Ep 16: How Data in the Cloud Enhances Customer Experience with Former Morgan Stanley International CIO & Head of Transformation Sigal Zarmi

Evan Reiser: Hi there, and welcome to Enterprise Software Innovators, a show where top technology executives share how they innovate at scale. In each episode, Enterprise leaders share how they're driving digital transformation and what they've learned along the way. I'm Evan Reiser, the CEO and founder of Abnormal Security.

Saam Motamedi: And I'm Saam Motamedi, a general partner at Greylock Partners.

Evan Reiser: Today on the show, we're bringing you a conversation with Sigal Zarmi, former CIO of Morgan Stanley. Sigal's decades of experience as an It executive and has been a CIO at some of the world's largest companies, including General Electric and Pricewaterhouse Cooper. Today, she's an advisor at Boston Consulting Group and sits on the board of directors at HashiCorp and ADT. In this conversation, Sigal shares her perspective on building a culture of innovation, the applications of harnessing data in the cloud, and how stars can collaborate with enterprise organizations.

Saam Motamedi: All right, well, maybe before we dive in, just thank you so much for taking the time to chat with us. It’s something I have been looking forward to this call. We're just curious people and like learning new things. We appreciate you making the time.

Sigal Zarmi: Oh, that's great. Happy to be here.

Saam Motamedi: Awesome - Thanks again for joining us. Just to kick off Sigal, I want to start with your background. You've had a storied career as a CIO, now a board member at some of the world's leading technology companies. Can you start by giving our audience a little bit of background on your career and how you got into this point?

Sigal Zarmi: Yeah, I've started as a programmer. As a developer. I was always passionate about technology and what technology can do to improve processes, and I felt that you can do that as a programmer. And in the old days of client server, everybody who knew how to program can really build programs on a PC and roll them out. And started with an insurance company and rose to be the CIO there. But I think that my career really took off when I joined. GE was a wonderful company, a wealth of training and education, a lot of focus on continuous improvement and excellence, and people moved around a lot. So I had the privilege of being in nine different roles in 18 years and being exposed to so many different things. If it's acquisition, integrations, legacy, modernization, transformation and innovation, running technology companies, what it means to be in an organization, then all of a sudden go through tough times and you need to cut costs, what it means to do a reef, to hire a lot of people fast, grow globally, outsource, insource. I got to do so many different things at GE, and I think that's what really helped me get the top job at PwC, which is a very large global organization, and be the CIO there, where I drove transformation. Over four years I was there, which led me to get the job with Morgan Stanley as Head of Transformation and later on be the international CIO. So I really credit the reasons why I got to where I got from the GE culture.

Saam Motamedi: One of the common themes on the show, right. Digital transformation. And so I'd love to just hear in your role kind of driving transformation, like, what does that mean? How do you think about what transformation is and why it's such a kind of theme right now?

Sigal Zarmi: Yeah, I think it's different for each organization, and you can define it the way you want to define it. To me, the common thread around transformation is how can you leverage technology to improve your engagement with your customers, increase revenue, efficiency and effectiveness. And that can be something general. Right. But then if you try to take it a few levels down, it depends on the organization, where the organization is at. That was definitely the case that GE, some of our units were still running on the mainframe at 2010. So what do you do? How do you upgrade legacy software when you're running into skill set gaps and the increasing cost of running on the mainframe at the time? So that can be your transformation. At PwC, it was about leveraging data in order to automate a lot of the audit and tax services for the PwC clients. At Morgan Stanley, transformation was more around. On the wealth management side is digitally engaging with the financial advisors, digitally engaging with their clients. On the institutional side, it was more around how do you leverage the cloud with all the data and the algorithm that you can run in the cloud? How do you leverage the elasticity of the cloud to take advantage of that, to be much more flexible in your algorithm for equity or fixed income trading? So it depends, really, on what the organization, what stage they're at, and what their goals are. But for the most part, it's really about leveraging technology to engage better with customers.

Evan Reiser: Are there any specific examples where you've seen technology be deployed that's not just about efficacy and efficiency, but actually creates a new customer experience that wasn't possible in the past?

