How Union Pacific’s CIO is Modernizing the 160-Year-Old Railroad | Technovation 682

Peter, it's been fantastic to be part of this podcast. Oh, it's a great pleasure.

Peter, there are things that were actually started by President Abraham Lincoln. So if there are any Lincoln fans out here, come work for Union Pacific and you'd be part of history. He signed the Pacific Railway Act back in 1862. He saw commerce as a great way to integrate the whole country as we were going through the whole Civil War strife. He came to Omaha and wanted to start this whole commerce journey. What's really called the Great Race, and with that historic stroke, really set the stage for setting up this Union Pacific company. Then the whole railroad network and transcontinental that was set up was really opened as part of that.

An essential piece of that supply chain, reconnecting the customers, the communities, the global economy. The stuff that comes into the LA port, we take it all the way inland. A lot of the commerce happens to create an efficient, reliable supply chain solution. It could be raw goods, finished products, cars, automobile, lumber. Big heavy stuff is good for rail. We are among the most cost-effective transportation systems and among the best in the world because of the billions of dollars we put into curating the network. Rails in general are very good for the economy in terms of value for the customers, but also investing back into the infrastructure, which creates jobs. Rails in general are a very environmentally responsible method to move freight. Compared to trucks, our emissions can be less by about 75 percent. So you can imagine the number of trucks we could take off if you actually have one train running. Really cool concept and a very storied company. If you are a history buff, come work for UP.

There are three components to the job really. One is overarching technology. We have about 32,000 miles of track, so you can imagine all the infrastructure required to run that: all of our terminals, all of our rail network, all the customers. Everything related to technology falls within the purview of this role. That includes all of the product, the engineering, the infrastructure, the platforms. The CSO reports into me. That's the first component. Second is rail, and in particular, we have a wholly owned subsidiary called PS Technology that we run for the general good of the rail industry. That's the second part, and I chair that board for PS Technology. The third component is around commercial telecom. You may not know that rails in general are big into telecom. From the 1860s, telegraph poles went on the side of the rail because you had to communicate with the rails. Rails have played a huge part in the telecom network. We have our own microwave network, we run fiber along our rail that we monetize. A lot of the fiber that goes from... T-Mobile, Sprint's actually an acronym: it stands for Southern Pacific Railroad Internal Network Telephony. Southern Pacific is part of Union Pacific, so it was almost a spin-off from Southern Pacific which became part of UP. People don't associate it, but rails have played a huge role in that telecom. That function also falls within my job.

Yeah, Peter, I came to UP about 18 months back, and I came out of retail, consumer retail. There are not that many 160-year-old companies that would say we're a growth company. So the role that I was brought into was really to start looking at having technology play the key part as the enabler for that growth. How do we super optimize everything? Use the analytics and data, and we can talk about it in detail in subsequent sections, but how do we actually change the way we work? How do we deploy a better digital experience across the board? How do we establish a high performance culture amongst the people? How do we prioritize? Together we put a three-year strategy centered on four pillars: people, process, technology, and in today's day and age, security, cybersecurity. That's where UP is headed. We focused on total employee experience, customer experience, really shifting the mindset from project oriented, which a lot of legacy companies fall into, to product. That's our play right now. We are a fantastic platform company. I just see that we are actually just scratching the surface. To give you some stats, with about 5.7 billion API calls, we connect seamlessly with supply chain partners, creating these deep APIs with the customers, two-way APIs. They need to come into UP to get all their data, and we need to be able to get into their systems to understand that. We're modernizing leveraging the cloud, which was not very prevalent within UP about 18 months back. Now we're getting heavy into the cloud, improving speed to market. One of the ways we're doing that is changing the way we work. One takeaway from working in retail, Peter, was this two-in-a-box concept with our internal people, streamlined through the concept for my internal business customers. We've really changed the way we work to maximize success. What it's producing is a maturity in delivery. Cycle times are going down, the ask to delivery has significantly gone down. As a result, we're deploying better digital experience because now we're able to think from a product standpoint. To answer your question about the people aspect, my philosophy is it all starts with people and ends with people. There's a business model in between. We're a company where I could tell you conclusively, hashtag our people are the... What I really found out after I joined Union Pacific was that this is truly a company that values people. We've got brilliant minds here. You cannot build platforms the size that I mentioned here without that. But then there is this divine discontent about change that we see via the lens of technology as that enabler to continue to grow for the future. I'm very excited with where Union Pacific is headed with this change journey.

