When four leading Nordic banks merged to form Nordea Bank AB in 2001, the IT organization consisted of a patchwork of silos: four separate groups and 11 different data centers. “We had local organizations everywhere,” recalls Tapio Saarelainen, who at the time was a member of the senior management team at one of the four banks that merged. “It was a major undertaking to merge all four IT groups into one centralized Nordic organization,” he notes.

Two years ago, when Saarelainen was named head of Group IT, he assumed charge for the next phase in the transformation of the bank’s IT operations, a move from a functional to operational model. “The IT organization very much mirrors the business units and is focused on delivering to the requirements of the business,” he says. Each business manager at Nordea has a counterpart in IT who meets with her or him on a regular basis. Indeed, the IT owner is expected to understand the issues facing that business unit as well as the business manager. The new business model goes beyond integrated collaboration and operations; the relationship extends to the customer. “We now work in a value chain instead of a silo-based organization focused on technical requirements,” Saarelainen explains. “We’ve changed the focus of the IT organization to customers. IT works with our business partners from each department to fulfill the value propositions to our customers and to deliver products that meet their needs.”

Change brings cultural shift

These changes have brought about a significant cultural shift. Nordea’s IT team is immense, encompassing approximately 1,800 employees spread across multiple locations and more than 1,200 external resources from multiple technology providers. “Everyone in the value chain had to start thinking differently," Saarelainen reports. “Each person must now think how her or his work affects customer experiences.” He cites the example of systems administrators who manage servers in the data center. “When they switch off a server, they must understand the ramifications on customers—both direct and indirect.”

The value chain extends to Nordea’s technology vendors as well. “We now measure our technology providers by the same measurements that we use for evaluating and tracking the performance of those from within,” Saarelainen says. “Service level agreements (SLAs) are based not on technology requirements but business requirements. And key performance indicators (KPIs) are the basis for all of our service level agreements.”

Indeed, the KPIs for the business units are mirrored in the SLAs of the IT organization. “Every stakeholder in the value chain is measured by the same set of KPIs,” Saarelainen says. And while there are other business measurements, there are three overarching KPIs. The first is the customer satisfaction index. This is based on quarterly customer surveys. The second is the internal delivery satisfaction index, a bilateral assessment across the different constituents of the value chain. The third is an employee satisfaction index that accounts for everything from employee development and retention to satisfaction.

Unbroken, intertwined value chain

To facilitate communications between IT and its various stakeholders, including the heads of banking, products, and operations, a value chain forum was formed and meets once a month. “This provides a forum for the exchange of ideas, strategic planning, and post-assessments,” Saarelainen says. “Many of the individual business groups also have regular meetings.”

As part of the transformation he began two years ago, Saarelainen restructured the IT organization. “Since we are mirroring the business, we have seen a fragmenting of the application landscape,” he explains. “Therefore, we have centralized the underlying architecture, risk management, and security infrastructure in order to retain cross-organizational synergies.”

This decision derives from Saarelainen’s philosophical approach to outsourcing versus in-sourcing. “Core functions will always be kept in-house,” he explains. “Any competencies that are customer focused, specifically understanding customer needs and how these are fulfilled through products, applications, security, and risk management, are handled by Nordea staff. However, other tasks such as application coding and administrative functions might be outsourced.”

Change management, functional diversity

Transformation has been a hallmark of Saarelainen’s career. His academic training is in marketing and business, and the positions he held prior to being named head of Group IT were in business operations, product management, and marketing. This business orientation provides Saarelainen with a unique perspective about the integration of business and IT. It has also given him an opportunity to work within and across many departments and functions at Nordea, as well as in the financial firms where he worked prior to coming to the bank. “One of the key challenges facing IT organizations today is marketing and communications,” he notes. “My experience in non-IT functions and a diverse array of experiences across different departments is certainly something that I have found useful in my current role.”

He continues: “I have also changed positions, including functional responsibilities, every three or four years.” This has given Saarelainen the opportunity to gain a breadth of operational experience from different segments of the business. For example, his assignment prior to becoming head of Group IT was as head of Global Operations Services.

Change is no fairy tale

In his famous fairy tale, The Emperor’s New Clothes, Danish poet and author Hans Christian Andersen* spins a story about an emperor who cares more about fine clothes than military pursuits or entertainment. Seeking to make himself resplendent, he hires two swindlers to make him an exquisite suit of clothes from the highest quality of cloth. However, rather than purchasing the cloth, they tell him the cloth is invisible to those who are either too stupid or unfit for his position. They pretend to dress him, and he then goes on a procession through the capital to show off his new clothes. When a child cries out that the emperor has no clothes, the crowd realizes this is the case; however, unwilling to change course and recognize his error, the emperor proceeds onward.

Change is not an easy undertaking for many organizations, and there is often resistance from individuals and the larger organization. They unwittingly trudge forward like the emperor, unwilling to make the changes needed to deliver a currency of value. And despite the publication of an almost unending list of books on the subject, change management remains a major stumbling block for many organizations. But this is not true of Nordea and its IT leadership team. Rather, change is welcomed as an opportunity, an investment that delivers tangible value back to the business.

^* One of the first customers of the oldest member of the Nordea family, Kjøbenhavn og Omegn, was Hans Christian Andersen, whose fortune grew from a few coins in 1820 to several million kroner by the time of his death in 1875.

Patrick E. Spencer (Ph.D.) is the editor in chief for CIO Digest and The Confident SMB and the author of a book and various articles and reviews published by Continuum Books and Sage Publications, among others.