'I feel elated': Jennifer Smith reflects on Zions Bank's 10-year core transformation

Zions Bank recently completed a carefully orchestrated core system transformation. In this Leaders episode, chief technology and operations officer Jennifer Smith shares the details of the project, how she and her team overcame hurdles, and the benefits they are reaping from 10 years of hard work.

Transcription:

Penny Crosman:
Jennifer, welcome.

Jennifer Smith:
Thank you.

Penny Crosman:
So you are chief technology officer at Zions Bank. You have been undergoing a core transformation for more than 10 years. A lot of people think of a core transformation as this dreaded project. Some people compare it to open heart surgery, some people compare it to trying to change the engine on a car that's driving 70 miles down a highway. It's painful, expensive, cumbersome. How do you feel now that you're done with this?

Jennifer Smith:
I feel elated to be done with it. And it is all of those things that you mentioned and it's so much more as well. It's hard work and it is like changing out the engine. We use the metaphor of changing out the engine on a plane that's flying even to give a little bit more perspective on how difficult it is. But it's so much more because one, it's critical longterm to the health of our company actually health of the banking industry from our point of view. And it was actually a lot of fun work as well.

Penny Crosman:
Glad it was fun. Are there any specific benefits that you're getting today or that you're hoping to get in the near future now that you've gotten this done?

Jennifer Smith:
It's fun. We started the implementation of our deposit system last year, so we've seen incremental benefits coming in, so we were able to realize those benefits right up to the minute. So it's not just predicting what might be coming. Some of those benefits that we've seen is first are bankers are so excited to be able to have so much more information right at their fingertips. They also will express to us that instead of having these criminals on the side of how to use these archaic old systems that they like, working with an intuitive system right out of the gate training is a lot easier. And then we also are able to open new accounts 25% faster. So that's just right away that we're hearing our bankers just expressed a light over their experience. That translates to our customers as well. So our customers are experiencing that. They're not waiting in line as long to open up an account. They're working with a banker that right away can see everything about that customer at their fingertips plus things they can't even imagine. And then finally the other element is that we're able to stop fraud with a real time system that is not possible without a lot of engineering on these older batch based systems.

Penny Crosman:
So how exactly are you getting that benefit in fraud detection? Is it that you have a real time system monitoring transactions?

Jennifer Smith:
So one easy example is a customer comes in to a branch and they're kiting and we're able to make a note right away on that system that propagates out immediately. It doesn't go into a batch cycle or it depend on posting later in the day. Even if there are multiple cycles, that customer then tries to go to another branch and commit the same type of because they've been turned away, they go back to another branch and try it again. These fraudsters are used to being able to go to hop between branches and they can't do it in our company anymore.

Penny Crosman:
They could go to a different bank but not do this at another Zion's

Jennifer Smith:
Branch. Yes. Right.

Penny Crosman:
And you mentioned that the branch staff are getting more information. What are some of the additional information they're getting?

Jennifer Smith:
So some of the information that they can see now because we have an integrated core, so unlike our major competitors are those who are exploring core replacements now because it is so difficult, they will tend to focus on an individual product, a deposit product, maybe a deposit product for high wealth customers. They aren't looking at all deposit products, they're all lending products like we have done over the course of many years as we've implemented this system. So when a customer comes in, they're able to see the full profile of that customer and then the model, the data model is the same for all of those customers. So the customer can avoid going in as they're applying for a loan application and avoid having to put data in they've already provided to the bank. So that's one of the ways that the system is providing that experience to our customers and to our bankers. That's not to say that other banks haven't figured out how to layer technology on top of their existing core environment or their teller environment, but the difference is it just becomes more complicated and more weighty as application channel after channel to put on core systems rather than creating more simplicity in the technology ecosystem.

Penny Crosman:
So when you say more simplicity, was that in kind of a middleware layer that you put on top of the core?

Jennifer Smith:
Yeah, so in a few ways I imagine this picture of if you have, think about core systems, they were developed decades ago, decades ago when there often was a terminal in a branch that had a direct connection to the mainframe. Those are the core systems that are often running in our banks. And what happened is checks would be handled at the branch and then at night the checks would be transported by plane to a data center for processing as decades ago. But that's the engine that is powering most core systems today. So as technology has evolved, organizations, companies just placed on additional technology on top of that core a teller system, then they place on a phone system and then they place on mobile banking or ATMs and so on and so forth. So I could see this picture of the weight coming down on that environment they typically didn't design based on integration patterns, whether it's APIs or over time those kind of evolve further into some microservices capabilities. It just simplifies the environment overall. Certainly some organizations are hollowing out the core and building in integration layers in order to create more simplicity. But at the end of the day, that core system that existed for decades empowering the branch of 1970 is still there.

