Transformation at U.S. Bank - Laying Groundwork, Crucibles, and Toxic Waste
Last year at DOES Werner Loots and Levi Geinert walked us through the evolving digital transformation at U.S. Bank. This year Werner is joined by Ian Eslick to discuss the company’s broader investments in modernization and in particular the impact on strategy created by the challenges and opportunities created by Covid-19.
They will share with us the conceptual foundation for digital transformation and modernization the company has built over the past several years, specific challenges and opportunities created by Covid-19, and how the company has responded with a commitment to accelerating transformation activities and DevOps adoption.
At the conclusion they introduce several mechanisms they will be exploring in the coming year to ensure that the new tools and techniques they are introducing are broadly adopted across the company’s development teams.
Chief Architect for Digital Technology Strategy & Modernization, U.S. Bank
EVP - Transformation, U.S. Bank
I was so delighted last year when Verner Lutes, EVP of transformation at us bank co presented with Levi Gaignard SVP and head of agile technology and experience. What I loved about their presentation was that Vernor and Levi described a unique opportunity that presented itself when the super bowl was held in Minneapolis in 2018, what resulted was an opportunity present a new vision, mobilizing technology teams with the highest levels of leadership in the company that led to the creation of nearly 50 studios, whose goal was to integrate all the business disciplines needed to create value for the customer. I was blown away by the results. They were able to generate, including being able to have small businesses apply and get alone within minutes or hours, having hundreds of thousands of dollars dispersed and show up in their bank accounts. I thought this was such an important presentation because it showed what can happen when technology leadership can work with business leaders who can create aspirations high enough to create greatness and incredible value for the customers.
So I am so delighted that this year Verner is co-presenting with Ian S lik SVP and chief architect for digital technology strategy and modernization at USBank. He is a time technologist. He spent three years at Amazon working on what eventually became honey code, the low code platform. And I was so delighted to learn that he too is a fan of the closure programming language, Ian reports to the CIO and his charter is a drive modernization initiatives across the enterprise to create platforms and share tooling that will enable thousands of engineers at us bank to do incredible things. So here's Vernor and Ian to talk about the continuation of the U S bank journey.
Hello everyone. Thank you very much for the invitation to get back with you. My name is Verner Lutes, and I had the pleasure of presenting last November at this event. So I'll provide some continuity without prior messages. And today I'm very excited to co present with my colleague, Ian S lik,
Thank you, Verner. It's a pleasure to be here today and to join the continuing story of what we're doing at us bank and dev ops and transformation. I've been at the bank for about nine months, and I've had the opportunity to learn from and contribute to the work that's been laid over the last couple of years. And today I look forward to talking a bit about what we've learned, particularly in the face of COVID and what we'll be doing going forward. So thank you, Verner.
Excellent. So I'll recap where we've been and what has occurred since presenting last year. Um, and then really hand to Ian to describe what we've learned recently and how that shaped our top priorities going forward. So the spoiler alert here is that this is a story of a lot of progress as an organization for a good while, without addressing one of the big rocks of transformation on the technology side, which is an aspect that is now coming into focus. Also courtesy of some of the hard knock learnings of 2020 and Ian's leadership. So just to recap who we are as an organization, us bank is the fifth largest commercial bank in the U S a customer obsessed organization with the mission mission of powering human potential. We're about 70,000 employees strong, and I always make the point as well, that we're not the biggest company by any stretch participating in this event, but we're big enough that we're not inherently nimble.
And that, that takes a concerted effort in terms of size. We have over half a trillion in assets and the market value of about 50 billion, very different from the start of the year, like all banks. And then we're a very well-regarded organization, very high performance. Uh, it's fortunate that, uh, we have all the accolades listed on this page nationally and internationally. And, uh, we have led the us industry in terms of financial return ratios year over year for over a decade. So the point is simply that, uh, we have the luxury of tackling transformation, not necessarily with a burning platform, at least traditionally, uh, but based on sort of next horizon vision and wanting to get ready for the future. So this is a recap of our transformation facing today. When I presented last year, you'll see that the DevOps summit towards the end of 2019, we were about two years in, and I told the story of starting with an empty floor and use bank Plaza, you know, lots of startup fund in January of 2018.
