Ep 2: Inside the Digital Transformation of CarMax with CITO Shamim Mohammad

Saam: Hi there and welcome to Enterprise Software Innovators, a show where top technology executives share how they innovate at scale. Each episode covers unique insights and stories that will help you succeed as a technology leader. I’m Saam Motamedi, a general partner at Greylock Partners.

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

Saam: Today on the show, we’re bringing you a conversation with Shamim Mohammad, Chief Information and Technology Officer at CarMax, where he’s worked for 9 years. CarMax is America’s largest used car retailer, and has been named one of Fortune Magazine’s 100 Best Companies to Work For for 17 years in a row. 

Evan: In this conversation, Shamim describes the difference between “startup” and “end up” companies, and how CarMax transformed into a digital company by disrupting itself.

Evan: Shamim, can you talk about the digital transformation that CarMax has gone through over the past several years?

Shamim: About five, six years ago, we found ourselves in a position where we're seeing a pretty significant shift with our customers, right?

Customers were no longer just going to a brick and mortar channel, but they really wanted to have that more digital experience. So we, in order to provide that, we recognized that we had to also become a digital company. So over the last five, six years, we've gone through a massive transformation where we took a very successful traditional brick and mortar company, and we transformed ourselves into a digital company.

Saam: What were the early signs that you and your team saw that, you know, you needed to make this shift to digital? And what do you think it was about your approach that enabled you to be ahead of that versus behind it, like so many others in retail and commerce industries?

Shamim: I think one of the biggest factor was the understanding of how our customers were shifting. And then realizing is one thing. But then having the company kind of get bought into that concept was also critical. From my perspective, our senior level executive team, being very open-minded and understanding that we needed to shift was extremely critical.

And then the board of directors, they also supported us and encouraged us to be on the journey. This is a very difficult journey, because when you're very successful and things are going well, why do you need to make a change?

Why do you need to inflict the pain on yourself? And that pain aversion is what I think prevents people to go through the journey. But fortunately for CarMax, we were not afraid to disrupt ourselves because we knew that if we didn't guess what's gonna happen, you know, maybe not immediately 3, 4, 5 years, 10 years down the road, we would be disrupted.

So we wanted to disrupt ourselves before somebody else did. But the key point, I would say there would be senior stakeholder engagement, absolutely critical, board engagement, absolutely critical. And then you just have to go all in. You cannot just say, okay, I'm gonna try a little thing here. No.

If you want to disrupt, you have to disrupt, you cannot just go try little things here and there. For us, we went all in. 

Evan: That’s really cool. Are there ways in which AI or machine learning has not just kind of accelerated some of the existing customer journey, but maybe it's kind of unlocked, you know, new business opportunities or new business models?

Shamim: Yeah, absolutely. One of the more recent ones that I'm so excited about is the instant offer, where a customer can use his or her mobile device or online tools to do a few things, and then we will give the customer an offer on their car and that offer is good for multiple days. 

You know, we deployed that through testing and learning and experimentation and the algorithms so that this is all machine generated offer that's done very quickly. And within basically a matter of a few weeks, we have become now the largest online buyer of used cars in the country. 

Saam: Yeah, Shamim, I think the instant offer concept is part of this bigger theme that we see happening in companies that are going through this digital transformation, which is the transformation of the customer experience. Right? I'd say every Fortune 500 CTO CIO, CEO that we talk to talks about the future of customer experience being omni-channel, in-person, on different digital channels. It seems like CarMax has actually been able to deliver on this omni-channel promise. What are the different touch points that you all have with customers and how do you use technology to drive better touch points? 

Shamim: Omni-channel for us is putting customers at the drivers seat to control their shopping journey so that they can do however much they want online or however much they want to do offline. So if you have somebody who wants to do a hundred percent online and get the car delivered to their home, that should be their choice.

If somebody is not as comfortable with all the digital experiences and they want to go talk to a human being in a store, they could do that. So what I found is in our omni-channel approach, most of the customers are taking advantage of the digital tools and capabilities we have built, but then also a lot of them are going to the store and finishing their transaction.

So the reason I believe our omni-channel approach is the best one in our industry and is the most comprehensive one is because we took this approach of having a 360 degree view of the customers through all channels. And basically equipping the customers and our associates with the tools and information and data, so that if a customer contacts someone, the associate knows exactly what the customer has done.

So the customer does not have to repeat. One example it comes in mind is one of the customers recently had a new baby. And our delivery team knew that the customer had a new baby. So when the car was delivered, they actually delivered a toy with the car and that little extra touch and caring and personalized service is really what omni-channel is all about.

