If digital transformation could be represented by an equation, technology would be one of the variables, to be sure. But other variables — people and processes — are just as crucial for reaching the desired result.
As technologists, it’s easy to focus on the technology and dismiss the organizational and cultural changes necessary to reach digital transformation. Application development platforms like the open source Cloud Foundry enable the acceleration of innovation, lowering costs, and increased efficiencies — if you get the organizational changes right.
To illustrate this point, let’s look at insurance — a $1.2 trillion industry that like many others is facing disruption. Car insurance alone is a $250 billion industry, and it employs more than 270,000 people.
According to consulting and research firm KPMG, the private passenger auto insurance industry will shrink by as much as 60 percent by 2040. Millennials will have aged into their 40s and 50s by then, and cars will be safer because they’re now fully autonomous; more than 90 percent of accidents each year are caused by driver error.
What’s a car insurance company to do? Allstate, a Cloud Foundry trailblazer and member of the foundation, is pioneering digital transformation in its own industry. The second-largest car insurance company in the U.S., Allstate was founded in 1931 as part of Sears Roebuck & Company. Today it’s a Fortune 81 company and boasts more than $35 billion in annual revenue.
Historically, insurance companies had a huge advantage as a barrier to entry to new market entrants. They had collected decades of data on cars, accidents, disasters, driver behavior, road safety and more. How could a new challenger possibly price risk better than the legacy incumbents without this data? Price risk wrong on the high side and customers won’t buy your product; price on the low side and you absorb company-destroying losses.
But today, data is cheap and widely available, and clever developers can create incredibly close proxies for this historical treasure trove of data. The startup barbarians are storming the gates with their Apache Hadoop clusters and fast data. Smelling blood, venture capital is pouring billions of dollars a year into FinTech startups.
Allstate, led by Douglas Safford, vice president of technology innovation, launched a company-wide program in 2015 to respond to these new challenges. But as Safford will be the first to tell you, the biggest internal challenge to digital transformation inside a big company is the culture, not the technology. For decades, large companies like Allstate hired people to take orders — and outsourced a lot of engineering. In this new world of digital, change becomes a constant. Things are never finished. They’re in constant flux. It’s about continuous incremental improvement. People become their own bosses to succeed. Decisions can’t wait for orders anymore. And you need more engineers. Lots more.
Where developers used to spend only 20 percent of their time coding software, today up to 90 percent of their days are spent programming.
Safford started small with distributed development teams at Allstate all around the world — his small band of believers. He embraced a concept called agile. The “agile” part of this increasingly popular management concept is simple: Rather than undertaking giant projects that span months or even years, you create small teams that focus on a bit at a time. Progress is measured in small steps — one little project at a time.
By the end of his first year, Safford and his teams had built prototypes and market tests and finished 16 new software projects. He created a new internal brand called CompoZed to focus on new ways of developing software. His goal with Cloud Foundry was to accelerate the velocity by which Allstate could deploy applications and drive automation all the way through the application lifecycle.
Safford had to innovate in technology and management practices, but also in people. For example, he quickly discovered that he couldn’t find enough internal developers or hire enough external developers to do the work needed. Safford closed this developer gap through internal training. Did you know that Allstate is the largest employer in Northern Ireland? Many of its people are newly-trained Cloud Foundry developers. Safford went to Ireland and set up new monthly programs to train internal engineers on cloud-native software techniques and recruit new talent to join Allstate’s cloud dev team based in the new tech hub of Belfast.
Safford’s eventual goal is to shift Allstate software development to 70 percent extreme agile programming and 30 percent traditional scrum and waterfall. Where developers used to spend only 20 percent of their time coding software, today up to 90 percent of their days are spent programming. Each of his CompoZed development labs around the world has the same startup look and feel, including scooters parked in the hallways. This is not your grandfather’s insurance company anymore.
Cloud Foundry is a sponsor of The New Stack.
Feature image: Constellation Research.
The New Stack is a wholly owned subsidiary of Insight Partners. TNS owner Insight Partners is an investor in the following companies: Velocity, Bit.