Toyota Financial Services CIO Vipin Gupta Has Led The Company To Become An Industry Platform

October 07, 2021
Peter High
BY Peter High Founder and President of Metis Strategy
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Toyota Financial Services (TFS) is a 35-year-old, wholly-owned subsidiary of Toyota Motor Corporation and is the largest auto finance company in the U.S. with $125 billion in managed assets. The company’s offering includes lending payments, banking, and fleet financing, as well as insurance and protection products to consumers and dealers of Toyota, Lexus, and through private-label partner brands. The emergence of private-label partnerships has been a new part of the company’s operating model, but it was enabled through a radical transformation led by the company’s CIO, Vipin Gupta.  

When Gupta joined TFS nearly three and a half years ago, he found a well-run IT organization, though he recognized that it was quite traditional. He was worried the IT department was not ready for the digital transformation necessary to be a bigger, strategic contributor to the company. Gupta faced a choice as to how best to proceed. “[I could] either fix the IT organization or redesign the next version of Toyota Financial Services in a grander way and use technology as a catalyst to design a new business model for Toyota Financial Services.” He chose the latter. Gupta continued, “The question that I used to ask was, ‘How would we design TFS if we were born today?’ If you were born in this digital world, the version of TFS [would] look very different, and the idea was, instead of trying to fix IT, let’s try to design that version, try to realize that [digital] vision of TFS.”

Gupta saw the opportunity to leapfrog the current standard and to make TFS into a platform for other brands to run their captive financial services on. “To do this, we needed to build a completely new technology chassis from the ground up with a multi-tenant architecture that allows us to run multiple brands on a shared infrastructure, but still keeps the data separate,” noted Gupta. The key in his mind was to transform behaviors before transforming technology. By first changing the way the team worked, the technology modernization pathway was clearer. The change required rethinking the way in which the company collaborated, the way new solutions were designed. “The best of strategies will fail without a culture that complements that aspiration,” said Gupta. “On the technology front, our vision is clear. We will use the cloud, and we will design a multi-tenant platform to deliver mobility finance as a service.”

When asked how the culture change was facilitated, Gupta noted how addressing three main points formed his gameplan, each using speed as the key performance indicator. First, there was a need to change the speed of decision-making. Second, there was a need to increase the speed of collaboration. Third, the team needed to increase the speed of engineering.

Speed of decision-making was the lynchpin according to Gupta. “Decision-making is the biggest barrier to speed and flexibility in an organization,” he noted. “The largest waste in IT projects is not in engineering. It is in decision-making and the lack of clarity. If you make decisions quickly supported by data and communicate decisions clearly, the team will consistently deliver with high quality and efficiency.” The key is to start this change from the top of the organization. Leaders needed to become more agile. Gupta facilitated the creation of new scrum-based routines for TFS’s executive team.

To facilitate the speed of collaboration, the digital organization needed to operate as a single ecosystem rather than separate silos. “Any business is a perpetual machine,” said Gupta. “It’s not a collection of time-bound projects. It needs durable teams led by subject matter experts, not by project managers only. These teams need to follow repeatable routines to maintain a continuous dialogue and prioritization.” Gupta developed a product orientation to the company, bringing together skills and teams from across the company aligned with the products that were defined. This common means of operating across product teams created greater output, but it also created greater levels of understanding and empathy across teams. Team members from across product teams shared information and learnings in ways that had not been the norm previously.

Changing the speed of engineering started with an acknowledgment that software is TFS’s product. As such, the company needed to become masters of its own technology. “We need to be as good at software engineering as [Toyota is] at automotive engineering,” said Gupta. “Inspired by our automotive factories, we built digital factories using the lean manufacturing practices of Toyota that have long been admired [the world over]. Just like automotive factories, the new digital factories were formed. They’re founded on consistency and standardization of behaviors, practices, and routines. We developed a new software engineering methodology that combines Toyota manufacturing practices with agile and scrum practice of software development.”

By increasing speed across these three vectors, the company was able to transform in months when years was the going-in assumption of what was possible. The key was to begin with the behavioral transformation. Gupta underscored that the focus on transforming habits before transforming the platform was a game-changer for TFS.

In order to ensure that the entire company and not just the technology employees raised their digital acumen, two years ago Gupta founded the TFS Digital Academy. “Harnessing the power of software is not just IT’s job; it is everyone’s job in a digital company,” noted Gupta. “The idea was not to just to train IT, but to train everyone across the organization, and whether they are employees or consultants, everyone will be trained in the new practices, new methods, new approaches, new behaviors.” This leveled the playing field and ensured that that level was much higher than in the past.

All of these changes have enabled the IT department to grow its contribution to the company’s success without growing costs. The new way of working has “reduced waste dramatically,” according to Gupta. “We’ve been managing our expenses in a very disciplined way, and we are now open to partner with any automaker, mobility provider or services provider, who wants to offer high quality, captive financial services for their brand to their customers and dealers.” As such IT’s transformation has been critical in developing the new private-label business. Mazda was the first partner to engage through Mazda Financial Services. Mazda gains mightily through the partnership by focusing on its products while leveraging the capabilities, talent, and quality of TFS.  

The future will include adding more brands to this model, but Gupta also sees the possibility of additional products and services. These will include insurance and payments in the used car business, for example.

Gupta has achieved a tremendous amount in less than three and a half years in his role. With the digital innovation engine that he has created with speed as the metric, no doubt this is just the beginning of what he and the team can accomplish for TFS.

Peter High is President of  Metis Strategy, a business and IT advisory firm. He has written two bestselling books, and his third, Getting to Nimble, was recently released. He also moderates the Technovation podcast series and speaks at conferences around the world. Follow him on Twitter @PeterAHigh.

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