Last week marked the third time we’ve had the opportunity to lead a group of senior IT leaders from carriers out to Silicon Valley for an on-the-ground, immersive “Innovation Tour.” In addition to visiting accelerators, incubators, start-up companies, and venture capital firms, the tour incorporates visits to mature organizations which grew from start-ups and which focus on keeping innovation as a central part of their corporate DNA. Each of the firms, which included AWS, Google, and DocuSign this time around, offers something special. In this case, however, some particularly key insights came from our visit to Salesforce. We were fortunate enough to meet with their new CIO on her 28th day “on the job,” which provided a terrific view into her plans for the organization’s future. From an outsider’s perspective, it was both impressive and intriguing.
Perhaps the most interesting insights, however, came from her most recent experiences as the CIO for BNSF Railways. What could that possibly have to do with the concerns of a CIO/CTO at an insurance company? Plenty, it turns out.
She framed this challenge with the recognition that they needed to rapidly transform from a transportation utility to a tech company. Actionable information is critical to everything they do and there’s a direct correlation between access to information and driving profitability for the enterprise. Making the trains run on time, with the proper freight loads, and to the right destinations, is an immense logistical challenge that had historically been supported by in-house systems that had been built internally, and which had become both rigid and inflexible over time. They had also accumulated impressive levels of technical debt. Sounds like many of the challenges facing insurance carriers today.
To move forward they needed to make a series of dramatic changes that would be tightly choreographed, and which offered very little room for failure. One added challenge was that the Board of Directors included Bill Gates (yes, that Bill Gates), whom the CIO needed to convince on the merits of the plan. Great to hear the description of the discussions which led to winning over a skeptical billionaire. The essentials of the plan included getting out of the data center business, moving key workloads to cloud-based providers, and moving away from building systems. The new focus was on configuring commercial solutions that would allow for faster “time to market” with capabilities and an improved ability to maintain currency with their selected technology partners.
Part of the discussion focused on the challenges of shifting from a world that had been dependent on and relished the flexibility of a CapEx model to one that was focused on OpEx as the preferred expense approach. As the CIO shared, the realization of this challenge led to three critical decisions which would have significant implications for their ultimate success. Long before they could begin configuring systems they needed to:
All three of these areas are outside of the IT organization but addressing them were fundamental for anything that was purely “technology”-related. Each represented a significant body of work in their own right, requiring that the CIO understand both the politics of the organization and the nuances of each specific discipline that was to be engaged. Each step, involving finance and legal and the PMO, represented a bit of an opportunity to call someone else’s “baby” ugly; this also required a detailed understanding of the issues related to their internal accounting, the specifics of developing contracts in this new world, and the challenges of pivoting to a different kind of project delivery methodology. Missing any of these steps may well have, at a minimum, had an adverse impact on the effort; more than likely, each could have represented a reason for failure in a hypothetical post-mortem.
The actual results? A wild success for their railroad, which has done a masterful job of making the transformation, and which used Salesforce as one of the key tools in the overarching technology strategy.
So it turns out that a railroad CIO’s effort to transform the organization into a technology company has many valuable insights that can be directly applied into insurance and financial services more broadly. Simply stated, there’s a lot of road bed work required long before you can lay rail – pun intended.