Lowe’s is winner of the 2022 TBM Council’s Agile Evolution Award.
Lowe’s Companies, Inc. has experienced tremendous benefits using Technology Business Management (TBM) to drive its agile transformation. Lowe’s has transitioned from a rigid, hierarchal operating model to an agile one centered around nimble development teams and product-aligned decisioning. By moving to an agile operating model, understanding product spend and funding product teams remained challenging. Through a strong partnership between Technology and Finance and leveraging TBM principles, Lowe’s produced a total cost of ownership (TCO) report to focus on delivering the business value, understanding cost with transparency, and aligning to a strategic plan. This Product TCO report has allowed Lowe’s to modernize their annual investment planning process by changing from funding at a project level to funding product teams with specifically targeted value.
Lowe’s Companies Overview
Lowe’s Companies, Inc. is a FORTUNE® 50 home improvement company serving approximately 19 million customer transactions weekly in the United States and Canada. With the fiscal year 2021 sales of over $96 billion, Lowe’s and its related businesses operate or service nearly 2,200 home improvement and hardware stores and employ over 300,000 associates. Based in Mooresville, N.C., Lowe’s supports the communities it serves through programs focused on creating safe, affordable housing and helping to develop the next generation of skilled trade experts.
TBM has provided insights into departmental spend, software expenditures, and infrastructure costs at Lowe’s since 2017, including moving to an agile operating model. Through their TBM practice, the Lowe’s team realized during the annual investment planning process that a gap existed in understanding spend in the context of products. The team needed to provide transparency at a heightened level to inform this new way of funding, resulting in the need for Product TCO.
Establishing the Solution
Lowe’s modernized their annual investment planning process by changing from funding at a project level to funding product teams with specifically targeted value. Utilizing the TBM discipline and best practices, along with Apptio Targetprocess, ApptioOne Plus, and Apptio Cloudability, Lowe’s established a sustainable process for interpreting large data with intricate relationships and provided a shared vocabulary for stakeholders to understand and adopt the cost model results.
The Impact of Product TCO Reporting
Under the leadership of Seemantini Godbole, Executive VP, Chief Digital and Information Officer, Lowe’s technology teams have made tremendous progress in fully embracing an agile delivery model. The product-structured organization and agile development have allowed technology teams to execute business requirements with incredible speed to market. A close partnership between technology and Finance and merging product cost and value conversations at every leadership level have been keys to their success. The partnership with technology and Finance has enabled the organization to be product centered.
Lowe’s TBM model allocates approximately 80% of technology spend to products. Lowe’s created its TBM model when ITIL and services dominated the thinking around technology service delivery. However, this was not a blocker for the Lowe’s team to shift to a product organization due to the nimbleness of TBM principles. The Product TCO Dashboard created in Apptio allows Godbole and her team to understand investments and trends at the Portfolio level. Furthermore, VPs can see investments and trends at the Product level, and lastly, Product Managers can see the investments and breakdown of their product costs. The drill-down capabilities allow one dashboard at all levels. Beyond the technology organization, Finance can center all financial conversations on products rather than departmental costs using the Product TCO Dashboard in all monthly financial reviews. With the OKR (objectives and key results) Dashboard, Lowe’s leaders can simultaneously discuss the value products deliver and the cost it takes to deliver that value.
In 2022, all Lowe’s technology organization members learned to use the Product TCO and OKR Dashboards, ensuring that TBM is embedded foundationally into the organization’s culture. By presenting the value products and related investments deliver, along with the cost to deliver, product owners are empowered to be good financial stewards, and Lowe’s leaders can make more informed decisions.
Value Conversations Leading to Innovation and Savings
By funding products instead of projects, Lowe’s technology teams were able to respond to immediate changes in customer demand due to the COVID-19 global pandemic. In April 2020, Lowe’s deployed a curbside pick-up application to support the instantaneous demand for contactless purchasing. As a result, in 2021, sales through digital platforms rose by 25%. The combination of TBM and the agile operating model enabled Lowe’s leadership to respond to market demands by quickly redeploying capital to the appropriate product teams.
As Lowe’s continues to invest in technology to advance its transformation, TBM has helped Lowe’s Technology better connect its costs to business value, cultivate operational excellence, and surface insights to reap expense optimization benefits quickly. With TBM, Lowe’s has reduced 10% of legacy applications, contributing to margin improvement. Additionally, Lowe’s has reduced 25% of cloud costs via rightsizing, increasing elasticity, and reservation management.
As the 2022 TBM Council’s Agile Evolution Award winner, Lowe’s TBM team offered advice to teams implementing TBM programs. First, get started so that you can deliver value with the data that you do have. Kelley Wendelborn, Sr. Manager of TBM, shared, “use the data that you do have and capture the value you’ve created with that data. As you capture the little value, they start to snowball into bigger and bigger value, and those turn into bigger and bigger wins.” Additionally, the Lowe’s team encourages new organizations to prioritize the Technology and Finance relationship. Lowe’s attributes much of their TBM success to the vital partnership between Technology and Finance, “We came together, we built a charter, and we made decisions on who would own what… it’s been vital to our adoption of TBM.”