IT as a product: Rethinking IT service delivery

CarMax has been a driving force in the used car industry, but when it came to speed in innovation, its IT group needed more horsepower.

Delivering a good customer experience while remaining a market leader was foremost on the mind of Senior Vice President and CIO Shamim Mohammad. About three years ago, as the company was in the throes of defining its multi-year business strategy, Mohammad wanted to apply the brakes on how IT was operating and take a more tactical approach.

“We decided we had to change to innovate faster and change how teams work and change our focus,” he says. “At the end of the day, we want to be where customers are and provide them the option in terms of where, when and how they want to transact with us. In order to do that, we felt we had to make a substantial change in how we operate, [since] the traditional way wouldn’t work in the new world,” which was rapidly becoming more digitized.

Today, the nation’s largest used car dealer delivers “IT as a product,” meaning teams that are delivering capabilities and experiences to its customers and employees “at a speed that they expect,” he says. The company has shifted the conversation about tech products that customers want and need and love, Mohammad says, to include how to go about delivering them quickly and iteratively.

“This was a pretty significant shift in how we worked and operated,’’ he notes, “and rather than taking baby steps, we decided to shock the system. In other words, we’re just going to go all in.”

Because business strategy at CarMax is synonymous with IT strategy and vice versa, Mohammad says, that became the foundation for shocking the system. “No longer was it something I’m trying to push as CIO; it was an organizational, enterprise-wide initiative.”

What IT as a product really means

IT as a product is a strategy companies are more frequently adopting to apply modern product management techniques for managing and operating an IT department. Typically, it involves the use of agile techniques as well as continuous integration and DevOps, to support a faster, more iterative way of developing digital systems, says Matthew Mead, chief technology officer of digital transformation consultancy SPR.

“This automatically shifts the relationship from IT being an afterthought in operations to IT being a partner in the planning and implementation process,” Mead says. “It can result in IT no longer being a cost center, and rather, viewed as a partner in driving efficiency gains, creating higher engagement, retaining customers, increasing revenue and implementing new revenue streams.”  

Migrating to an IT product strategy is a key component of the overall agile transformation that “started in earnest” this year at John Deere, says Ganesh Jayaram, vice president of IT.

However, the transition started a few years ago with some early adopters who, Jayaram says, showed the rest of IT that “taking this approach creates clear accountability for highly autonomous product teams to drive quality and delivery improvements, while improving the level to which our IT products meet the needs of our business.” 

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He defines the concept as a collection of applications — or a single application — that enables an overall business capability or value stream.

“Each product will have clear business and IT ownership and a clear set of metrics managed by these owners, including security, quality, delivery, cost and value created. Each product will also have a multi-year roadmap with associated investment,” Jayaram says. That is in contrast to their traditional approach to planning application development on a project basis based on annual budget constraints without the context of a longer-term roadmap.

Additionally, John Deere’s IT products offer clearly defined business value and a holistic estimate of IT cost, including development, support, infrastructure and any supporting shared service costs, he says.  

How to sell ‘IT as a product’ internally

Convincing others in the C-suite that change was needed meant having a lot of dialogue with his colleagues, Mohammad says. “At CarMax, we always have been fairly innovative and … fortunately, we have a fairly informal and collaborative executive team,’’ he says.

The timing was also right since a new CMO had just joined the company, “who happened to be very fluent with data and technology.” CarMax also brought on board a new chief operating officer.

It helped that Mohammad is also a CPA and has an MBA in marketing. For his entire career, he says, he’s been “a very, very focused IT business executive, so that combination really helped.” He says there were synergies among the three of them.

“We were aligned, and we got the rest of the team aligned,’’ he says.

But getting the rest of the leadership team to understand why the top used car company in the country had to change its approach to delivering systems was another story. It was no small task, he adds.

Mohammad says his message was pretty simple: “If we don’t disrupt ourselves someone else will. And disruption is really going to come from the technology and how we enable technology to drive the [customer] experience.”

Moving to IT as a product has been a gradual approach at Aflac, with IT providing the tech enablement while the business sets the strategy and direction, says CIO Julia Davis. It started about three years ago when Davis was asked to do a proof of concept to get the business on board for the company’s One Day Pay initiative.

“We were asked not to follow the traditional waterfall approach, and the CEO asked me what it would take, and I said, ‘We’ll do this in smaller chunks with 100 percent dedicated business and IT resources — and not 20 priorities,’’’ she recalls. That was the first agile implementation, and Davis says it proved to the CEO that the new approach works.

“He became our biggest advocate and champion,’’ she says. Unlike CarMax’s all-in approach, Davis estimates Aflac is doing about 60 percent of its work using agile processes. That will soon change, though; Davis says it’s not effective to merely dab your toes in the water, and they will be all-in agile in the next few months.

“You’ve got to get the one win and our one win was the One Day Pay initiative,’’ she says. “I had the opportunity to show this works and I got more money for IT than ever before to focus on a tech roadmap. So building on that success made [the business] realize IT can deliver and we can get engaged in the process.”

To adapt to an IT as a product strategy, IT needs to be open to adopting new tools and agile techniques to achieve their goals, says SPR’s Mead. Agile strategies also have a way of creating transparency across the team, he adds. At the same time, “These changes can make some people uncomfortable, so expect some IT personnel to leave the organization and avoid this change. Culturally, once the team has a few months under their belts, there should be a feeling of camaraderie between teammates as their end goals are aligned, and there should no longer be an ‘us versus them’ feeling between IT and the business.”