Sigal Zarmi:So I'll give you an example from my GE days. A unit of GE Capital was doing franchise financing, and we were financing franchise stores when they were opening new stores. We created an app where we can help a franchise or figure out where would be the best place to open that franchise. Based on location data, based on cost of living in that area, based on car traffic. How many people are moving through the area? Where are our hospitals? Where are schools? Where are city government offices in the area? And based off all of that, we created an algorithm that recommended a place for a franchise or to open a new franchise. So if we are financing you, we want you to open a new franchise. And if we're giving you the tools to really evaluate, where would it be the most efficient from you? The salaries, right, labor cost in the area, all of that went into the model that helped the franchise own decide where to open a new franchise. And that's like a great connection with your clients that you didn't have before. And originally we gave it for free to the franchise owners. So that was a great way for us to initiate a meeting, something to talk to them about, something that was different than the competition and helped create the relationship. So a lot about relationship building is how you differentiate from the other company and how do you add value. So it was definitely a value differentiation.

Evan Reiser: I love that example because if you went back, I don't know, 20 years and you told people at the time, hey, we're going to be able to use technology here to do things like this, people probably wouldn't have believed you, right? That sounds like some science fiction. Are there maybe similar things like that that you've seen in financial services where we can now use technology to create differentiated customer experiences? It's just like we're kind of almost unimaginable ten years ago.

Sigal Zarmi: To me, cloud is opening so many things that were unimaginable before. AIML the same thing. We talked about the algorithm and the analytics with the other example. But I think the way machine learning is working today is just taking it to the next level and we're just starting actually to get the benefits of how you accelerate intelligent insight with machine learning. But let me give you an example on the cloud. There's a lot of data that is moving around in financial services, right? And it's moving between your clients to you, to your vendors. There's a lot of data feeds and companies are always thinking about how to improve that. And the amount of data is just astonishing. And you can go back and really analyze the stock market 100 years ago. So the ability to really use big data in the cloud is opening a lot of new ways to engage with your customers. How you move the data around, how you can create places where clients can come and through APIs, take that data into their own environment, or use any analytical tools that they want on that data in this cloud instance. And that's something that the collaboration with data I don't think was available ten years ago to the extent that you can do things today. We had big data warehouses and we had a db ten years ago and all of that stuff, but it didn't provide the same flexibility and interconnectivity that you have today. And those tools are just getting better, right?

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Saam Motamedi: It's interesting you talk about being a data driven enterprise. That's such a common theme that comes up on the show, and yet companies are at different levels of progression towards actually being data driven and not materializing and end customer products. What are some of the investments that you can talk about that you've made that, kind of, if you reflect back to where you were ten years ago versus now actually let you operationalize data inside the context of the enterprise.

Sigal Zarmi: So at PwC they look through a lot of data and same as in financial services, they have data that financial data and balance sheet and income statement and journal entries. Lots of data that goes back on each of the companies that they audit. And what we did is take that data and automate some of the functions of the auditor in a way that enable you to not just do sampling when you do your test, but you can actually run that on full sets of data and it will give you much more accurate results. So the audit became more bulletproof than what it was before.

Saam Motamedi: And that's an amazing example, actually one that I wasn't aware of and I think it's a good theme of leveraging historical data sets to automate the work and make more effective, in this case, the auditing workflow. Are there other examples, either that exist today or that if we're having this conversation ten years from now you feel like we're going to be interacting with, in the context of financial services?

Sigal Zarmi: Definitely on the trading floor. They've been using a lot of algorithm and analytics for a long time, right? That's what electronic trading is all about. It's all powered by the technology and there are teams of really smart people, all of them are data science degrees that are creating those models. The tools that are available now much better is automating how you get the algorithm. So the learning curve and the start-up time to build new algorithm is much faster MLPs and how you operate those models, the transparency around those models. So if regulators are asking about what went into the model, what data, where the data came from, what have you changed in the model? Show me the version control, let me know why did you get these results versus that result? So all of those tools are much more developed today than they were in the past. So it takes out a lot of the manual work and it increased the transparency around the models that are driving trading. Where will it be in ten years? I don't think we will replace the data scientists, I don't think we will replace the people that are coming up with the algorithm, but we will have more algorithms and there will be more nuanced because it's going to be really easy to test things. What if you don't just take linear regression and test if the interest rate is going up, what is going to be the impact? You will be able to take a lot more parameters and see the impact on your data. When you think about time series data. So I think it's the richness of the decision making and the speed of the execution is going to increase with better tools but it's still going to be used for the same reason. And the same reason is, for example, for trading or for engaging with your customers. It's still going to be used for the same reasons.

Saam Motamedi: I kind of want to transition something you actually noted earlier around when you were at Ga and just the impact that had from a cultural perspective and maybe ask a question on how you build team culture to drive innovation, like you've done this at now several large and defining companies. What are some of the key things you've done from a cultural perspective with your teams that have led to some of these innovative projects and work?

