Debby Hopkins, Citigroup's chief innovation officer, is holding court in a sunny conference room at Citi Ventures, her bold effort to fundamentally revamp how work gets done inside the megabank.
Seated at a large table, surrounded by the three tech-savvy women who are her top deputies, Hopkins recalls when she first walked through the unfinished space in this Palo Alto, Calif., building, about five blocks from where Google got its start.
"I said, 'Don't touch anything. Don't finish the ceiling. I want it to look nothing like a bank,'" she recounts. "'It's got to be a collaborative space, where it really encourages people to come together in an ad hoc way and work on problems.'"
Today, the offices could pass for a set on the HBO comedy "Silicon Valley," which satirizes the culture of startups. The coffee-table book that greets visitors is about Big Data a handy buzzword to drop around here. Most of the Citi Ventures team works in a high-ceilinged open space in the center of the room. All around are walls of glass, brightly colored surfaces, scribble-filled white boards.
Hopkins seems to appreciate that the tech industry is an easy sitcom target. She admittedly finds "Silicon Valley" funny, perhaps in large part because she sees the truth in it.
In the series' opening episode, a young entrepreneur takes the stage at his lavish house party and exclaims: "We're making the world a better place, through constructing elegant hierarchies of maximum code reuse and extensibility."
The joke is biting the frenetic CEO doesn't realize how naïve the change-the-world mantra can sound to an outsider but Hopkins suggests that she and her team have drunk the same Kool-Aid.
"The crazy thing is, we actually think we can change the world," she says. "So you have to have a little of that going on in your head."
For now, Hopkins will be happy with changing the culture at Citigroup.
As the CEO at Citi Ventures, she is out to find or develop new technology that could provide a competitive edge. That involves changing the way Citi employees think and replacing a slow-moving, process-oriented culture with the adaptive mentality of a startup.
"Experimentation is not exactly the way a big business works," Hopkins says. "Our focus here is to bring the outside in. And that is really important, because when you're running a big business, you're thinking inside-out."
Citi Ventures invests in financial technology firms, coordinates research and development, and generally aims to bring the tech industry's nimble product development techniques to its giant parent company.
Though Citigroup is probably still too big to fail, its technology outpost in Silicon Valley decidedly is not. The 30 employees here are determined to heed one of the tech industry's most revered credos: fail fast and fail cheap.
And it's up to Hopkins, a former chief operations and technology officer at Citi who moved from New York to Palo Alto five years ago to launch this grand experiment, to ensure that Citi Ventures has an impact throughout the 244,000-person global company.
Hopkins is as energetic as she is passionate about her mission; she fires off emails in the middle of the night, and speaks about Silicon Valley with the fervor of a true believer. Referring to tech giants such as Apple, Google and Facebook, she gushes: "They are both masters of discovery and fanatics on execution."
At the same time, she is acutely aware that her job entails bridging two very different business cultures, the tech industry and banking, and that Valley-speak may sound a bit flighty to Citi executives in the trenches of a particular business. After all, innovation may look like a luxury when you're clawing to meet your quarterly profit target.
"One of the things we have to demonstrate is that we are accountable," so executives in other parts of the company understand what her team is trying to do, Hopkins says. Often that means flying Citi execs out to Palo Alto so they can see up close that Citi Ventures' work is not pie-in-the-sky.
Hopkins is adamant that Citi needs to change. "Traditional sources of growth and traditional business models are being Pac-Manned" by startups, she says. In the era of cloud computing, entrepreneurs who "would have taken three years putting up some infrastructure before they even begin innovating, can be up in two weeks, for pennies."
Hopkins says she isn't using "scare tactics" to force change; her fellow Citi execs would not be persuaded by that type of appeal. But inside the Citi Ventures office, there are daily reminders of how quickly technology can upend an established business. Hanging on one wall is a quote from General Electric CEO Jeffrey Immelt: "A software company could disintermediate GE someday, and we're better off being paranoid about that."
The genesis of Citi Ventures dates to May 2008, as the financial crisis began to hit. Vikram Pandit, who'd been Citi's CEO for five months, was meeting with a group of consultants from McKinsey and was facing difficult choices about spending priorities. Money for innovation had been cut from a proposed budget, but Pandit demanded that it be restored.
Six year later, Pandit says it was clear to him even in those very early days of the crisis that a change in strategy was needed. "The credit crisis showed that Citi couldn't continue to grow just by increasing its balance sheet, or acquiring assets or buying businesses," he says.
Citi has a long history of innovation, adds Pandit. He points to the ATM, a technology that Citi deployed across New York City in the late 1970s, forcing competitors to play catch-up.
"The seeds of innovation had never disappeared from Citi," says Pandit, who is now an investor in startups. "It was happening in pockets, and what needed to be done was to harness it and bring it together, encourage it, and make it something that's valued and important for the organization."