That's a fabulous question. Probably take the rest of the media, but I'll try to be concise. In B2C world, it's a very simple phenomenon: you stay at the speed of the customer, or if you're cutting edge companies like Apple, you think ahead for the customer. You had to constantly have a bias for action to actually come back and do something about what you just heard. 60% of the folks that shopped at Walmart, for example, were women, busy moms, and the job was to get them out of there as quickly as possible. The second thing we learned as we went through the transformation is that most organizations, Peter, are set up by an operations team, a sales team, a finance team, so it's very vertically organized, and stuff goes over the walls in terms of data. But when you're trying to get a busy mom out of the store in four minutes when she shows up at the back of the store to pick up online grocery, you need to think horizontally. The B2B customer actually started telling us, 'Hey, I've got this 8-to-5 life and then a 5-to-8 life, and it seems different. Why can't you guys think like any other company that's in this business?' So we listened for the first 90 days to understand what the issues were. We formulated this strategy, but then we said, 'Let's get the real feedback.' We took our UX team and embedded them with these B2B customers. We said, 'We want to take a look at us from your view. Tell us how we look from the RV.' When you're going to eat what you cook and it doesn't taste good, you come and do something about it. That's the feedback we started getting. We said, 'Let's fix that.' So principally, I would say the retail concepts actually apply pretty much everywhere. The second thing that happened is I talked about changing the way we work. The relationship with the customers, both internal and external, is open and transparent. Most of the time, IT organizations are black boxes. You don't know how it goes, was it a good time frame, did I get my money's worth? We said we're going to open up this Pandora's box in the most transparent way here at Union Pacific. That was something we did very well at the prior job. When you have a three to five year roadmap, it starts building not only the relationships but trust. Here's the funny thing: when you have trust and relationships, you can take the accountability to the nth level on either side. We're beginning to see the fruits of that, where now more of the work is happening towards ROI-driven projects. There's less and less work aimed at keeping the lights on, and there's a self-awareness within the organization that we should stop that because we've been doing it for X period of time, but maybe we should shift ourselves to this entire growth engine for the customers, which are internal customers, to make an impact in running a safe, reliable, consistent railroad. They know where their stuff is. We can give incredible amount of visibility and transparency into it. Again, concepts of retail that absolutely work in B2B. So I see total, it doesn't have to be different than my prior job.

Yeah, so to run a railroad, the railroad is still a bit of a mystery to folks here especially in the US compared to Europe, but everybody does airlines. So I'll try to draw a parallel to an airline, but it's not very different. We have terminals, you have your terminals in airlines that you take flights from. Your customers, if the airplanes via trails, if the cargo, you've got to go. You know how the whole thing works: you go to a terminal, you go through the check-in process, you get on a flight, you get somewhere, you go to Chicago, you change flights, and you get your luggage at the destination. We have a transportation management platform, an equivalent of an air traffic control platform. But sometimes these platforms become those vertical silos, data going backward and forward, bridges, etc. My vision is that we connect the five elements that form the railroad together: the locomotives, the crew and the people that run it, the line of road, the customers, etc. We connect it all together. In some cases, we've bought solutions, for example, we have Salesforce that we use for running our customer CRM. We've developed all these internal solutions to be reliable. We're far from it, but the good news is the components of this platform are together. We need to put it all together and have a vision for what technology can do in that realm. So people, you want to watch out, let's talk again in 18 months or so, and I'll be able to give you a very good view of how far along we have come in developing this vision for platform. But the ultimate goal of that is to create a total experience for our customers. You can talk about platforms and all that stuff, so what? What is customer experience? It really needs to be easy, nimble. At the end of the day, the customers want to know where their stuff is, and they want visibility around it. That's what platforms should enable for our customers. That's how we're looking at it, that's what we are striving for.

Yeah, so I have a very simple philosophy on why people would want to come work for UP or any other company. They want to know we've got interesting problems to solve, Peter. People gravitate towards solving tough problems. Really good talent wants to do that. They want to know that when they get here, we operate with the principles of inclusion, that they will be heard, their ideas won't be discounted even if they may have different ideas. And third, people want to be paid a fair penny for the job they do. So we're trying to create a culture in which we're acting on those three things. We've seen a change in organization's behavior and buy-in because they were like, 'Man, there's a vision and we're connecting the dots as to how and where this Union Pacific company is going to go, and I want to be part of this purpose-driven organization.' Initially, it started with, 'Is this for real? How long is this going to last? Well, he's not going away.' So it's beginning to stick. We're going in with the same message, a set of KPIs, unveiling this change at regular intervals so the organization can digest. We're not a startup company here, but getting into that startup mindset requires a series of changes that the organization can digest. So creating that... We have KPIs for everything, but you consciously care and dive into the data. You look at attrition, why are people leaving, what are they telling you from surveys? I love to have this concept called visibly exude caring, compassion, and concern for employees. And practice relaxed intensity. You need to be intense, but you also need to be the ordinary Joe that somebody can have a beer with after work. Don't wear your titles on your shoulders and scare people away. Practice these concepts of relaxed intensity. And you know, suddenly five of the friends are interested in Omaha that normally would not have been interested. So we want it to be a viral movement like that. It's been fun.