Sigal Zarmi: Yeah, I think the first thing if you do want to drive innovation is really look at the organization values and see where innovation fits in. And then you do need as a leader to talk about it. You do need to incentivize people so when they innovate, they get some rewards. If it is a shout out and a team meeting, or an email that goes out to the whole organization, or breakfast with the CEO, whatever it might be. But you incentivize people to innovate. And to me, innovation is not just the big idea. It's not just something that is changing the world within large, complex organizations, it's not about, let's create a new product or the big system that we are implementing. It could be around an idea that improve a customer interface. It could be an idea that improve how the team is working together. It could be something small. So what I'm saying is, don't just talk about the big innovations. Yes, they're important. Yes, they're definitely the ones that get a lot of the accolades, but also think about the smaller ones because you want innovation to be part of the culture, part of the fabric of the organization that everybody feels that they can innovate. And it's not just the teams that are working on migration to the cloud, for example, or AIML, for example. You also want the teams that day to day have to run the systems. They need to feel that they can innovate as well if it's implementing a new process, automating something, or delighting and pleasing their clients.

Evan Reiser: You talked about the importance of recognizing innovation in the team. Are there any specific ways that have been effective for you to really reinforce some of those behaviors that ultimately drive innovation?

Sigal Zarmi: Yeah, so for example, at Morgan Stanley, we had an innovation office that was designed to accelerate technology experimentation across the company through different programs like design thinking, vendor evaluation, sandboxes testing, POC. We had an innovation challenge where we invited people from all across the company to come up with ideas and through the shock tank process go through the ideas. And some of them were funded and evaluated. We had a whole innovation presentations and awards, and I think that drove the message that anyone can innovate. And it doesn't matter where the ideas are coming from. Some of them can be business ideas, some of them can be process ideas, some of them can be new products, some of them can just be improving a specific process. But those ideas were all getting a fair share of evaluation and then it was a cross functionality from the business and from technology that decided which ones would be at least worked on in a pilot phase. And once the pilot was successful, then we expanded a few of them across the company. Also we had a tech expo where a lot of new innovation ideas, even ones that didn't come through the innovation challenge were presented. And we did it virtually. We did it in each one of the major locations, pre-pandemic, where people presented their ideas and technology teams could just walk around and understand what was the idea about, how did it help the business? A huge focus on business value and outcomes. So not so much technology for technology's sake, but really, how does this help the business? So you're driving two things. You're driving the innovation and the connection to the business and the learning and experience on how to work on something in more of a startup environment.

Saam Motamedi: Sigal one of the things that's so interesting about your background is you've been the catalyst for driving innovation on the large enterprise side at some of the world's most important companies. And now as a board member, you're working with some of the world's most important technology companies HashiCorp, Data Robot, others. What's been the learning from that kind of transition point as you've brought the context of the journeys at Morgan Stanley and GE to the world of like HashiCorp or some of the other technology companies you're involved with?

Sigal Zarmi: So one of the things that I would say is that Morgan Stanley has been working in partnership with technology innovators VCs and startups for many years. They started the CTO Innovation Summit on the West Coast in 2001 and the technology teams are evaluating about 1000 companies every year and working very closely with visas and investors. So working with the startup community has not been foreign to me. I've been doing that for a while. I've been doing that also when I was at PwC and also GE when GE had their GE ventures that was investing in startups. And I think the great thing about this partnership is how do you share and exchange ideas from a complex organization that has a lot of processes to go through just to test the technology to the startups that are moving really fast and wants to be very responsive to every customer request? So a big thing for big companies is security, right? And some small companies don't think about security the same way financial services think about security. So it might be an afterthought for them. So how do you bring the thinking around security regulations, data privacy into small companies in a way that they can make their product much more resilient and attractive to large, complex organizations.

Saam Motamedi: So you talked about security. For example, if you're inside the boardroom of an early stage software company who's trying to serve customers like Morgan Stanley, what are two or three things that you wish you could tell them that would make them more effective?

Sigal Zarmi: First, it takes a long time to sell to large, complex organizations. Second, focus about security upfront. Make sure that you would know how to answer very complex, in depth questions around security. Third, make sure that your product answers the customer needs, because sometimes products just answer a niche. They're a feature that is solving a specific problem. But me, I wouldn't buy something that is just a feature because that might be acquired or developed by a competitor. So would rather go with an incumbent that already I'm using their product and say, how about this feature as opposed to buy another software? So think about a platform that you're building rather than just a feature.

