Dave Franchino: Thank you very much for joining us today. Our guest is Dan Murray, who's the Chief Operating Officer and Chief Information Officer of SafetyNet, and I'm probably going to let Dan dive in a little bit to explain that. One of the reasons. I'm really excited about this conversation and is because I think SafetyNet represents a really good test case for what it takes to create a culture of innovation within an established, mature company and there's different ways to approach that. I think it'll be really interesting for our listeners to hear how you chose to approach that at CUNA Mutual and what your experience has been. I think there will be some things to learn, but maybe could start by just telling our listeners a little bit about yourself and your background.
Dan Murray: Sure, Dave. Thank you, and I'm really happy to be here with you today. So, I started out as an entrepreneur. I came from an entrepreneurial family and started three businesses right out of college and then have worked in corporations since then in a variety of leadership roles. And now at CUNA Mutual Group, I'm in this unique position of being able to bring those two things together by leveraging my entrepreneurial experience to start new businesses for CUNA Mutual Group
Dave Franchino:So, tell me a little bit more about those entrepreneurial experiences. I think it's really intriguing because you work for what's arguably a large company. It might be stereotypical to think of people sort of either following an entrepreneur track or following a track at a larger company. You found a way to blend those. Tell us about the entrepreneurial experiences. And then what it was like to decide to work for a larger organization?
Dan Murray: So, the first business was a materials business and I studied engineering in college and when I left college I saw opportunity in environmentally friendly building materials, and so with a couple of colleagues I started the business and we built that to a certain size and we sold it and that was a wonderful learning experience because there was so much we didn't know about business and about making payroll and managing the ins and outs of a business. So, it was a wonderful experience. I caught the bug and the second company I started was right at the birth of the world wide web and started out as a product company. We were going to provide a web product for small businesses and quickly figured out that they didn't want to buy that, but they wanted to buy a consulting service from us. So, we pivoted and that became a web consulting business that we ran for about five years and then sold to Deloitte Consulting and at that point I went to work for Deloitte for about a year and got a view into the corporate world.
Dave Franchino:And then what transpired to take you into the insurance world?
Dan Murray: So, in that interim period I spent time in federal government contracting and we were essentially working on issues in civilian agencies to help working people. So, my attraction to the insurance industry was actually to the financial services industry and at the front end of this wave of innovation in financial services to be to help CUNA Mutual Group design products for working people and design brand new financial services products.
Dave Franchino:So how long were you with CUNA before kind of leaping over into starting SafetyNet?
Dan Murray: About seven years.
Dave Franchino: Tell me a little bit that about what it was like to enter a larger company culturally as an entrepreneur. What did you find that experience to be like? What were some of the benefits of working for a larger firm? And, you know, what did you find, perhaps, I won't use the word stifling, but maybe surprising about working larger company coming from an entrepreneurial background?
Dan Murray: There are a lot of benefits large companies have, resources, and they have specialists who take care of lots of functions that the entrepreneur may not have experience with. And so, a lot of things just get handled, things like legal and regulatory and stuff that are not necessarily in my bailiwick. And so, it's wonderful to have those resources around you. One of the downsides is that large organizations are typically built to eliminate risky things and new businesses and entrepreneurial ventures are risky things. So, a company like CUNA Mutual Group has a lot of process in place, has a lot of risk management in place, to eliminate risks. What we're doing in the entrepreneurial side of things is introducing controlled risks, measured risks. And so, you have to communicate a lot about that because you don't want those antibodies of the organization to crush the innovation.
Dave Franchino: So, let's talk about Innovation within the larger company before we dive into your decision to separate out SafetyNet as an organization. Maybe talk for our listeners a little bit about CUNA’s business because they might not be completely familiar about it and then sort out the challenges and opportunities for innovation in the insurance industry writ large.
Dan Murray: So, CUNA Mutual Group is a diversified financial services company. It's been around for a long time, over 85 years, and we deliver products primarily through credit unions. So, we are part of the credit union industry and we distribute a full line of financial services products, including a number of insurance products through credit unions. We have a wonderful core business, very stable and profitable. And CUNA Mutual Group is a business in transformation like everybody else in financial services, looking to the future and trying to figure out what is the business of the future. How do we support credit unions and their members in the future? So, this unit that we started for the Horizon Three Innovation Center, which is the SafetyNet unit, is really about designing brand new business models and designing the products that credit unions and their members are going to need in the future
Dave Franchino: For our listeners, if you could describe the Horizons from Horizon One to Horizon Three and how that impacted your decision to sort of spin the SafetyNet product off as as a separate entity.