He tapped Hopkins, who'd served as chief financial officer at Boeing and Lucent Technologies before joining Citi in 2003, to serve as the company's chief innovation officer and to help devise a strategy for the change he wanted to see.
In the beginning, Hopkins' title was not well defined. During much of her first year on the job, she was working in Manhattan and flying out to California for periodic meetings.
One day in late 2009, Hopkins was leaving a meeting at Kleiner Perkins, the fabled Silicon Valley venture capital firm, when she had an important realization. "It was a beautiful fall day. I walked out into the parking lot, and I thought, 'What am I doing in New York?'"
Getting a few meetings could not compare to interacting daily with an abundance of tech talent and being immersed in Silicon Valley culture, which is known for encouraging risk-taking and rapid experimentation and for not stigmatizing failure.
"I came back home. I said, 'I could really help you guys more if I was out there,'" Hopkins says. "And I figured nothing was going to come of it."
A short time later, Hopkins was selling her belongings in New York.
She initially encountered skepticism within the tech community about the depth of Citi's commitment to Silicon Valley. People would ask her where she was renting assuming she was a short-timer and then express surprise when she said that she had purchased a home in Palo Alto. "You can't be a tourist here," Hopkins says.
Citi Ventures is an outlier, at least compared to most companies in tech and finance: its top four executives are women. That wasn't by design, according to Hopkins. It just happened.
Debbie Brackeen is very much a product of Silicon Valley, having previously worked as an executive at Hewlett-Packard, Apple, Sun and eBay. Busy Burr, who gets props from colleagues for her creativity, has a diverse resumé that includes work as an investment banker and CEO of a startup. And Vanessa Colella landed here following stints at Yahoo, U.S. Venture Partners and McKinsey. "All of us have had a lot of experience of being the only woman in the room," Hopkins says.
As the three managing directors share stories about their work, Hopkins occasionally interrupts with her own biting commentary. But the others give as good as they get, to Hopkins' amusement. "They're all outspoken," she says.
Citi Ventures puts money mainly into firms in finance, payments, and data security. Colella's team has invested in Square and Jumio, for example. She describes Citi Ventures as a strategic investor which means the goal is to help Citi profit from the insight and creativity of outsiders rather than to earn a financial profit.
"We believe that the way that we can be champions of these entrepreneurs is to be solving something that is an opportunity for Citi, and is also an opportunity for these companies," says Colella.
Pandit, who was ousted as Citi's CEO in 2012, describes the value proposition in slightly different terms. He says that for Citigroup, this type of investment is "really just a way of ensuring you're close to some of the companies that you think are going to be important in changing the way finance is conducted."
One of Citi Ventures' investments is in Pindrop Security, which uses technology to detect fraud in phone calls to corporate call centers.
Vijay Balasubramaniyan, Pindrop's CEO, says offering customer service via telephone poses major security problems. "The only thing that you have is the phone number, and that phone number can be easily spoofed," he says. So companies have no clue who's really calling.
The authentication questions that financial institutions' call centers commonly use can be easily beaten, he adds. "You can go to Facebook and find out date of birth. You can go to Ancestry.com and find out mother's maiden name."
Pindrop's technology allows corporate call centers to identify a phone based on its audio characteristics, according to Balasubramaniyan. If a call is coming from West Africa, where fraudsters often operate, that might raise a red flag.
Authentication technology is an area of intense focus for Citi, which has done research on better authentication techniques. Having access to Pindrop the Atlanta company got an investment from Citi Ventures in June 2013 provides new insights on how to think about the problems.
From Pindrop's standpoint, selling its authentication service to Citigroup's call centers would be a coup, and Colella's team has aided in that effort. "Citi Ventures helped us understand how to navigate that, how to get everyone to the table," Balasubramaniyan says.
Citi's imprimatur also could help Pindrop win other customers, Colella says. "If Citi's global information security group says, 'Wow, here's a technology that really helped us to eradicate bad behavior, then it's highly likely that other institutions might take notice."
Numerous other banks are making investments in tech startups Wells Fargo, BBVA Compass and American Express, among others and some are taking a different philosophical approach to their investments than Citi Ventures.
Jay Reinemann, executive director of BBVA Ventures, argues that it's difficult to get the timing right on so-called strategic investments. Startups need financing within a certain window of time, and that schedule doesn't always mesh with the priorities of business units within BBVA. "We're not requiring business unit buy-in," he says.
Still, Reinemann endorses the general proposition that banks should be investing in startups that have disruptive potential. "I see it as kind of a no-brainer," he says. "It's difficult for banks to keep up with the pace of innovation that's taking place outside of our walls."
