Here's how the CEO of $5.5 billion fintech startup Klarna adapted Amazon's two-pizza meeting theory to restructure and scale faster in the US
- Klarna, Europe's most valuable private finance startup at $5.5 billion, has taken radical steps to improve its internal working processes in recent years as it gears up to take on companies like PayPal.
- The company struggled to complete some key tasks and projects under previous working conditions but found a novel way of getting jobs done through eight person teams and single goals.
- The startup applied the new processes to its marketing department and has now rolled the "small team, individual project" strategy across the whole company with impressive results.
- The startup likened its new, focused approach to Amazon's two-pizza theory, where Amazon CEO Jeff Bezos keeps team meetings focused by only permitting a small number of attendees.
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Scaling a successful company sometimes requires bold decisions.
Sebastian Siemiatkowski is the CEO and cofounder of Europe's most valuable private fintech firm, Klarna. It's a Paypal competitor that processes payments online, and hit a $5.5 billion valuation in August after a $460 million funding round.
Siemiatkowski could, perhaps, afford to rest on his laurels but says he's always looking for ways to improve Klarna's efficiency.
In an interview with Business Insider at Slush in Helsinki, he recalled watching a movie about Swedish tennis icon Bjorn Borg who as a child is told by a coach that he will succeed because winning is life or death for him. "I watched this scene and I thought 'Jesus that's me!'"
"I am mature enough today to realise that I will not necessarily be happier if the company is more successful but every day I wake up and that's my thought. So I need to continuously learn, I think 'What could I have done differently to produce a different outcome?'"
Klarna overhauled its operations in 2019 after finding a bottleneck in its marketing team
Research conducted by Harvard Business School, published in the Harvard Business Review, indicates that CEOs should spend a large proportion of their time on strategy and aligning that strategy with, and shaping, company culture.
To that effect, Klarna undertook a radical overhaul of its operations around 18 months ago to help achieve one of the company's goals.
Namely, to complete a sales presentation that had been knocking around the marketing team almost two years. The company brought in external consultants McKinsey to evaluate why the team was having such trouble executing.
The result was a complete switcharound in structure. Klarna formed 8-person teams tasked with looking at specific issues. They held daily standup meetings and people worked in the same office to finish the task.
Three weeks later, the project was complete and Siemiatkowsi was convinced enough by the new approach to roll out the structure across other departments.
The company likened its approach to Amazon's famous "two pizza" working theory, where Amazon CEO Jeff Bezos keeps meetings limited to small groups - small enough to be fed by two pizzas. Another example is Spotify's squads, which enabled the Swedish music giant to scale quickly across different geographies. The structure is essentially lots of highly focused groups which can concentrate on a single project or area, which means tasks get done faster.
Klarna now has 280 teams of four to eight people working across 36 domains, each with its own targets which are reviewed every six weeks.
It's another good example of innovative tech companies looking to move beyond traditional management structures in order to get the best out of their staff. A
As Siemiatkowski explains: "The most critical thing is, companies are organized in a way which works for top managers and they need things to be comprehensible for them.
"At the floor level there is a lot of confusion about why we're doing certain things and that can be demotivating. We wanted to turn this around, so that the people doing the work on a day-to-day basis are clear on what they are doing, what does success look like and they can then own that."
Things weren't rosy to begin with, however.
Staff complained about the difficulty and novelty of the new system which took people out of their comfort zone and for nine months employee moral was low. But once people became used to the new way of working, things improved dramatically, according to Siemiatkowski.
This year the company has onboarded 60,000 new merchants to its platform alongside 16 million customers, something that a Klarna spokesperson claims would have been impossible prior the shift.
Klarna has applied this strategy to its US growth plans too, something which has taken off in recent months as it looks to take on payments giant, PayPal. This will be the last radical overhaul for a while though, both given the recent success of Klarna's strategy shift and a desire to allow staff to work unimpeded, Siemiatkowski added.
Expansion into six more countries in 2020 with global brands that partner the company would also have been trickier to execute without the improved time management and prioritization that the strategy change has brought about, the company told Business Insider.