Penny Crosman:
Right. So you did a complete overhaul. We did a complete overhaul, overhauled out and put new in. And you did it over the course of about 10 years I think. And you kind of did it in phases. Can you kind of explain your philosophy around how you broke it down into these pieces and then which pieces you did when?

Jennifer Smith:
I'll say we were really ambitious when we started and we started and had a view that we were going to do all three of these conversions in parallel and we bit off more than we could chew because it is really complicated. So we took a step back and we said, what are we going to learn? How are we going to learn the most? And we chose actually the smallest implementation, which would was our consumer lending replacement. And for us that was at the time about a 4 billion portfolio. So small overall much smaller than when you think about 1.6 million customers using your deposit system. And we harvested the learnings from that. Then we moved on to commercial lending and construction lending and then we moved into the deposits domain. So three major transformations in themselves that we captured learnings from. We made changes to our approach to who was leading to how we tested throughout that period of time. So even though deposits gives us the most value in terms of getting away from some vendors who are no longer supporting our systems and customer impact, it also was the riskiest for us to implement and with the opportunity to impact customers the greatest. And so that's how we thought about the implementation approach.

Penny Crosman:
So you started with the smallest and then you took on the bigger, you said you had to make some changes along the way. Can you give an example of a change that you made along the way?

Jennifer Smith:
Yeah, well we made changes in our methodologies. We made changes in the tools we were using and we made changes in leadership as well along the way. And what I'll note is from a leadership standpoint, it is really important to have the whole company moving in the exact same direction with the board to executive management and all of the way down fully committed to the strategy and the vision that's being executed. So as we are managing our program early on we saw opportunities where we saw divergence from how we were going to approach something to dealing with controversy, which naturally comes up and there's a really important place for debate and dissension, but at the end of the day, everybody in the company needs to be working towards the same goals. And so we would make changes out when we saw that when weren't all rowing in the same direction.

And that's really important to always make sure you have the highest performing team in place. So that's one change that we made. Other changes is to include one of our learnings was realizing this started almost a decade, well a decade ago, is the degree of automation in our test suites was not where it needed to be. And so we had to do a significantly more tooling as part of why we went with this smaller implementation early on. So bringing in new tools and approaches around testing and the great thing is then that permeates the rest of our technology organization and lifts us all up. And then so those are tools. And then in terms of methodologies moving to an agile methodology for deposits implementation really reduced risk for us and created more value as we moved along the implementation path.

Penny Crosman:
The leadership point is interesting. I remember writing about core transformations many years ago and someone telling me that CIOs tend to revolve every two years or so. So it's very hard to get somebody who's going to stay through an entire project that could take four or five, 10 years. Does it take a certain amount of fortitude to stick it out?

Jennifer Smith:
So I've been with the CIO for almost nine years, eight and a half years. And then before that I was involved in starting this kind of in a sponsorship role. So there's the fortitude that's required and I would even bring it up a level because I having a CEO who will continually see the vision and push it, particularly when you get into the hard spots in the middle of these kinds of projects, they start costing more than you expected. There's other things, even though we completed other critical customer facing initiatives during the same time, there's other things you may want to be doing as well. The board may ask the questions on what the path is. I think this is why some implementations have started and then failed because of that fortitude over many years. So for us it started with our CEO and his commitment and his vision to seeing this through over the last many years.

Penny Crosman:
What do you think he and the board see as the key benefit of spending all this time on a core upgrade?

Jennifer Smith:
I think what they would say is we are now done. We are the only bank of our size or larger that has completed it across all products and major core systems. And every other bank in the country still has to spend time on this and we don't. And we see that as a real advantage for us moving forward. The fact that it's in the rear view mirror right now. Yeah, it does feel good.

Penny Crosman:
So you mentioned there were hard parts. What were some of the biggest hurdles you had to overcome?