And introducing the first couple of dedicated cross-functional agile teams, and then growing that to close to 50 teams over the course of a couple of years, serving businesses across the enterprise. So great run. But as part of that, we did get into a bit of a steady rhythm after two years, and probably felt pretty comfortable with our trajectory at that point. So enter 2020 pick your favorite meme. It all, because you brought a lot of change for us internally, we organized more formally around digital transformation across the enterprise growing the number of agile teams who were supporting to close to a hundred, and also just maturing our overall capability further in particular, our renewed and focused drive around technology modernization. And as you'll hear no surprise that this coincides with the COVID pandemic. And then I'll just do a quick aside at this point and mentioned that I am transitioning to a new role at us bank, uh, leading a business within consumer lending, very exciting opportunity to directly drive a PNL and refine our digital processes and create market leading consumer lending experience, uh, let's hope. And this opportunity clearly stems from seeing how critical the transformation approach is to executing strategy and just competing effectively. Uh, I believe the fundamentals are perfectly transferrable to leading a business. Yeah, actually, as I was listening to Jean present at our first demo day recently to delivery teams across the enterprise, I found myself furiously taking notes on his five ideals, uh, very much with my new role in mine to, um, to give you some sense of sort of the accumulated experience and the perspective of the organization on this transformation effort.
Then I also just find it fascinating to see how organizational change is driven by a mix of careful internal planning on one hand, and then also just external catalyst events. Uh, the transformation effort got a lot of inspiration from the 2018 super bowl being hosted down the street from our headquarters in us bank stadium, and wanting to make the most of that opportunity forced us to come together in unprecedented ways around the marketing and growth opportunity very quickly. I think it was super successful and it occurred to us that we should probably work like this more often in all aspects of our business. And that really helped the organization around that aligned around the agile transformation. I also enjoy the slide there with the familiar phrase. The rate of change has never been faster than we will never be this slow again, you know, that was a standard slide for us in our transformation presentations and internal road trips, featuring a busy professional walking through an airport as characteristic image of fast pace.
If we can all remember that little, did we know what we were really preparing for? So it goes without saying then that COVID-19 had profound impact on every aspect of life, but banking very much so, you know, figuring out customer service continuity as an essential service executing new government programs like the payment protection program, all while making sense of extreme market volatility and disruption to the lives and businesses of our millions of consumer and corporate customers. So for many in our teams, this has been the busiest period they've experienced in their careers. How did it play out? You know, the short version is that we came through it and we did well. We absorbed business shifts in weeks and months that we did not anticipate seeing for years, you know, increasing digital interactions by twofold year over year with a third increase in digital transactions. And the 40% decline in branch, you know, that is something that we would have scenario planned well into the future. And we were lucky to receive external recognition for the quality and response to the COVID pandemic. So we feel good about that, but as you can imagine, it was not all smooth behind scenes. And Ian will share with you more about the experience on the ground and what we've learned as an organization over to you in
Thank you, Verner at COVID was really a crucible for the technology organization. We, if you imagine, uh, organizations that are oriented around a steady growth rate, uh, having to deal with a two X increase in volume all over the company, different products, different processes, we're under pressure to dramatically expand or adapt to all of the pressures brought by COVID. And I want to take you through one experience we had that I thought was particularly telling it was also personal. I got a call on a Saturday morning, about 10:00 AM from our CIO said, you know, we, we have a challenge in a, in a process that we have to stand up in about a week where we're taking something that we've done historically, but we're having to scale it by a hundred times. Uh, and instead of doing that over a month, we need to do it over a week or two.
And we looked at the logistics of bringing several thousand people from our branches to help us scale this process and found just huge frictions in being able to do that, uh, at this particular stage of a multi-step process. And as we dug in there, wasn't a provided solution for automation in this space. So we had to go and evaluate a large number of different ways to do integrations. The systems we were leveraging were older mainframe systems. Uh, we had an enterprise service buses and teams that weren't necessarily experienced with these rapid turnaround. And when I got that call on Saturday, the go live date was the following Thursday. So we ultimately identified a obscure document of a 2000 era soap interface that we could connect through our bus, to the mainframe, and then had to work through all of the issues of tying this functionality together.
