Three Roles That USAA Labs Plays

By Scott Kirsner |  January 15, 2018

From drones to Alexa skills, bitcoin to facial recognition, few financial services companies are as quick to explore the potential of a new technology as San Antonio-based USAA. Founded in 1922 when a group of 25 Army officers got together to collectively insure their cars, USAA now has more than 11 million members and 28,000 employees.

USAA Chief Innovation Officer Zachary Gipson

We spoke with Zachary Gipson, USAA’s Chief Innovation Officer, about how his team is structured; how it takes projects into production; and delivering the “warmth and caring and empathy” that USAA’s members expect over a digital channel.

Gipson also discussed the importance of being “passionately dispassionate.”

“Passion is what keeps us going through the challenges of being an innovator in a big company,” he says. “But you need to really be dispassionate about the work you do and how it can change.”

Our organization, USAA Labs, plays three macro roles in the organization. One is inspiring and engaging our employees and members to be innovators with us. We do that through our challenges and hackathons. On the employee side, 94 percent of our employees [have] participated in that program; on the member side, we have similar kinds of programs and challenges.

The second role is that of being an accelerator for emerging technologies like AI and autonomous vehicles and blockchain and bitcoin. That’s the stuff that’s usually written about.

Our third big pillar is around creating new forms of growth and revenue for the company – launching new businesses. Those are typically adjacencies, or things outside of our core business.

How We’re Structured

We have an organization called the Chief Technology & Digital Office. The EVP of that, Heather Cox, reports to the CEO, and I report to Heather.

In terms of staffing, we go up and down. Today we are right around 200 to 250. Those are USAA employees, full-time on our team. We have a team that leads member and employee innovation, a team focused on emerging technology work, and a team that leads our new business work.

2008 was when we stood up our formal innovation teams. Before that, it just happened in IT or product groups. But our former CEO felt we needed a dedicated function to do two things – to start our employee innovation program so we could bring every employee into this work, and to have a team that was dedicated and forward-looking, versus tethered to the core business. That team was originally in marketing, but then moved into IT from 2010 to 2014. At that stage, it became more about the technology, as opposed to serving members in new ways and creating value. In 2014, I was a GM, and I got tapped to go figure out innovation.

I view 2014 to today as [being] about maturing the practice of innovation —bringing together the business and IT functions into a single team, and aligning our work to the strategy of USAA. We’ve been putting in place a lot of the process and rigor, in terms of how we manage our work across the different portfolios we lead. We are maturing innovation into a strategic asset for the firm — not trying to be this interesting function working on disconnected stuff, or an isolated lab, but shaping the future of USAA. The Chief Innovation Officer role was created in 2015; the CINO title didn’t exist before then at USAA.

As far as where the talent on our team comes from, we hire from the external market, but for most of the team, this is not job #1 they’ve had at USAA. We have some very long-tenured employees on the team, with 20 or 30 years of experience. So that gives us a really good balance of external perspective and new skills.

If you go out and hire everybody from the outside and bring them in, they expect to do things a certain way. [Sometimes they] take an approach of, ‘Everything’s busted and we need to totally change everything.’ That’s where you can get some tissue rejection.

Delivering Warmth and Caring in a Digital Channel

USAA is very mission-driven. We have a strong focus on our members, and facilitating their financial security. So we always start with our members and their needs and how we can serve them best.

It’s so easy to get distracted in a corporate innovation function. You take senior leadership on the Silicon Valley tour, you run some hackathons, and you invest in a startup. Those are all good things, but unto themselves, it’s just activity. It’s not moving the ball forward.

We’ve built a fairly broad ecosystem that we tap into. We have interacted with over 700 startups, and brought north of 50 of them into our lab. We have relationships with MIT and Stanford and others, and we work with the big tech vendors, too.

One area of interest is, what happens when members interact with digital channels more than human channels? How do we replicate warmth and caring and empathy in digital channels? We think there’s lots of potential with artificial intelligence and machine learning – and emerging devices like Google Home or Amazon Alexa. You’ll be able to create not just rote, static interactions, but personalized experiences.

