Goldman Sachs has historically thought about the technology function within the company a bit differently than most. This has been reflected in the choices of chief information officers that the company has chosen, which have included Martin Chavez, who held a PhD in Medical Information Sciences and would go on to become the chief financial officer of the company as well as George Lee, who was a Partner and Co-Head of Global Technology, Media and Telecom Banking prior to become CIO. He is currently the Co-Head of Applied Innovation at the company. The incumbent is Marco Argenti, who joined the firm as a Partner as well as CIO in 2019. He joined the company after spending six years as a Vice President of Technology at Amazon. One might think that trading in a plum role at perhaps the world’s premier technology company for an institution that was founded in 1869 might not seem like the obvious choice, despite Goldman’s prestigious brand, but Argenti notes that his only worry was that his new employer might be too successful to embrace change. “That was my biggest worry coming in: I'm not going in for a turnaround because Goldman Sachs is extremely successful,” he admitted, adding, “How does a successful company embrace change, as opposed to resist change?”
The Goldman Sachs logo is seen on at the New York Stock Exchange
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Argenti took a leap of faith and discovered that the reason for Goldman’s long-term success has been a willingness to embrace change despite consistently strong performance across more than a century and a half of experience. “The leadership has the foresight to see that no matter how successful you are in the current context, there could be a change of context due to externalities, which will change the landscape and shift the table,” said Argenti. “Then you need to be open to change.” He was impressed with David Solomon and John Waldron, Goldman Sachs’ CEO and President, respectively, and their challenger mentality despite a long history of success. They were open to transformation, and Argenti had an appetite to provide it.
There have been three focal points to the transformation that Argenti and his team have led:
- People
- Mechanisms
- Platforms
Relative to people, Argenti notes that in order to be a master of technology no matter the industry, building and maintaining a world class team is sacrosanct. Therefore, he focuses on “being able to attract the best of the best, being able to make sure that [they have] the opportunity to do their best work within an organization like ours,” as he put it.
Goldman Sachs CIO Marco Argenti
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By “mechanisms,” Argenti refers to how people work together effectively, while aligning that work with the business objectives and strategy. This requires “a way to build software that works backwards from the customer and follows a rigorous process to try to understand the business objectives before you write the first line of code,” according to Argenti.
He hastened to add that strategies can be copied. The true differentiation comes through the development of platforms, the third focal point. “You can read about the strategy,” he said. “You can hire a consulting company that will tell you, “Oh, there's a big opportunity in externalizing services.” You cannot wake up one day and start externalizing stuff, because you can only do it if you have a solid foundation underneath.” Argenti and team have built platforms to scale. Most are cloud-native, and they have data models that allow one to connect dots across the enterprise in meaningful ways.
He refers to data as the life-blood and big enabler of the strategy. “We've invested a lot in our data quality, in our data lineage, in our data platforms, the ability to abstract the complexity of data, how we represent complex option, or how do we represent trades,” Argenti noted. “We decided to take a fairly modern and standardized approach to that by creating a standard which started internally.”
“Those three strategies – excellence in people and rigorous but customers-focused mechanisms and scalable platforms, is a magic triad that is behind the strategy that we're trying to implement as technology leaders at the forefront of digital transformation.”
In addition to having senior colleagues who embrace change, Argenti noted another advantage. “We're 100% digital, and software tends to be more malleable than [hardware],” he said. “Being a 100% software organization, with essentially no bricks and mortar and just people and software, I think we are in a good position to be open to change.”
In order to build trust with the team he hoped to lead through the change, Argenti had to admit that he was not a financial services expert upon joining the Goldman Sachs. He found that admitting the need to learn built trust between his team and him. He also built trust by being well organized, clearly describing the change to come and why it was necessary. In fact, starting with why was the first of several Engineering Leadership Tenets he instituted.
Argenti referred to his first tenet as “building with purpose.” “Do not just build,” he suggested. “First, ask yourself, ‘why should I build anything?’…You start asking yourself anti-engineering questions because every engineer wants to build. If you say, ‘Why should I build?”, it's almost like you're immediately creating a little bit of tension, but it's positive tension.” By starting with why, Argenti believes that starting with why unifies engineers and the rest of the business, providing them with a shared logic on what to pursue.
