink of bankruptcy. Thinking you have a great product that will work anywhere in the world just the way it is, is a huge mistake, as regulations and culture vary and your product needs to adapt constantly, with no one-size-fits-all recipe. Then what makes scaling successful? How to find the motivation to keep going even when the odds are against you?
Klarna, now a unicorn is coming from Stockholm School of Economics with the aim of making it easier for people to shop online with a mission to make paying as simple, safe and above all, smooth as possible is competing in the most regulated field. When they started, experienced businessmen, who knew exactly what they were talking about, warned them repeatedly: you are not going to make it. But the team just disregarded them and kept pushing. Klarna is now one of Europe’s largest banks and is providing payment solutions for 60 million consumers across 130,000 merchants in 14 countries.
The key To Success In Scaling
Erik Engellau-Nilsson sees two key factors: the tenacity and grit of the founders, and the timing how they approached a market that was just about to explode, approaching this highly regulated, incumbent market in new ways that were never seen before.
“Every time we entered a new market, we nearly went bankrupt. We thought we had this cute little product, we can just apply it to a new market, we don’t have to tailor-make it, because the customers in Sweden really like it. But the credit models were completely different in Germany compared Sweden. Pretty much the whole company went bankrupt when we entered Germany, we had to switch the product around so much. The same thing happened in Norway, in Finland, as we were just trying to build a company that was modeled on what we did in Sweden and applies it to the new market, and this failed every time. So we had to quickly think about what’s the new way to approach this, who do we need to bring in. And we learned from the best from Sweden: IKEA.” – said Erik.
Team Culture And Having The Right People On Board
The company quickly realized that embracing the local culture and getting the right people on board with years of corporate experience was crucial. So, when entering the US market, Klarna followed this model: the company brought in one local guy, who was in Sweden for 6 months before, to set up the office in Ohio. At the same time, the company sent its Swedish long-term employees to New York to find merchants. They managed to bring in one big client and expected other merchants to keep flowing. The reality was, they couldn’t have been more wrong. What worked for one client, did not work for any other. The business was struggling for years, but have started to take off now.
“We had no trust, no credibility, just a bunch of 23 year-olds putting on suits. Then we realized we had credibility in the product itself,” said Erik. The company shifted its mindset and explored the market from the consumer perspective – it started challenging the market and be as far from a normal bank as possible. Instead of the standard color choice of blue of the banks, their color is pink and they use Snoop Dogg as a spokesperson. Or shall we say, Smooth Dogg?
Maintaining The Vision
According to Erik, at first, there will be fires everywhere. You might have a continuous feeling of helplessness and stagnation. What will keep you to move forward is people with vision, who are able to keep the momentum and bring in more, even though everything around you is burning. You will need people whose actions spur the feeling of growth against all odds. You’ll need a leading force to go on, even when the road is tough. Nearly every great product or company needed time to take off, even Tetra Pak or Apple had their fair share of difficulties before becoming successful global players.
Shifting Towards Impact
Today, Erik is running Norrsken Foundation (meaning Northern lights), a Swedish effective altruism foundation which supports and invests in organizations that have a positive impact on society.
“Selling payments and making it smooth is fantastic, but we got to think: what would happen if we would apply our experience towards building a company that solves societal problems with tech and entrepreneurship?”
Contributing to a good cause have become an important requirement for businesses. When you combine business mentality with social entrepreneurship, top it up with the culture of making things happen and have the resources to scale the solution conquering the new territories becomes easier.
Norssken has set up an impact ecosystem in Stockholm by creating a coworking space where 150 impact-focused companies can work under one roof to solve global problems.
“Solving fundamental problems is key for our transition as a planet and as humans,” says Erik Engellau-Nilsson.
Whether it is an AI tool designed for healthcare, digital solutions for education, or a platform for knowledge sharing between local farmers to grow more efficiently, Norssken is agnostic to the problem itself and welcomes companies addressing any of the global challenges. They have put in 80 million EUR as personal capital and set up a VC fund with external capital, with other unicorn founders as investors, so they now manage 150 million in total capital to help impact entrepreneurs scale. Next stop is Kigali, Rwanda, and London, with a goal of opening offices all over the world.