You’ve heard it before. In order for large, traditional enterprises to compete with startups, they need to operate like startups. But what does that actually mean? After all, startups make plenty of mistakes (and not just the fail fast kind) that probably aren’t worth emulating. And enterprises that have been around the block a few times have built up domain expertise, brand equity and other sources of competitive advantage that shouldn’t be thrown aside.
The reality is that enterprises need to strategically adopt specific practices that startups have used to their advantage — not all of them — and adapt these practices for their particular circumstances. Layer in the things enterprises already do well — like understanding local markets, navigating regulatory hurdles, and, you know, generating real revenue and profit — and you might just have a winning formula.
Allstate and Health Care Service Corporation are two enterprises that have been around longer than most startup founders have been alive, and both are in the process of applying this startup formula to their enterprise realities. Both serve the insurance industry — Allstate in property and casualty insurance, Health Care Service Corporation in health insurance — that is ripe for disruption thanks to a heavily regulated environment and increasingly complex buying processes for customers. New market entrants like Lemonade and Oscar are using software to make the process smoother, more transparent and even, dare I say, enjoyable for customers.
Executives at both companies understood they needed to put software at the center of their businesses in order to provide more compelling customer experiences and to quickly experiment with and operationalize new business models. But they soon learned there was more to operating like a startup than just adopting Agile.
Below are some tips Allstate and Health Care Service Corporation executives shared at a recent CIO Executive Summit in Chicago.
Get business and IT to trust each other
At most startups there is barely a distinction between “the business” and IT. Many startup founders are software engineers by training and background, so right off the bat, software is at the center of the company’s vision. This usually isn’t the case at established enterprises, where the business and IT often have very different views of the world. But it is critical to get business buy-in because successful digital transformation initiatives are about using software to develop new business models, not just about adopting new software development practices.
“If IT is trying to push this along, by themselves, it’s not going to work,” said Peter Logothetis, Group CIO at Allstate. “It has to be the business model that starts out first. Our chairman and senior executives get that. As a matter of fact our chairman is on record saying that Allstate is no longer an insurance company. Allstate is a software company.”
When the business is on board and fully invested and working with IT, that’s when “transformational” ideas start to bubble up, Logothetis continues. Allstate’s claims division, for example, set out to use modern software development practices to build applications that make it easier for customers to self-serve. The goal is to reduce the six million phone calls to the claims division by half. The effort is ongoing and, if successful, will result in lower administrative costs and higher customer satisfaction. The goal isn’t just to use Agile to speed up software delivery. There are specific business outcomes tied to the initiative, which only happens if the business is on-board from the start.
Large, traditional enterprises love to plan. And plan … and plan. Nothing gets funded until a fully-baked plan is fleshed out and approved by several committees, the board, and upper management. That’s not how start-ups operate. Enterprises that overplan digital transformation initiatives risk slipping into organizational inertia and never getting started. Mark Ardito, Senior Director for Portfolio Delivery at Health Care Service Corporation, suggests a different approach, one that’s actually embodied by the term “startup.”
“My advice is if you are an organization in an enterprise that is currently planning your transformation, stop. Stop planning right now,” Ardito said. “Just go and do it. Start it and go. There is no way you are ever planning this and getting it right. Start it and fail. Fix it, recover and keep going. That is the key to making this happen. Just throw your plan away. Stop with the PowerPoints.”
Ardito’s colleague, Health Care Service Corporation CIO Steve Betts, agreed. “Just get started. Find something small, something low risk, and find a willing business partner or enthusiastic business partner, [but] don’t make it a big strategy,” Betts said. At Health Care Service Corporation, “We didn’t ask permission. It wasn’t a big presentation to senior management.”
The physical space teams work in can have a direct impact on the success of digital transformation efforts. Cube farms don’t foster the kind of collaboration required to support modern software development methods. Instead, enterprises should invest in open workspaces that put both IT and the business in close physical proximity to each other and enable software development approaches like pair programming, balanced teams, user (stakeholder) interviews, and more.
“The traditional cube structure that had its time and place for the way we were working,” says Opal Perry, Group CIO for Allstate’s claims division. But now, things are different. The company created a new group, called Compozed Labs, with its own unique space. “We have our pods of product teams and pairing stations. We also have screens that very visibly show the build pipeline and I can just walk through a lab that may have many projects and see right away what’s humming on green, what’s red, and see who’s working on it.”
Ardito noted that Health Care Service Corporation developers sometimes only got to write code for a couple of hours a day. Instead, developers spent most of their days in meetings with the business. “It wasn’t until we moved out of our headquarters and colocated with [Pivotal] that the lightbulb went on,” Ardito said. “Our first week at the office, one of our developers said to me, ‘Mark, I wrote more code in one week than I did in three months at HCSC.’
That’s when Ardito knew they were on to something. “When we started this journey, we colocated. It was business and IT colocating as a pod together. So we didn’t have the need to have meetings anymore. If I have a question, I actually turn to you and ask you as my business owner, ‘Hey, what should I be doing here? That story is confusing to me.’ Added Ardito: “I didn’t need an hour meeting. I just needed a three minute conversation.”
It’s one thing to develop software at a faster cadence. It’s another thing to get that software into production and delivering real value to customers. Enterprises that want to ship code at startup speed need to ditch the manual testing and deployment methods and invest in a platform that automates these tasks.
“Every time we make a new build and deploy that build to a test environment, it executes 800 tests and it does it in about 5 seconds,” said Ardito. “There’s no way a human being, no matter how big your staff is, is going execute all those tests.”
When it comes to automation, Ardito is emphatic: “The key to making all of this work to get faster is automation. You have to have a platform where you can automate and provision an environment, automate and compile code, automate and deploy code,” he said, “So we automate tests, we automate the pipeline, we automate all of this because if I’m waiting on a middleware person to go provision a new Tomcat server or install WebSphere on this AIX box, this is never happening.”
The right platform empowers developers, Ardito said they “really started to see the improvement when we used a platform like Cloud Foundry, where we enabled developers to spin up environments, [and] be the DBAs.”
Months to weeks, weeks to days, days to hours
Clearly, there’s a lot more to successful digital transformation and operating like a startup than just adopting new software development practices. It requires a wholesale change of mindset, culture, and expectations. But why should an enterprise even go through the effort? Because it enables established enterprises, like Allstate and Health Care Service Corporation, to disrupt the disruptors and move at speeds never before imaginable for big organizations.
Or as Health Care Service Corporation’s Ardito put it: “I’m taking months and I’m turning them into weeks. I’m taking weeks and I’m turning them into days. And I’m taking days and turning them into hours and sometimes even minutes.”
If you’ve found value in these points, check out the entire panel discussion below.
Change is the only constant, so individuals, institutions, and businesses must be Built to Adapt. At Pivotal, we believe change should be expected, embraced, and incorporated continuously through development and innovation, because good software is never finished.
Two Insurance Companies Learn How to Operate Like a Startup … And So Can Your Enterprise was originally published in Built to Adapt on Medium, where people are continuing the conversation by highlighting and responding to this story.