It’s all about the teams

To begin the process of removing walls to create a partnership between IT and the business at CarMax, officials literally took down the walls. Then Mohammad and his counterparts formed small, highly cross-functional teams of seven to nine people.

“When you walk into the work spaces you can’t tell who is who,’’ he observes. “Teams are collocated, and they work for CarMax; that’s the differentiation.” He acknowledges that it took a lot of people time to adjust to the change.

At John Deere, the process is similar in that IT and business partners are collaborating daily, making decisions faster and actively managing product priorities, says Jayaram. “The agile teams are more empowered than in the past, taking on decision making that was traditionally done by a supervisor. In addition, our business partners are fully engaged in the development process, jointly responsible for the entire life cycle of the product, including the reduction of the products’ ongoing support costs.”

Since other parts of its technology organization adopted agile processes, Jayaram says, the CEO and other senior executives already understood what delivering IT as a product meant.

“Their key concern was that this shift to agile not cause either a huge drop in productivity during the change or cause a bubble-up in cost,’’ says Jayaram. “We mitigated this issue by staggering the rollout over two years, so only a few teams are making the change during the same month. There have not been any real concerns on the other modernization initiatives like cloud or lean service management.”

Change is scary for any group, says Aflac’s Davis, but IT values working in a collaborative team environment. The organization has seen huge productivity increases in terms of throughput, capacity and quality using a test-driven approach, she says. “So quality’s gone up along with customer satisfaction, because the business now feels it is more engaged in the process and has a true understand of what the limitations are and what the capacity is. You can’t have 5,000 things being done at once.”

Continuous improvement: Gauging product success

Often, IT measures project success by how many systems it delivers. At CarMax, “we changed the conversation to business outcomes,’’ says Mohammad. Teams have objectives and specific goals they must meet that are “business outcome-driven goals, not just output.” An outcome could be a percentage increase in website traffic or in revenue, and the goals are measured every two weeks, so officials can see how the teams are tracking to those goals.

“Teams are encouraged to try different things to figure out how to achieve those goals,’’ he says. “We empower them and encourage them to try and fail.” Teams are also required to explain what they’ve learned — and what they’re going to do differently.

At John Deere, IT is running agile projects in eight-week cycles with four two-week sprints, says Jayaram. “We work to get the first product out to customers in eight weeks and then build up the features in each cycle. “In addition, many of our agile teams demonstrate their work to the business partners every two weeks in sprint demos to ensure the solution will meet their needs.”

For example, IT recently worked to innovate the process of generating customer leads for dealers. Officials built an algorithm first in a standalone, executable model with static data and gave the minimum viable product (MVP) to a couple of dealers to try, Jayaram says.

“This was literally deployed as an email attachment and was built in a single eight-week cycle,’’ he says. “The standalone system had to be manually updated every week and was very labor-intensive.”

Then they validated with the two dealers that the leads were useful and gained insight into what would make the system better. From that MVP, IT then built a minimal online system that is now being deployed to a larger set of dealers in one region.

“This iterative approach is new for us; in the past we would have justified and built out the whole system. It would have likely taken 50 percent longer and had a lower initial acceptance with the dealers,’’ he says.

Their initial measurement tactic is having the teams self-assess their maturity related to agile, cloud, security, UX and lean, Jayaram says. The teams then set one-year goals for where they want to improve.

“This allows us to tailor a team-by-team plan for what they need to work on. We are also setting organization-level metrics around each sphere (agile, cloud, security, UX and lean). For instance, we are working to get 40 percent of the teams at a base level of agile in year one and [over] 80 percent at a base level by year two.”

He uses the self-assessments to gauge where the teams are. “The most important thing is we get the teams in a mode of assessing where they are and setting self-improvement plans. This culture of continuous improvement will allow us to continue to streamline our organization.”

With the shift to agile at Aflac, Davis says they’ve seen a twelve-fold increase from what IT was producing to what the organization produced between 2014 and 2016, “and we’ve been holding steady since then.” She has also decreased staff by 10 percent in the process through a combination of full-time equivalent employees and contractors.

Another metric they have measured is emergency or unscheduled releases, meaning how often something in production has to be fixed. They were at 14 percent in 2014 and saw that rate decline to 3 percent by 2016, she says. Customer satisfaction was the third metric, and Davis says it was at 40 percent between 2013 and 2016 and has increased to 79 percent.

When a merchandising product team at CarMax rolled out new, 360-degree view digital cameras to almost 200 stores so that pictures can be taken of each car’s interior for the company website, the goal was to provide customers with as close to a live experience of a car from their mobile device, Mohammad says. The deployment took two weeks and changed the customer experience and organizational processes in stores, he says; something that would not be doable in a traditional IT environment. It went “fairly smoothly” because the mantra at CarMax is “Test and learn — and learn fast. We’re not saying, ‘Go deploy this thing after working on it for a year and see what happens.’ We’re testing all the time so we’re failing all the time, quite frankly.”

The teams are told what to do and the goals they need to achieve, Mohammad says. “We don’t tell them how. In order to do the ‘how,’ they have to test and learn and come up with ideas.”

Measuring success in an agile world should include retrospectives for each sprint, says SPR’s Mead. There should be a meeting of joint business and IT teams and discussion about what went well, what didn’t go well and what they can do next. “Success can be measured simply by the level of cooperation and transparency in the retro meetings,” he says, “and whether the joint team is meeting their goals in terms of software and product development.”