Evan Reiser: I want to ask you the opposite of Saam's question. What are the common mistakes that up and coming enterprise software companies make as they're trying to work and partner with large enterprises?

Sigal Zarmi: What I've seen is how important and critical is your go to market strategy, your chief revenue officer is, and your sales team? Do they understand the product? Do they know how to sell it? Do they know how to talk about the value to the customer? Do they know who are they selling to? Who is the economic buyer? What is the competition doing? Why would somebody buy from you? And I find that it's so critical and sometimes underestimated. I've talked to so many companies that think that just their technology should sell itself. It's obvious what the technology does. That never happens. Technology does not sell itself.

Evan Reiser: I like great advice, which probably all companies needs to reflect and review every so often. So appreciate you sharing. We like to do basically kind of like a Lightning round, kind of like shorter punchier questions. And we kind of like, keep the cadence changing a little bit. Sam, you want to kick it off?

Saam Motamedi: Yeah. How do you think companies should measure the success of a CIO?

Sigal Zarmi: I think really, about how much technology is contributing to the company's success depends on how you measure that. It could be increased revenue. It could be decreased cost. It could be reducing enterprise risk. However you measure the CEO, the CFO, and the rest of the leadership team, you should measure the CIO.

Saam Motamedi: We've asked that question many times. That was a really clear answer.

Evan Reiser: Yeah, maybe a slightly similar question. Some of our listeners are aspiring technology executives, and I'm sure some of them are either just got into or moving into the CIO role. Is there a common mistake you see kind of new CIOs make or maybe things that they over, underestimate in some way?

Sigal Zarmi: I think a common mistake is focusing too much inward and not really creating the relationship with your peers and with the business leader. You have to make sure that you don't just focus inward on your team and then deliverables a day to day, but really think about the strategy and how your technology strategy, fitting the organization strategy.

Saam Motamedi: Maybe a kind of different angle on that question. What part of the CIO's responsibility do you think is most commonly underestimated and its importance?

Sigal Zarmi: One is how hard it is just to keep the systems running and keep the train on the track, if you will. I think it's like electricity. You expect that it's going to be there, and you expect your computer to work in the morning and the amount of time and effort and the budget that requires in order to just keep everything running. I think that's underestimated by business leaders and sometimes some people in technology as well.

Evan Reiser: I'm going to switch a little bit. This is maybe more like the personal side. Is there a book you've read recently that's had an impact on you or maybe an impact on your leadership?

Sigal Zarmi: So I'm doing an executive coaching certificate through BCG, and I'm actually reading a book called The Psychology of Executive Coaching. It's heavy. It's a lot of theory and application. But the interesting thing about this book is that it really highlights how the mental model and mindsets of people are so ingrained in who they are and are so hard to change. So when you are a coach or you are a mentor or you are on a board and you're trying to really influence a company, what's the best ways to get people to open their mind and think about something else they haven't thought about as a coach? If people are stuck in a specific problem, how do you help them to get unstuck as a board member? If you talk about the strategy of the company, how do you make sure the CEO is taking into account a broad set of possibilities and incorporated into the strategy? As you're mentoring someone, how do you make them see around corners and something they haven't thought about? And it's really interesting to understand the psychology behind the person because that can help you get people from where they are to where they need to be in order to be successful.

Evan Reiser: I never expected to get that answer from this question, but that was really wonderful.

Saam Motamedi: Yeah, I second that. That was a really good answer.

Sigal Zarmi: Thank you.

Saam Motamedi: Okay, I have five more questions but we’re out of time. Sigal, thank you so much for making time to chat with us. I really appreciate chatting with you, as always, and looking forward to talking again soon.

Sigal Zarmi: Glad to be here and thank you for inviting me.

Sigal Zarmi: Thanks a lot Sigal.

Evan Reiser: That was Sigal Zarmi. Former CIO of Morgan Stanley.

Saam Motamedi: Thanks for listening to the Enterprise Software Innovators podcast. I'm Saam Motamedi, a general partner at Greylock Partners.

Evan Reiser: And I'm Evan Reiser, the CEO and Founder of Abnormal Security.

Evan Reiser: Please be sure to subscribe to never miss an episode. You can find more great lessons from technology leaders and other enterprise software experts at Enterprise Software blog.

Saam Motamedi: This show is produced by Luke Reiser and Josh Meer. See you next time.