Yeah, so IT is information technology. What do you do with information? You store it, you process it, you manage it. But that's not how modern companies should think about IT. It's really the strategic advantage. We need to elevate IT to the same levels as operations, sales, or finance organizations because these are strategic. I see a clear path for us being a differentiator for having a tech-enabled company. So how can we be an admin of UP? It was not an event. So we said, 'If there's a bad connotation with IT, change the name.' So we changed the name and simply called ourselves Tech. So the Tech team. IT is a four-letter word. We are very well supported by our CEO, Lance Fritz, an amazing visionary guy. He gets it. He understands the strategic importance of it. Our board gets it. They understand the strategic importance that this is not an admin department; this is actually a way to unlock the growth potential for a great company. I feel great responsibility as curators of a great legacy here, Peter. It was a fantastic ship that was handed to us by our predecessors. My job is to exponentially make it better and then hand it off and have the next generation take it from a future perspective. But I feel that old IT mindset, that old project mindset, would not cut it. So you kind of got to rebrand yourself. I will tell my CIO friends, think about it. It's not easy, but if you create the buy-in and then you have the metrics and KPIs that show you're actually impacting change, engineering trust, accelerating growth, it becomes a believable thing. That's what we're beginning to see here.

We are a very big Western company, but we are representative of the area we are in. It was a change that I personally saw at Walmart as to being that inclusive organization that brings and respects every skill set that may not look like you, may not talk like you, but brings the skills that exponentially change the company. Creating an environment in which people feel comfortable has produced great results, and we begin to see that here. My boss has done a most amazing job of creating the direct report structure. If I compare a picture of today's leadership team here at UP versus a few years ago, it's very different. Having a technology leader at a railroad doesn't happen in an insular industry like railroad. The way I've been treated here, I feel my thoughts count. I'm listening to past experiences, how do we move the company forward? It's a great manifestation of the change we're seeing in the world in general and in UP in particular. We're trying to create that culture. My personal philosophy is also, and I'm not ashamed to say this, that we need to be more consciously promoting women and make sure that representation is consistent with the skill sets. I didn't know this was possible, but we're beginning to see really good results. But there's a lot more to happen. We as a society, as a country, as a company, are far from where we need to be. Railroads are not very attractive for women because of how operations work. So we made some ambitious ESG goals as a company to double the number of women working in the field and in operations. I feel really good about the absolute positions we've taken on this topic of DNI and ESG.

Yeah, so as we're not a digitally native company, as you alluded to earlier, we have stuff that's new that UP is world class and stuff that's older that UP is old. So we have to deal with the whole gamut of it. I feel the job of CIO needs to first and foremost start with keeping the company safe. Cybersecurity usually takes a lot of my worry. It keeps me up at night that we need to keep the company safe, but yet as we're going through these transitions, building these beautiful platforms with deals with Salesforce and SAP and others, we have devices that we have. My CSO, Rick, really thinks hard about how to create this best-of-breed standalone security solutions to work together. I foresee cybersecurity mesh and continued work on the tools as a trend that won't cease anytime soon. The second is around data. We have petabytes of it, terabytes of it. How do you take this data and provide more flexible, resilient integration of data sources across platforms and business users so that you can make it to the 'so what' of that, improve the customer experience? The third trend, Peter, is around this whole concept of cloud native platforms. Instead of doing lift and shifts, which initially we are doing to get our footprint on the cloud, we're also now fast and furious looking at what cloud native platforms and technologies we need to build architectures that are resilient, elastic, and agile. That's a big trend. The fourth trend I see is around total experience. The best experience today is your common minimum experience tomorrow. If you get a package from Amazon and you order it today and you go to bed, and it comes two days later, it feels like a bad experience. Yet five years back, that would have been great. So your common minimum experience today is the minimum experience you expect tomorrow. This around user experience, total experience, is going to be a key trend. Those are five trends I see today that CIOs need to pay a lot of attention to.