As you can imagine, in a large organization, those kinds of changes involve risk and legal and compliance, uh, throughout the company. And, uh, by Tuesday of the following week after that Saturday call, we had an agreed upon plan. Uh, and as part of this, there were four or five other major efforts all happening in parallel. And so as we had our plan and we're reviewing it, the other groups were coming together. And because of the criticality of this work to the company as a whole, uh, we started having morning and evening stand-ups, uh, central time for those of us in the Pacific coast. It was a bit early. And, uh, on that call, we've had anywhere from two to four of our vice chairs, uh, for digital, for consumer and, uh, for our wealth management. And they were helping a team of 50 or 60 work through the tactical day-to-day blocking and tackling that was necessary to address all of these different processes.
And so it was a wonderful opportunity for me to get to know people throughout the bank and different business units on the business side, as well as some direct exposure to our vice chairs. And I'd been at the, at this point, maybe three, four months, still trying to figure out where all the pieces were. So as we, we did these daily stand ups, we had an opportunity to provide a view to our senior leadership, into the details of the change management that we had to go through as, as an engineering and as an organization, more broadly to figure out how to solve these problems and the problems weren't just about technology. Although there were technology challenges, I think perhaps the most telling takeaway from that whole experience was really this notion of what is the engineering mindset look like. It was an opportunity to bring our business partners and our risk partners into a discussion about how do we solve a problem under tremendous pressure.
And what does it take to think holistically about the process end to end and what we can and can't do with technology to facilitate that? One of my, uh, kind of most interesting moments was when one of the mainframe engineering leaders said, you know, you realize that what we just did this week would normally take us three months with the approval processes and other things. But because of the organizational priority, we were able to pick up the phone, get whoever we needed in the company to get into a meeting on a half-hour notice, and just able to kind of continue to crank through on a fairly hefty schedule, all of these steps. And so by Thursday, we had a prototype by Friday, we were in production and I was able to stand that up throughout the next week. Now, obviously nothing was quite so smooth.
There were a couple of hitches along the way, but we were able to scale that process and deliver the business value end to end. Uh, and one of the senior leaders as we came a couple of weeks later, when the process was up and running said, you know, I had no idea. And I heard this from multiple people that we could move so fast as an organization, that it was even possible for us to go from concept to delivery in a week. And that started to raise the question, well, modernization, let us do this at a more scaled way through other areas. Like, can we as an organization actually transform and do it, what we did in this particular program throughout the organization. We got a question then from senior management, which is what if we increased our investment dramatically next year in the technology org itself, you know, typically the technology or is supporting business initiatives that are driven by business objectives, but this is an opportunity to invest in core technology capabilities that would help us deliver some of these benefits as well as just increased velocity of across all of our technology projects.
And the, as we went back and we spent a month or two doing homework, but that homework was facilitated by the fact that we'd had several years of thinking and work and planning and a longterm agenda laid out ahead of time really saying these are all of the different initiatives, whether it's creating a common data platform and reducing data sprawl or, uh, identifying business opportunities that were impacted by COVID that needed dramatic transformation in the short-term just to deal with the immediate pressures or additional work of moving to the public cloud, which has been an initiative ongoing for several years. And we have our first projects going into the cloud, uh, this year, actually late in 2019. So all of that groundwork gave us an opportunity to come back and say, well, here are the things we're doing, give an extra investment we can accelerate and what would be the impact of that acceleration.
So we worked through across the entire organization, uh, what kind of impact can we have to our own expense base to enabling other projects? Uh, and what would this mean to the business and our business partners? So, uh, we then got a funding, uh, proposal put through and supported by senior management. That's actually a massive acceleration in what we were planning to do over the next two or three years. One of the challenges in a large organization is how we look at and compare different projects to decide where we want to invest effort going forward. And, uh, oftentimes this is driven by the business value of the project minus the cost of that investment. And one of the side effects of that equation is when you look at projects in isolation and you compare them on their internal rate of return, you often are incentivized to try to minimize that cost of a given project.