Dan Murray: Yes. So, there's a what's called the three Horizons model and Horizon One is the established business, the core business. It's the mature part of the business. Horizon Two are those things that are adjacent. So perhaps distributing your products in a new way or distributing into a new market. And Horizon Three are brand-new business models or brand-new businesses that you may start, and we made the conscious decision to establish a Horizon Three unit taking a long-term view on designing brand-new products and brand-new business models, in addition to the innovation that we're doing at Horizon One and Horizon Two. We quickly discovered that it takes completely different toolkits to do innovation in those three Horizons. And so, we went out and we got educated and we hired the right people who learned how to do Horizon Three innovation, which turns out is very much like starting a brand-new business, like being an entrepreneur, and has a lot of the same characteristics of a startup.
Dave Franchino: Yeah, want to talk more about that in a bit. But before I go there tell me a little bit about how the rest of the organization has viewed your opportunity. I'm sure that there are people who are strongly supportive, people who might have been more skeptical. How did you find the rest of the organization dealing with this decision to break off a team and focus on Horizon Three?
Dan Murray: The organization has really been remarkably supportive and that starts with our top leadership. I would advise anyone in a larger company who has is starting a Horizon Three effort that you have to have the support of top leaders in the company. It's absolutely essential to the success of that unit. We've had very strong support since the very beginning. Our CEO and our executive team, our board of directors. We meet with them quarterly. We're completely transparent with them about the progress, the challenges, the direction that we're taking. They've been an incredible help to us, and that support has set the tone for the rest of the organization. And the rest of the organization has been excited about what we're doing because they see it for what it is, and they recognize that it's complementary to the work that they're doing
Dave Franchino: The fact that you have a board of directors is really interesting to me. It sounds like the governance for this group is actually fairly formal. It's not just a project in the back corner. It sounds like it's got some structure and governance behind it. Tell me a little bit about that and how that works and the decision to set it up that way. his team. We do have some formality around the governance. They are our sole investor. And so, we view ourselves as a startup with this important stakeholder of our sole investor, CUNA Mutual Group. They can also help us. So, the transparency that we share with our board benefits both them, so they understand how their investment is being deployed and it benefits us because they have lots of contacts and knowledge and wisdom that they can share with us and help reset our perspective. So, it's been a wonderful relationship. We also have an external advisory panel, which is made up of luminaries and other folks who are in the financial services revolution, if you will. And we meet with that group quarterly as well for their advice and counsel and to gain their knowledge and experience with other fintech businesses who are trying to transform financial services. To attract this type of resource, one of the advantages of doing this within a larger company, you you’re able to establish some of the credibility necessary to build up some of those linkages, which maybe would have been hard if you would have been a straight-up startup.
Dave Franchino: So, let's talk a little bit about building out your team within SafetyNet. You know, you've made the decision to start this Horizon Three group and made the decision there is going to be some degree of separation. Now, you've got to find the right individuals you talked earlier about, that being a slightly different skill set to what extent did you look internally for resources to staff that out and how did you find those and vet those and to what extent did you build that out with the external resources?
Dan Murray: So, it's a mix and we have several people that came into the group from CUNA Mutual Group, and these are people who are multi-disciplinarians who have lots of different skill sets because, as you know, on an entrepreneurial team, you have a smaller group of people and everybody has to wear multiple hats. So, we hired very talented people from within the company who had an interest in this entrepreneurial venture and were people with multiple disciplines. Then we went outside to fill in the gaps on our team. We've been very lucky. So, our entire team has been in place for three and a half years. The team that started this is the team that's working on it today. We haven't lost anybody. We've added a few people along the way, but we found a really nice balance as we've grown by adding people to the team at the right moments.
Dave Franchino: So, tell me about the development of your first product. First off, it would be good for our listeners just to hear the particulars of your products. I think it's a really interesting combination of social mission and financial mission but tell me about that product and talk about the process of getting that developed.