Working with Academia

For us, the bridge from academic research to eventual production was too broad of a bridge to cross. But what we’ve found that works well is when we have a very specific use case, and we can sit down with graduate-level folks. We work with them almost as an extension of the team. They’re ideating around a problem, and creating prototypes. We work with University of Texas at San Antonio, which has a big cybersecurity practice.

But part of [our learnings about academic collaborations] was finding ways how not to do things. I’m a data and information nerd. I love when my brain hurts as I sit through a PhD dissertation on machine learning applied to something. The knowledge share is good, but [we are focused on] getting to something much more applied.

Getting Concepts into Production

Our team is set up to put things in market – not just ideate, or do piloting and prototyping.

You can get very enamored of the ideation and testing and learning, but if you don’t get things into the hands of your customer, you haven’t created value. That’s why we’ve built a strong function around [getting] an idea from a member [and taking] it into production.

There is some work that we can take straight through to production, in the digital domains. If we’re doing something around a specific line of business, that would [involve] a handoff to the business to take into production, because they have all the expertise on the core underlying systems. When we hand things off to the business units, we stay on top of them until it gets into production. It helps that we’re co-located in the same mile-long building. We can literally show up at their door. If you hand something off, assume it won’t get into production unless you keep working to get it there.

Then, there are some situations where we lead [a project] into production, but pull in digital or technical resources from outside our team when we go into full production.I like the fact that our team has the ability to put things into production. Once you hand things off, it becomes part of another queue, and if you don’t champion it through, it could get lost.

When we take things into production, we make sure we’re engaging legal, compliance, and risk – our control partners – very early in the process. If it’s a domain where there’s extra scrutiny, like our work around bitcoin, we make sure we have everybody lined up in the ideation stage. If you wait until the last minute to bring in the control partners, the answer will be no.

Project Examples

On the Thursday right after Hurricane Harvey had gone through Texas and was headed toward Houston, we got a call. Our property and casualty team was deployed to the coast, and we got a call from them saying, “Hey, our members can’t get to their homes, and they’re not sure if their cars are lost. But we have a bunch of imagery from Cessna and drone flights, and satellite data from governmental agencies. So eight hours later, we had deployed a tool that stitched together all the imagery so anyone could go online and get a real-time view of their home and see if it was flooded. If we saw your car was underwater, we could say, “We’re going to give you a check, or automatically deposit funds in your account.” Then you could go out and buy a car that day. We ran that straight through to production, and hosted it on our site, We used it again for Hurricane Irma, and the odds are that we’ll have another event where it gets used.

Our bitcoin integration with [the startup] Coinbase, [which serves as a digital wallet] – we did that end-to-end and put that into production. Same with our work on banking skills delivered through Alexa – we took that straight through to production.

We did some payments-related work last year that ultimately hit the banks’ money movement systems. We don’t have all those core systems skills on our team, so we worked with other teams on that.

When it comes to the hand-off, one of the things I coach my team on is being passionately dispassionate. Passion is what keeps us going through the challenges of being an innovator in a big company. But you need to really be dispassionate about the work you do and how it can change.

A lot of what we pass to the business becomes different by the time it goes into production. You need to accept that this thing is like your child going off to college. He or she is going to be a little different by graduation time. We try to focus on what the key things are that we learned from members that need to persist until launch — but other things wrapped around it could change.

Creating New Businesses Outside the Core

The third pillar is an emerging pillar for us. It took around a year of work with the executive council and our CEO [to outline how we might] step in and create new businesses outside the core. We’re exploring adjacencies right now, and earning our way into creating new businesses outside our core. We’re at the front end of that.

When you’re a large, successful business – we’ve been growing revenue and net worth in the high single digits for a decade probably, and all our satisfaction scores are through the roof — there’s no burning platform to find new sources of revenue, because the core is growing. [Creating new businesses is] the least mature, most emerging part of our time.

I’m a steward of this important thing called innovation, which is helping us serve members better tomorrow than we do today. My hope is that I make things better in my time here than they were before.