Jennifer Smith:
Oh yeah. So I think some of the biggest hurdles is when we had to make hard decisions to delay in implementation because we had several implementations over the past several years of all these different areas and they're rolled out and when our team had been putting all of their efforts into hitting that date, but because we were data driven and we knew exactly, we knew very precisely what our test results were showing in every single component, we knew the pace of which we were delivering the value just through user stories, user points. And we could see when it was no longer feasible that there was a certain date that we weren't going to hit. And recalibrating all of that, not just the timeline, but then the engaging the team of this is still really important work for us and stay engaged, we're going to get through it. Those were the hard moments to navigate through, but then they were really watching the team navigate through it. As a leader, it was inspiring and I could sit back and watch them and ask what do I have to learn from my colleagues and my team members that are able to just continue to get up every morning and do their best work? And so that was the silver lining to those moments.

Penny Crosman:
So you had to keep morale up,

Jennifer Smith:
Morale up, engagement up as well. And it was a continuous process. And this is something as others start down this path, it's an underappreciated element. We continuously the director over the program itself, she was continuously monitoring engagement levels, like quarterly surveys, where's our engagement at? Getting feedback, making adjustments. And then there were quarterly we're sending out some pieces of recognitions a letter saying thank you for doing this. It was very, very formal or very small spot bonuses of a hundred dollars here and there. That in the whole scheme of things don't cost a lot. Continuously monitoring that and then weekly celebrating every win. And if someone would show up for a status meeting without a win, it was like, okay, well come back to me later today. Because there was definitely a win, even if it was small that you experienced or your team experienced the week that resulted in this program, having the lowest turnover of any division within my larger organization, it ran about three to 4% over the course of the program. So people were deeply committed to pulling this off and that level of engagement of course increases performance and I think helped and it definitely led us to the results we've experienced actually just in the last two weeks as we have finished up our last implementation.

Penny Crosman:
So people felt seen, they felt appreciated. They felt like you valued the efforts were

Jennifer Smith:
Making. Absolutely.

Penny Crosman:
Even if they didn't have big, huge returns on a regular basis because it's a song that's a slog.

Jennifer Smith:
Yeah, it's a good way to put it. They felt sane for their specific accomplishment and we never approached all of our recognition was very specific and that helped along those lines of people being seen. Yeah.

Penny Crosman:
Was there a big celebration when you finished?

Jennifer Smith:
We've had several big celebrations over the course of a few years and they're fun and I mean we've done things as crazy as actually having our company president dress up in a Batman costume and several of us is doing superhero themes and so we did a lot of kind of crazy antics like that as well. Even though we just finished implementing our final or our final bank in the last couple of weeks, we're going to hold off celebrating until we get through quarter end and make sure that we're in good shape. But we'll definitely have some parties.

Penny Crosman:
Alright, great. Well I just want to ask you, when you think about the whole women in banking, most powerful women banking program, why do you think something like this is important in the industry?

Jennifer Smith:
So this program overall, specifically on this program, we had leadership because on the program overall it was about equal male and females on the program itself. And then at the executive rank, senior vice president and above, it was 60%. So over overall I would call that parody that we saw on this program itself. And so in the context of women in banking overall, this demonstrated that there is enormous power in having diverse voices at the table, parody at the table. And what the result is when you have an equal amount of male and female voices. And by the way, it was a pretty diverse program overall from all aspects and having those unique attributes that men and women bring to the program and seeing that that actually created something special was really powerful. So there's an underlying story there as well. More importantly for the whole banking industry, I think as we all have struggled with these old core systems, it shows this work can be done, it can be done successfully and it can be done in a lot of different ways, but it can't be ignored either.

Penny Crosman:
And you were at last year's conference, is there any one takeaway or moment that you remember from last year?

Jennifer Smith:
Oh, last year as I remember, I was on a panel, we were talking about data overall and they're one of the participants on the panel. She was the chief data officer at one of the other large regional banks and she was just a superstar and I think she was a Next winner and she was brilliant. Sitting up there and seeing the face of these women who'll be leading, I mean she's already leading obviously, but leading in executive ranks, wherever she goes, long term is, it is heartening to see. And so at the conference itself, seeing all of these women who are able to create magic in whatever they're doing but are sponges for learning as well and seeing the value of that and the value of connecting and networking, that was a big takeaway for me.

Penny Crosman:
Great. Jennifer Smith, thanks so much for joining us today.

Jennifer Smith:
So glad to. Thank you so much. Thank you.