It's a classic problem of the commons. If I do the expedient thing to solve, to make this project work and another expedient thing to make the next project work and so on. And so on, I ended up creating kind of a externality across all these projects where, uh, I'll end up with a lot of individual ETL and not a coherent underlying platform that I can reuse effectively. So the big initiatives in the company are to think about how do we create an architectural view of what is essential in a given project. So just like we wouldn't compromise security or compliance, we shouldn't be compromising corporate strategy around the architecture of the systems that we're building. And we've worked hard to build strong buy-in from our business partners across the technology organizations against the strategy. And so at the beginning, we talked about our digital strategy and our modernization strategy.
We want to start thinking about how to exercise those strategies for every project that we do. So they start to fit into the context of this accelerated investment that that management has given us over the last few months. So if we go burner, if we go to the next slide, what I'd like to do is talk to you about some of the opportunities and the ways we're approaching, making this transformation stick across a very large company that does hundreds of projects at this time every year. And, and always, when you think about changing or transforming an organization, I like to think of it and carrots and sticks. You want it very, very small, selective sticks and mostly carrots, right? You want the strategy to be something that makes everybody's life better. We're working hard with our dev ops enablement, creating common documentation, onboarding, support resources across all of the different components of our enablement strategy.
I mentioned a few of them earlier, like a common data platform that helps us reduce data, sprawl our cloud enablement with a lot of built built in security controls, reduces the security tax and review tax on an individual project, building a common microservice deployment platform. So we can get containers, both on-prem and into our two main public cloud partners. And so what this starts to do is it gives us a foundation for onboarding teams to a practice that actually reduces individual project costs the same time. Sometimes the team wants to do something independently. That really should be part of one of our central microservices. So one of the things that we've been doing is kind of a rigorous internal sales and PR strategy, going to each team and talking to them about the opportunities to move faster and make things easier. Uh, now we dovetail this with a little bit of a, of a stick, which is we have something we now call the project scorecard or technology scorecard, and you see it there at the bottom, right of the slide where we look across various dimensions of architectural consistency and assess how well is this project currently configured to leverage these opportunities.
And we pitched this as a dialogue. The goal here is not to say this project has to have be a 10 or a nine to get funded. It's let's understand that pragmatic trade-offs that as an organization we're making between our long-term strategies and our need to meet near term business objectives. So in some projects we've had three or four areas that are actually non-ideal, but, uh, we might say, we're going to spend $2 million this year, getting this business value, recognizing that we're holding off on maybe $20 million of investment, we're going to need to make later, but this isn't the year to do it. And historically, I don't think those conversations have been happening in a very explicit way at the senior management level. So this gives us a vehicle for talking about how well are we doing with our strategy, which is a question that we get, it's an opportunity to educate teams and pull them into the dialogue.
And it's also an opportunity to start to track, well, what kind of tech debt are we deferring or creating through individual projects? Uh, and the last thing that we're experimenting with this is more of a personal passion and a little bit less of an organizational imperative today is how do we think about that book of tech debt that we carry? And how do we start to think about, as we look into the 2022 tech plan, what percentage of our overall spending or investment that year will go towards paying down tech debt so that we can improve or reduce the tax on every single project that, uh, that we have at the bank. We'd love an opportunity to talk to you about how do you look at, in your organizations, this kind of externality, where projects are often incentivized to reduce individual project costs, but are creating these extra taxes that through, uh, you know, death by a thousand cuts are affecting every single technology group or every single project.
And then secondly, I'm really interested, understanding more about how do you earn trust with your senior management, that the strategic technology investments you're making really drive the kind of direct and more importantly, indirect improvements that we advocate for. It's easy to talk about developer productivity, but it's more difficult to show the slow bending of the curve over time. Uh, and so I think it would be great to see what other companies are doing in this area to, to share our knowledge about whether it's metrics or how you put together your pitch, uh, to, to your senior management.
Thanks, Sam. Yeah, I think that would be tremendously helpful. You know, we're making historic progress on this because we had a way to really demonstrate it recently. And, um, you know, Ian has both brought the expertise in powerful analogies, like toxic waste to clarify to folks, but as an organization, we love comparing notes with other leading institutions. I think weighs a lot. If we can find out how you've tackled the same, both communication and very substantive challenge. So look forward to connecting with everyone afterwards. Thank you.
All right. Thank you very much. Appreciate your time today. It was a pleasure to have an opportunity to present.