Saam: That is such a powerful example. Shamim, I'm curious, like if you could expand on this a little bit, so if I'm trying to buy a car and I interact with CarMax online and I do some of my work online, and then I transition to interacting with the company at an offline presence, how do you tie that data together, and what are some of the other ways you integrate the online and offline experience? 

Shamim: So everything that you do online you can actually save, it's being saved and stored. So at any moment, when you reach out to somebody, they will know what you have done. Like for example, you narrowed it down to three cars and you did an appraisal on your own car and you applied for finance. So everything you've done is stored and saved in this 360 degree view that we have created around customer journey, so that the person helping you knows exactly where to pick up and how to help you.

Now, if you take a step farther, if you do all the work and you just want to pick it up from a store, the car will be ready for you. We leverage technology in every part of that shopping journey so that you, as a customer and the associate who is helping you, they have all the information they need in their fingertips. 

Saam: That’s excellent and I'm sure we have a number of technology and IT leaders listening to this conversation trying to go through this same transformation to omni-channel at their companies. Are there any hard-fought lessons or things that are maybe not obvious that you learned as you went through this and delivered on it at CarMax that you would share with others who are, who are trying to go on their own journeys here? 

Shamim: I would say number one is before you embark on the journey, make sure that you have full support of your peers. That would be other key executives of the company and the board of directors. They need to be all in with this transformation because the transformation is painful - it is a difficult journey to take on, especially if you are a successful company, because you're saying, hey, you know, we're great. Nothing seems to be broken, but we need to really change everything and the way we do business.

Second thing I would say is it is a business transformation. Yes, technology is going to enable it. But at the end of the day, the core of this is really business enablement and business transformation. And the third advice I would have for you is you have to build the talent and you cannot underestimate the cultural aspect of this transformation.

You have to make sure you have the right people to guide you through this transformation and your people are coming along with you in addition to the leadership team. 

Saam: Nice. So I’m curious, what’s changed about how CarMax operates to enable this digital transformation we’ve been discussing?

Shamim: The big shift, I would say today versus five, six years ago, when we were a very successful brick and mortar, traditional car retail company is that we moved away from a project-based sequential waterfall organization to more of a product-based organization.

And the product organizations work very differently. They are more empowered. They're more OKR-driven - objectives and key results-driven. There's a lot of transparency in the work they do. And they're supported, they're encouraged to experiment, test and learn. So that move from project to product was a big shift for us from a cultural perspective and how we work today.

And because we have these product teams constantly testing new things with our customers and our associates, that's really helping us innovate and experiment. At any given moment, our teams are doing hundreds of experiments and trying new things.

And many of them may not come to any fruition, which is okay, because what it is allowing us to do is figure out all the things that don't work so that we can identify a few things that do work. Instant offer is a great example - in order to get to that, we had to go through probably eight or nine other things that did not work, but we have found this one, that's a game changer for our industry.

Evan: What do you do as a leader to really kind of drive this culture of experimentation, innovation and testing, iterating, and just continuous learning? 

Shamim: The number one thing I have to do as a leader is make sure that I'm supporting - I have their back, I have the team's back so that they can be empowered and they feel, feel good about taking some of this risk.

So that's the number one thing I can do as a leader. Beyond that, the other leaders, in my case my CMO, and my COO, the two critical partners in this transformation that we've been on, without their support, none of this would have happened. And then ultimately the CEO that I work for, he has been this unbelievable supporter of this change.

The, you know, when the teams see this, when the teams see that, hey, senior executive teams are aligned and this is just not a flavor of the day or the month, they are on this, they're serious about it. We are continuing to invest in them and grow them. Guess what - they gave a hundred percent and they give more than that.

And so I think those are some of the things we have done. I mean, I'll give you one example. When we started out this journey back in, I don’t know, 2016, 5, 6 years ago, we had, you know, a handful of teams, product teams that we just said, okay, let's, we're going to go down this path and we're serious. We’re going to do this.

Part of the change, we had moved physical space. I mean, we co-located people. We created new job titles. We organized ourselves very differently, a very cross-functional team, all those things we did. And that partnership, that way of working has never changed. 

One other thing we do is show interest in the work they do. Every two weeks, all product teams, they're presenting, they’re showing what they have done that were very successful. And the things that they tried are not so successful, like things that they didn't produce the right results, but it's okay.

And the leaders attend those open houses. I attend most of them, COO, CEO, CMO. We attend most of the sessions. So the team knows what they're doing is very important and is driving results. And even if they make mistakes and learn from it, we got their back. 

Evan: That’s great feedback. Shamim, can you share how startups or other companies have influenced your approach to driving innovation at CarMax?

