How To Turn Your Analog Corporation Into An Incubator

If a 150-year-old railroad can disrupt itself, what's your company's excuse?

Luke Christiansen is one of 1,400 IT employees at Union Pacific, the 152-year-old Fortune 150 railroad company. Almost a year ago, UP’s chief information officer Lynden Tennison pulled Christiansen into his office in Union Pacific's downtown Omaha headquarters, and gave him a mandate: take products UP had built for internal use and figure out which ones would be commercially viable.

The first resulting product is internal startup Valvora, its name a play off a "valve" releasing software from the railroad giant. The broader goal is a leaner, higher-metabolism software mentality within the company.

Finding new products

For decades, UP has built its own software because they weren't happy with the enterprise options out there: Those products reportedly generated $35–$40 million in annual revenue from other big transportation businesses. Christiansen’s mission was to think more broadly than just those big businesses.

"I spent six months beating down doors and asking what products we even had out there," Christiansen said. One of the first things Christiansen’s entrepreneurial eye found: Mobile solutions built for the company's 45,000-plus employees. As many as half of them used company-issued mobile devices, so tens of thousands of people were downloading the same apps and then expensing them. To simplify things, UP programmers created the App Station: a private app store that Valvora is now marketing to large corporations across industries that are in similar positions.

"It allows you to distill the chaos in the public Google Play and iTunes App Store," Christiansen said. "You get the right apps to the right people without having to wade through everything and then have them create an expense report to get paid." And companies can get discounts on bulk purchases of licenses.

Another piece of UP software due to be released by Valvora is Innovation Station, a "suggestion box on steroids.” Employees from any department can submit an idea, it gets peer reviewed anonymously (instead of having it go up the chain), and if it gets enough votes from your peers, the company gives its employee $3,000 and three weeks to run with the idea.

"We've had a few ideas that have been huge and had multi-millions in savings," he said. "You don't have to submit it to 14 different bosses to get it to happen."

Disrupting sales and changing the culture

While Tennison sent Christiansen off to find products to sell, the CTO turned his eye on enterprise software sales themselves, which are filled with direct sales, requests for proposals, and contract negotiations.

"We do the same thing, but without the traditional sales model with reps, contracts, and mess," he said. "We redefine the marketplace for the software." The plan with App Station and other offerings is to offer the product at a disruptively low pricing with limited contract terms and an easy way to opt in and out.

Tennison understands why other companies with enterprise software decide to stick with direct sales. “Others don't do it because they feel there are too many risks--and we're aware of this--we can justify their existence with the revenue they produce," he said.

He's also able to offer a more appealing environment for his programmers, giving them a chance to work for a big corporation, while creating something that will be available in the commercial marketplace.

"It's changing the mind-set," Christiansen said. "We write for the best in the world and not just us."

For all these reasons, Tennison says Valvora is going to get the room it needs to grow. "We tend to have staying power," Tennison said. "We won’t plow zillions in it, but our tendency is not to change for the flavor of the day.”

[Image: Flickr user Chris Bojanower]

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