Dan Murray: Sure. So, we're a mission-driven organization and our mission is to help people in a cash crunch. It was our observation that some of the tools out there that help people when they're in a cash-flow crisis are not the best tools, not the most constructive for their long-term financial health. Things like payday loans can be very destructive for people. So, we met with a lot of consumers and we talked to them about the nature of these cash crunches and we learn from them and through those conversations, what kind of tools they might need in their life and those things fall into the categories of savings, insurance, cash flow management, and lending. And so, we used the Lean Startup process and we began to build prototypes around those things. The first prototype that we built was cash-flow Insurance product and the product itself is called SafetyNet. And, essentially, it pays a lump sum to a worker when they lose their job through no fault of their own or they become disabled. And the novelty of it is that it is simple. There is no complexity. There are not a bunch of exclusions and when the event happens, we pay a lump sum immediately, which is what people told us that they needed. So, we have leverage, the insurance expertise of the CUNA Mutual organization, to build this product and then we've used the entrepreneurial skills that we have gained to make it simple for consumers, understandable, make it fit into their lives, and to really build a better mousetrap.
Dave Franchino: You talked about Lean Startup methods drive this business. I'm sure our listeners are at least in some respects are familiar with that. But you've sort of been through the trenches in exploring that and using that to really bring a product to the marketplace. What have you found surprising? What have you learned and what has gone really effectively and well for you and using Lean methods to bring this business to life?
Dan Murray: Now, I'll say this – it's right there on the page in terms of how to use it. The books are out there. The materials are online. There are all kinds of training courses and the most surprising thing to us has been you just need to follow the process. It has worked really well for us because we've been true to it. We are very disciplined. We document everything. We follow the process as closely as we can because it does indeed work. And we have talked to others who have said, “Well we kind of use Lean Startup,” and I believe that doesn't work. I think you have to engage in the process. As it is, it's build, measure, learn and what we've gotten better at over time is doing it faster. Interpreting the data quickly and moving back into another build loop more quickly. We run a lot of experiments. Some weeks we're running 10 experiments. Some weeks were running 15 experiments. When we started, it took us two weeks to run one experiment in the Lean Startup process. So, my advice would be to embrace the process. Commit fully to it. It's not something that can be done halfway
Dave Franchino: Talk a little bit about where you see the organization going. You've done a great job of building out an innovation organization in a startup mentality, but I'm curious to know if you expect that startup mentality to continue and or do you expect that eventually the company will transition to maybe a more mature business model?
Dan Murray: So, CUNA Mutual Group is doing innovation across all three Horizons. And the bulk of their innovation investment is actually in the core business, which is appropriate, and they're innovating across multiple mature product lines. We're also doing Horizon Two innovation and our Horizon Three area. I see it continuing for the foreseeable future the way it is, which is it's separate from the core business and its really autonomous from what the core business does. I think the senior leadership has understood the long-term value that can produce for the company. SafetyNet was our first product at the end of 2017. Now, we’ve brought six more products to market. We flex that muscle that we had built with design thinking and Lean Startup to design several more products that go after this cash flow issue for the consumer. Not all of those products will survive. Part of this process is to recognize when it's time to sunset one of these products when it's not going to be a winner in the market, but some of them will, and the company's excited about that.
Dave Franchino: Do you anticipate that these ideas will propagate out of your Horizon Three back throughout the mothership if some of your people might transition back at certain points in time or do you think that little organization will stay cohesive the way it is?
Dan Murray: Yeah, so on the product side it is a big open question for us. We have decided that for the time being, at the size of these products with a few thousand customers, that we will continue to scale them in the Innovation Center. But at some point, with hundreds of thousands of customers, it may be large enough and it may make sense for them to transition back into the core business. As far as the people, they do have opportunities both in the Center ongoing and if they want to move back into the core business. And I think one or two of our folks may transition, come back, and some of our folks have caught the entrepreneurial bug and I think they love the Lean Startup process and starting these new businesses and I think they'll want to stick in the Horizon 3 Innovation Center. But we have some folks that are good across all Horizons and comfortable across all Horizons and they move back and forth.
Dave Franchino: What advice would you have to leaders in mature stable organizations that might be really struggling with how to drive innovation within their organization? What are the things that you've learned that you might be able to share?
Dan Murray: Well, I think you have to be really deliberate about your innovation efforts. You have to have an innovation thesis in the design to decide what problem you're trying to solve with innovation and really look at Horizon One, Horizon Two, and Horizon Three, and decide where you're going to place your bets.