Shamim: So one advantage I have as a CIO and CTO of CarMax is I did work for a startup many years ago. I was employee number five of a company that became a multi - or I’d say billion plus company eventually. And so I've seen what a startup kind of mindset can do. And the energy and the passion a startup company has is invaluable. And when the company gets too big and gets away from that startup mindset is when trouble begins.

So I went from a startup company to a company that was a market leader doing really well, and they were too complacent and could not change and I ended up leaving them. And today they're no longer around. So that experience kind of taught me, right. Start up, works, end up, I called the other company, end up doesn't work.

So when I came to CarMax, I wanted to embody a lot of the same startup mindset at CarMax. And this is why a lot of the interaction with the Silicon valley companies, startups have been really critical because I value that. 

The biggest differentiation, biggest thing that I admire from that startup company discussion, and a lot of the digital company discussion, is nothing seems impossible. This whole possibility mindset. Yes, I can do it or we can do this. Let's go make it happen. Versus the end up companies, I call them probability. They look at oh, can I do it or can I not do it? So the possibility mindset is really what CarMax is all about because we know there's a tremendous possibility with the company and we're working on it through technology and through innovation.

And we'd never want to be an end up company that looking at the probability, whether or not we can do it or not do it. 

Saam: So Shamim, can you give an example of a startup partnership CarMax has had that’s been particularly impactful?

Shamim: Three, four years ago a startup company we looked at, a big company would probably say, oh, no, this is too small, too risky. Don't go there. But we actually, I went and spent time with their head of product. I went and spent time with the founder and I understood what they were trying to do and what they can be.

So, as a result, we built a relationship. And it was painful because we had to help them mature, they didn't have the scale or they didn't have a lot of the processes, but I knew their core technology and the drive they had was the right one. So we ended up investing in them as a, as a customer.

And today they're a big enabler for a lot of the things we do. So the point is that we have to keep our eyes open. And we have to be exposed to as many startups as we physically can be in tune with, even though they may not have an immediate use case or immediate need, but you know, maybe a year down the road or two years down the road. Sometimes I don't even know what I need until I talk to some of these startups. I'm like, oh, that's a great idea. We should probably find a way to leverage that in our company. 

Saam: That makes total sense. Now Evan’s going to kick off our lightning round of questions.

Evan: What do you think is the biggest misconception that people have about technology in the auto or retail industry?

Shamim: Biggest misconception is how fast self-driving cars are going to be on the road. I think it’s still a kind of hype, it’s not imminent.

Saam: What is the number one thing every new CIO should be thinking about when they take a new role at a new company?

Shamim: Build a great team. 

Evan: What do you think is like the biggest mistake a CIO can make? 

Shamim: Try to make too much transformation without building that internal partnership and having a strong team to support that transformation.

Saam: How do you measure a CIO? 

Shamim: Ultimately, it’s the business results and business outcome. What the CIO or the CTO is driving. And the secondary measure would be what culture he or she is creating that's driving that business result. 

Evan: If you think about the role of the CIO today and what the role looks like in five or 10 years, what do you think are going to be some of the big changes?

Shamim: The role of the CIO and the CTO is becoming more and more business focused. It’s less about technology, more about business outcome. That's really what the role has become and will be becoming.

Saam: What's a recent book you've read that's had a big impact on you and why?

Shamim: One recent book I read, which I - I influenced the title of the book, is Getting To Nimble. It's a book by a guy named Peter High. He talked to over 500 CIOs and CTOs to write the book and he gave me credit for the title, but that's not the reason I like it. I just think he has some great content in there. 

Evan: What is a new technology that you're most excited about? 

Shamim: I think the machine learning and AI, we're just scratching the surface. I’m most excited about that. 

Evan: Me too. That'd be my answer as well. This has been a really fascinating conversation. I feel like I learned a lot and just really enjoyed our time together. I just want to say, you know, thank you so much for making the time to speak with us. 

Shamim: Well, thank you.

Saam: Thanks, Shamim.

Evan: That was Shamim Mohammad, Chief Information and Technology Officer at CarMax. Thanks for listening to the Enterprise Software Innovators podcast. I’m Evan Reiser, the Founder and CEO of Abnormal Security.

Saam: And I’m Saam Motamedi, a general partner at Greylock Partners. Be sure to subscribe, so you never miss an episode! You can find more great lessons from technology leaders and enterprise software experts at enterprisesoftware.blog.

Evan: Enterprise Software Innovators is produced by Luke Reiser and Emily Shaw, and is mixed by Veronica Simonetti. See you next time!