The Three Dimensions of Digital Transformation at Capital One Financial Services

Chandra Dhandapani, Senior Vice President, CIO and Digital Transformation Leader, Capital One Financial Services

Chandra Dhandapani, Senior Vice President, CIO and Digital Transformation Leader, Capital One Financial Services

“We create an environment that allows our software engineers to put love into the product,” Chandra Dhandapani told me in a recent phone interview. She is Senior Vice President, CIO and Digital Transformation Leader at Capital One Financial Services, the home loan and auto financing division of Capital One.

Dhandapani has worked in consulting and advertising before joining Capital One sixteen years ago, first working in IT and later in Marketing & Analysis and Operations. About 6 years ago she moved back to IT, eventually becoming the CIO for the financial services division. Last year, she added to her CIO role the responsibilities for digital transformation.

“I see my role as digital transformation leader as more of a catalyst role,” says Dhandapani. “There’s a great team working with me and we drive this transformation of the entire division, and both influence and learn from the entire company, together. Since engineering is a huge part of the transformation, it probably makes sense for the CIO to play a key role in it,” she adds.

There is a lot of talk nowadays, sometimes in vague terms, about digital transformation, but at Capital One Financial Services it is operationalized along three specific dimensions: Culture change, customer focus, and data analytics.

The first dimension is “changing the way we work,” says Dhandapani. The crux of the change is a strong emphasis on collaboration. To that end, the company has created what it calls “product pods.” These are teams of software engineers, product managers and designers, working together on a specific application or solution.  That creates an environment in which engineers, acting as peers to other people involved in product development, put love into the product: “Every day, our engineers are working with product managers and designers in shaping intent, not just writing code based on someone else’s requirements,” observes Dhandapani.

But collaboration is not limited to the internal workings of the organization. “We continuously observe and learn from what’s going on in the world around us,” says Dhandapani.  “We believe strongly that our competition is not coming just from other banks. To compete effectively and be successful we need to be a technology company. An integral part of that is the maker culture,” she explains.

Bringing in the maker culture to a financial institution is indeed an outstanding example of observing and learning from the world outside of the corporation. The maker culture is a philosophy and a movement, driven by the rapid proliferation of independent “hackerspaces” around the world, emphasizing informal, networked, peer-led, and shared learning motivated by fun and self-fulfillment. Earlier this month, Capital One was a platinum sponsor of the inaugural National Maker Faire in Washington DC.

Design thinking, another philosophy imported from the world outside Capital One Financial Services, is at the heart of the second dimension of the division’s digital transformation. It is an approach to innovation combining what is desirable from a human point of view with what is technologically feasible and economically viable, an approach that is being adopted by many organizations transforming how they develop products and services. Design thinking is based on a deep understanding of what customers do and what they really want, using proven tools and methodologies such as live prototyping, exploration, and improving ideas through iteration in the real world.

At Capital One Financial Services, design thinking helps answer the question Dhandapani posed in our conversation: “As customer needs change and technology changes, how do we work back from our customer needs and leverage technology to make it much easier for them to work with a bank like ours?”

In addition to having a design thinking practice, Capital One has user labs where they bring customers to help them work through the very early stages of thinking about a product. They have also established “360 cafes” across the United States, where staffers engage with customers that come in to do their banking and sip freshly-brewed coffee, and ask about their experiences with the bank’s products.

At the financial services division, they send engineers and product managers to the auto dealers they work with to see how they use their products.  They have also established a dealer council that serves to discuss ideas for new or enhanced products. For home loans, a similar sounding board is an associates council, consisting of the division’s employees who are using the division’s products.

“To be a digital technology company we need to have design thinking in our DNA,” says Dhandapani. “The key principle is let the consumer who will be using our product help guide us and tell us what the product should be. A lot of companies say they use the fail-fast methodology but we use the term ‘test and learn’ – we test the product and that helps us identify what the customers really like and what they don’t like.”

The third dimension of the digital transformation at Capital One Financial Services is data analytics, which happens to be one of Dhandapani’s areas of expertise.  “We are an intense analytically-driven company,” she says.  Capital One tests product enhancements in specific markets and then launch them nationally based on the analysis of the data gathered in these tests.

An example of data-driven product decisions is an auto loan product called Blank Check. Advances in mobile technology and changes in consumer behavior led the bank to replace it with a new product, Auto Navigator. Consumers no longer need to wait for a check arriving in the mail and can use a calculator to see their estimated monthly payment before they visit the dealer.  Auto Navigator came out of the division’s “Garage” late last year, launched nationwide early this year, and its next-generation is currently being tested, Dhandapani told me.

The Garage is the manifestation of all three dimensions of digital transformation at Capital One Financial Services. Opened in Dallas last year, it is an innovation center with a name that references Silicon Valley and hints at the home and car aspects of the division’s business. “It is our beachhead in terms of how to create a maker culture, how to create compelling products,” says Dhandapani. She adds: “When we started the Garage, it was just a conversation and an idea. We wanted to experiment with innovation that is focused on the two businesses we are in – auto finance and home loans – and create a space that looks like a Silicon Valley startup incubator in terms of look and feel and in terms of the composition of the team.”

The teams (or startups), consisting of software engineers, product managers, and designers, were initially hand-selected. They were not told what to work on and were only given the general guidance to “massively improve our consumers’ experience with our product.” The Garage was started with 15 people and by now has quadrupled in size, both in terms of number of people working there and the physical space.

There is no fixed time for a team to complete its work at the Garage and the duration of the work is decided on a case-by-case basis. “With the teams we select to work in the Garage, you have to be careful in setting deadlines because the deadline you think is aggressive, they find a way to beat it. It’s who you select and how they work together. Let the magic happen,” says Dhandapani.

The people completing their work in the Garage go back to their previous place of work or continue to support and enhance the product they have developed. According to Dhandapani, there is no formal process for selecting teams for the Garage—rather it’s “a combination of how we think about our overall business priorities and trusting our talented teams to come up with what they think makes sense.”

The results so far are meeting the promise of transforming product development at Capital One Financial Services. “Every idea that has come out of the Garage so far has been taken by a line of business into the mainstream to a market-facing launch,” says Dhandapani.

Collaborating, making time for innovation and future-oriented work, talking to customers and analyzing product data, testing, learning, observing and adopting relevant trends and developments in the world,  are the building blocks of digital transformation. All contribute to creating a workplace that is a magnet for people with the right skills, expertise, and motivation.

“As we go through this transformation,” says Dhandapani, “we are big believers in becoming the destination for top technology talent, not just in banking but in the United States. If you have great talent with great ideas, great things happen.”

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