Among the tenets that Argenti has brought with him from Amazon is the development of the six page memo to provide more depth and common understanding of what is to be pursued. Among the questions that must be answered are
- Who is the customer?
- What is the problem or opportunity that we're trying to solve or optimize for?
- What is the benefit for the customer once that is solved?
- How do we know that that's what the customer wants or needs?
- What is the user experience?
“Until [we] answer those questions, we don't start building anything,” he emphasized.
The personal memo has been a driver of inclusiveness, as it provides a mechanism for less loquacious colleagues to more fully represent their thoughts in an environment that might otherwise favor the bolder, extroverted colleagues.
Additional tenets include
- Value data-driven decisions
- Inspire trust, build with purpose
- Look around corners
These tenets have gone from theoretical to implemented, becoming the way in which business is done.
Goldman recently announced a new business for the firm within Platform Solutions, to externalize technology services with a business-to-business and developer focus. “Doing that merges the incredible client orientation that Goldman has with the ability to serve those customers with technology in addition to financial banking services,” said Argenti. By way of example, he noted Financial Cloud, which is a product that helps take a complex topic that is core to Goldman’s business as well as customers’ businesses, such as payments, for example, and abstracts the complexity, which could be related to scale, regulation, operational complexity, or the like. By offering this as a service, Argenti’s team can drive greater levels of value for customers.
At this point in the conversation, Argenti emphasized the that many tech and business leaders conflate products and services in terms of their management. “That's something that takes decades to understand,” he said. “Fortunately, we were able to attract many people in the recent years who have run services. Also, Goldman has been in the services business now for a long time. Marquee was created almost 10 years ago, and it's offered an as-a-service offering. More recently, transaction banking, which we have been offering for a couple of years now to large corporate customers [is another example].” To further explain the difference, Argenti offers the example of food. “Imagine that you need to prepare food,” he said. “That's your product. If you cook for your family, then you have a product. If you open a restaurant, then you have a service. Even if it's the same exact kitchen and the same exact food, but I tell you, that restaurant has one purpose, which is to offer a level of service, which is constant, which is innovative, and rotating, but is also adheres to certain standards, has a certain predictability, has a certain capacity management.” The service is more complex than the product.
Argenti paused for emphasis to reiterate a point more pointedly: cloud businesses are best when they serve to abstract complexities. He began with an example from Amazon. “AWS sells services that are based on open source software, but then adds a layer of management that actually abstracts a lot of the complexity of operating a service such as uptime, alerting, patching, auto-scaling, logging, and the billing, and all those things that are so hard to manage,” he noted. “This is what we want to do with our platform solution, which is we take primitives, banking primitives such as payments, such as loans, such as credit card, creation of ETFs, et cetera, et cetera. Then you package them into services that have a very consistent way to be delivered to our customers. They offer through APIs, which are application programming interfaces. They target developers with a great developer experience.”
Argenti noted that the company’s digital storefront, Marquee, is an example of this. “It provides market insights, analytical tools, executional services, data services, as well as services that target trades for chief investment officers,” he said. “Transaction banking is an offering for treasurers and chief financial officers to manage payments and cash balances in an efficient way, as well.”
Argenti also highlighted the development of credit cards for Apple and General Motors, which, unlike traditional white label cards, are customizable by the client so they can create an optimal user experience.
As a third example, Argenti noted ETF acceleration. “It takes generally two years to bring an ETF to market for anybody,” he highlighted. “There is so much complexity underlying, and we are aiming to do it to allow our clients to do it in weeks or months. Really cutting that time because we are abstracting a lot of that complexity and so on and so forth. We already have a really nice set of primitives. There will be more to come. I think it is one of the most interesting aspects that exemplifies the transformation that we're going through.”
Argenti continues to translate the ideas of a digital native to a company born long before the digital age. Through his credibility and his humility, he is winning acolytes along the way.
Peter High is President of Metis Strategy, a business and IT advisory firm. He has written three bestselling books, including his latest Getting to Nimble. He also moderates the Technovation podcast series and speaks at conferences around the world. Follow him on Twitter @PeterAHigh.