Vanguard is a global investment management firm with more than $7 trillion in assets under management and a history spanning more than four decades. The firm is best known for its low-cost mutual funds and ETFs, particularly those that track an index such as the S&P 500. Costs are one of the key variables within an investor’s control that determine whether or not one meets investment goals. Vanguard has been so successful in delivering on this insight that competitors in markets the firm operates also reduce their expenses – a phenomenon known as the “Vanguard Effect” – to the benefit of all investors.
A few years ago, Vanguard set out to have a similar impact on the world of advice. Doing this would require that we set a bold vision, communicate it clearly, and move in an agile fashion – akin to a startup. Here’s how we made that happen.
Why CIOs must stress education and communication
In today’s digital world, CIOs must be in a position to educate executives on the evolving technology landscape. As Vanguard’s Global CIO, reporting to Chairman and CEO Tim Buckley, it’s my job to not only understand business strategy, but also where IT solutions can offer optionality to accelerate serving clients better, grow top-line revenue, become more cost-effective, and mitigate risks.
Our vision was to bring high-quality advice to the masses, globally, while lowering the price point. While Vanguard has been in the US retail advice business for 25 years, the vision to make advice a more central part of the firm’s strategy, coupled with modern technology, presented an opportunity to take a new approach.
Rather than each business line advancing their advice products and services in bespoke fashions, Vanguard centralized the investment in advice thought leadership, business product ownership, and technical teams in an agile environment akin to a startup – all within IT. This was a big dream, and without a solid foundation of education with the C-suite and our ability to communicate this vision from the unique perspective of business strategy and the evolving tech landscape, it might not have happened.
3 keys to our approach
A greenfield approach was taken with technology, building a cloud-native enterprise advice platform. The platform is composed of APIs, including a number that leverage AI/ML to provide personalized forecasts, and is now powering numerous advice offers across business lines and the globe. Through cross-functional teams working in new ways with shared goals and leveraging contemporary technology, the platform approach is enabling us to be disruptive.
We’ve since architected additional business platforms using this blueprint, which has resulted in an exciting new, loosely coupled technology mosaic. The business value has been insights from low-cost experiments with quick feedback loops, unprecedented speed to market and scale, cost savings through reusable and globally extensible capabilities, and record employee engagement.
A number of years ago, Alex Rampell of Andreesen Horowitz stated, “The battle between every startup and incumbent comes down to whether the startup gets distribution before the incumbent gets innovation.” That statement still resonates today. Vanguard stewards the dreams of more than 30 million investors, which over time has helped us hone financial advice that improves outcomes. Armed with this experience, we set out to give investors the best chance of success.
To tear down walls within the company, look to eliminate terms like “the business” and “IT” from corporate vernacular.
Three ingredients that enable us to embrace a startup mentality are ensuring technology is front and center in our corporate strategy, tearing down walls within the company to foster innovation horizontally, and embracing cloud-native approaches with a modular architecture to create possibilities for new opportunities. Here are a few takeaways to consider:
- To ensure technology is embedded in corporate strategy, it’s critical to avoid pursuing technology for technology’s sake and instead to influence and enable business strategy. Technology leaders need to understand the firm’s competitive position and strategy, while also educating business executives on technology to ensure they have a strong foundation of digital savviness to realize opportunities.
- To tear down walls within the company, look to eliminate terms like “the business” and “IT” from corporate vernacular. Establishing cross-functional agile teams that collectively own a product with shared OKRs is an essential building block to unlocking innovation and empowering talented teams.
- Finally, to embrace modern technology, we’ve seen success in (re)building platforms utilizing the greenfield approach that creates optionality beyond discrete use cases, allowing us to scale new offers quickly and cheaply – much like a startup.
Being an established global company with decades of experience delivering financial advice has provided Vanguard both investment capital and thought-leadership tailwinds for success, which differentiate us from startups. However, our centralized global approach to advice is different from market incumbents, allowing us to act like a startup and reap the best of both worlds. For us, acting with the nimbleness of a startup but with the backing and brand of Vanguard have been key ingredients to success.