It could be perfectly appropriate in one business to just innovate in your core business and to do incremental innovation on your products for others. Transformation is important. So, if you're in financial services, you need to be focused on transformation. And so, you need Horizon Three investments, but you have to be really thoughtful about how much of your investment you're going to make across each of those Horizons. And then, what you expect in return from those and how you're going to manage them, because you have to manage them differently. Horizon One Innovation uses a completely different toolkit and probably even different people than what you'll use in Horizon Three Innovation. Different skill sets. Different toolkits. So, you have to be deliberate about it. You can't just say we're going to be innovative and send everybody to an innovation seminar and expect good things to happen. You’ve really got to get organized about it and be deliberate about your investments and the differences in the way people should expect to manage employees within an innovation environment versus the way they might manage their staff in a more mature organization, you know, that's going to vary widely.
By organization, I can tell you in our experience we have a completely unique culture in our Innovation Center, and we work pretty hard. We work a lot of hours and it's pretty intense at times. We also have a lot of fun and it's a 20-person office versus, you know, a larger company. And so, it just has a lot of different characteristics than the main company. We've let that culture evolve naturally apart from the culture at the parent company. CUNA Mutual Group is fantastic. It's a wonderful company to work for, but it's just different than this unique culture that we've set up or that has evolved for us. And I think that's going to be pretty natural for other organizations as well.
Dave Franchino: Then one thing I'm aware of that I probably should have asked you about earlier is you made the decision to physically separate your organization from the main companies. Well, tell me a little bit about the rationale behind that and what you think the pros and cons perhaps of that decision have been.
Dan Murray: You know, I think it was a really important decision. I'm glad that we did it and if we had it to do over I would certainly do it again and it's really because we need to focus and the way big companies like, you know, CUNA Mutual Group are set up is we have lots of departments that cut across all products and all functions and they want to help, right? And they have good intentions. If we were on the main campus and we ran into people in the hallway, they would say to us, “Hey, I've heard you've got some challenges with X. We can help with that.” And those are good intentions, but the reality is that the toolkit that they use to solve that problem is probably not the toolkit that we're going to use to solve that problem.
So that physical separation also feeds the logical separation that these are two different activities, two different business activities. And it allows us to focus. There are times when we need help from the parent campus and they're very gracious about helping us. But in most cases, that separation is what is required for us to deliver
Dave Franchino: Great Dan, you used the word focus and I wanted to dive into that particular topic just a little bit. One of the challenges that entrepreneurial organizations sometimes face is how to pick the target on the wall. How to focus. Where to get started. The value, of course, of a small entrepreneur organization is you can be very nimble and quick and then the challenges sometimes are finding, you know, what exactly to target, deciding when to pivot and when to persevere. Can you tell me a little bit about your experiences in an innovation organization getting everybody pointed in the right direction?
Dan Murray: Yes, and this really goes a level deeper on the Lean Startup process because part of what the process says is be data-driven. Run experiments. Gather data. Press the data and use the data to make your decisions. And so, I can't tell you how many times I've had a brilliant idea for a product to test and we run a smoke test in the market and we get consumer feedback and consumers don't like the idea at all and at that moment I'm crushed, but I have to get over it quickly because we have to move on to the next idea. But what's happening, there is that data is telling us where to go. And so, the reason we run so many experiments using the Lean Startup process is so we can get that data, so we can figure out where to go next. We ran 25 major product smoke tests last year—six of those showed promise in the data. And so, we pursued those six ideas. Some of those have already fallen off because in the next phase of the Lean Startup process, the data said this isn't a winner and so it's really about following the process, following the data, and making data driven decisions.
Dave Franchino: Great. It sounds like the Lean Startup method is really provided a very nice framework for you to help build out that business.
Dan Murray: It has.
Dave Franchino: Dan, maybe just one last question. You know the future is certainly uncertain. What keeps you up at night relative to innovation? And what are you focused on? Where's your next challenge for the organization?
Dan Murray: You know, what we think about all the time is are we moving fast enough, you know, are we getting the data? Are we testing the products fast enough? Are we transforming these business models fast enough? That the rest of the industry isn't standing still. They're out there working on innovations and there are large number of fintech organizations, many of whom we collaborate with. They’re very nimble and are trying to solve some of the same problems that the financial services industry is trying to solve for their future business models. So that's what we worry about is, you know, we've got to move quickly, and we've got to be decisive in the direction that we take.
Dave Franchino: Great. Fantastic, Dan. Thank you so very much for your time and for some great insights into a really remarkable organization. I'm sure we can post some links both on SafetyNet for our listeners and a little bit about the Lean Startup methods. Once again, my guest has been Dan Murray who's the Chief Information Officer and Chief Operating Officer of SafetyNet, spun off from CUNA Mutual, that's helping bring financial services products to underserved populations.