After Pandit made a commitment to invest more in innovation, Citi opened R&D labs in far-flung spots like Dublin, Tel Aviv, Singapore and Blue Ash, Ohio. The labs are part of different business segments within Citi for example, the Dublin lab is part of Citi's Treasury and Trade Solutions business, and the one in Tel Aviv is part of the Capital Markets group and initially they weren't communicating very much with each other.
One job of Brackeen's team in Palo Alto is to tie the work of these distant laboratories together. She hosts monthly meetings at 6 a.m. Pacific time in which the heads of all the labs trade notes. "In a big company, it's really easy to get siloed and compartmentalized," Brackeen says.
Citi Ventures also oversees a budget the labs can use for experiments that could benefit the entire company, but might be hard for a particular business line to justify as an expense.
This "acceleration fund" the company would not reveal its size operates based on the tech-industry principle that many of the experiments will fail, and that's fine. The idea is to fail fast, and without costing a lot of money. Sifting through a huge volume of ideas is the key to identifying the ones with promise.
"Our belief is that we need to have a lot more experimentation happening in the labs, and in the businesses, frankly," Brackeen says. "You have to have lot of those experiments, or little bets going on, for small dollar amounts, to identify the ones, the few that you actually want to put real money behind."
In Dublin, Citi has experiments under way in areas from authentication to digital money. The lab's head, Ken Moore, says the acceleration fund allows his team to explore areas that are adjacent to the lab's core focus. "What it allows us to do is promote more breakthrough thinking throughout the bank."
Burr heads the third team at Citi Ventures. Her group is tasked and it's no small task with helping Citi's businesses to reinvent how they operate. "It's not enough to just bring new technology to an old business model," Burr says. "So how do you really help a business step into disruption by really looking end to end at how they do their work?"
Burr's team has been working with Citi Private Bank on a major initiative, started in 2011, that's dubbed "Project Sheen." The project involves updating the client experience for the modern age, and one outcome is a new digital platform known as In View.
Part of the company's thinking is that, under the old model of private banking, each banker could serve a certain number of clients, so you needed to hire new bankers to build your client base. But in the digital age, where many people have a much more hands-on approach to money management, that dynamic is changing.
Dena Brumpton, chief operating officer of Citi Private Bank, says the question Project Sheen aims to answer is: "How can we look at really breaking down the opaque, wood-paneled view of a private bank, and bring it into a more modern, vibrant and transparent way forward?"
Brumpton says that Citi Ventures allowed the private bank to invest in a major overhaul at a time when Citi was cutting expenses. She also credits the team in Palo Alto with helping Citi Private Bank to rethink how it operates from the ground up, rather than simply converting its old processes into a digital format.
"We cannot digitize dumb processes," Brumpton says. "So for everything you take digital, you have to have reengineered how you look at it, how you deal with it, how you process it, before you take it digital. And that's actually sort of a big change for many large companies."
Citigroup is by no means the only large company making a bet in Silicon Valley on its own future. A number of massive global corporations with storied R&D traditions household names like GE, Johnson & Johnson, and Ford Motor Co. also have set up shop here over the last few years.
Hopkins sometimes trades notes with colleagues at these other outposts. "We're all trying to do the same thing, which is help very large organizations step into some of these new ways of working," she says.
Those new ways of working include the development of "minimum viable products," which software companies typically distribute to early adopters in order to speed up the process of making improvements."That is just very, very different from how banking products were built," Hopkins says.
It's unclear how big Citigroup's commitment to Citi Ventures is the company would not reveal the unit's annual budget. Also unclear is whether Citi Ventures is creating enough traction inside the company to last. But Hopkins says she's pleased with the response her team's efforts have drawn from CEO Michael Corbat, Pandit's successor.
"Obviously when you have a change in CEO, you go, 'uh-oh,' right? 'There could be a change in thinking,'" Hopkins says. "Mike has been amazing."
Pandit acknowledges that Citi Ventures needs to bridge a cultural divide between Silicon Valley and Wall Street, but says the same gap applies to any big corporation. "When you have a large business, which is creating good returns and has cash flows, it takes a lot to move the needle," Pandit says. "And it takes a lot of good innovation to do it, and you need to keep at it. And that takes time. And that takes effort as well."
For her part, Hopkins has been focusing on convincing peers inside Citi that what her team is doing in California is central to the company's future. She is accustomed to encountering executives who are understandably focused on their own bottom line and perhaps a bit dismissive of the experimentation she sees as vital. The 3,000 miles between New York and Palo Alto can be hard to overcome. What is a minimally viable product to someone in Silicon Valley may sound like a half-baked idea to a banker on the East Coast. "Somehow putting out something that's minimally viable immediately sounds kind of negative or inconsequential," Hopkins says.
She tells the skeptics to look at startups like Airbnb, Uber and LinkedIn. Each have upended an entire business category through a process of rapid prototyping, fixing and redoing. "So, not to be discounted," she says.