Technology transformation revs up CarMax’s business
To shift from brick-and-mortar to a digital business, the US car retailer had to completely transform, from a project-based, waterfall organization to an agile product-based one.
Digital transformation has meant many things over the last decade: cloud migration plans, one-off modernization efforts, or a catch-all effort for addressing technical debt from outdated systems that need to be modernized. At CarMax, the largest used car retailer in the United States, the vision was more defined: transform from a successful brick-and-mortar company to a digital, omnichannel business. For Shamim Mohammad, executive vice president and chief information and technology officer, that meant transforming the whole organization into a digital technology powerhouse. “To accomplish that, we had to move from being a project-based, waterfall organization to a product-based, agile technology organization,” says Mohammad.1
Overseeing CarMax’s transformation journey over the past eight years, Mohammad has turned IT into a highly cross-functional team, one that is willing to experiment, test, and learn. This has allowed the company to build a strong digital backbone around data, cloud capabilities, and engineering practices. “Digital transformation is never a project. It is a cultural change that permeates the business,” says Mohammad. In fact, this cultural shift enabled CarMax to pivot quickly during the early days of the COVID-19 pandemic to continue serving customers by enabling them to sell or purchase used cars online.
Of course, there were challenges. As Mohammad says, “If digital transformation were easy, everybody would do it well. We had to be committed and aligned with senior leadership.” From a technology standpoint, Mohammad’s team had to transform and migrate a legacy technology stack to the cloud for scale and agility. From a process standpoint, IT had to replace previous ways of measuring success, such as projects completed, with quarterly results for more frequent delivery. And in terms of people, Mohammad had to get his team used to entirely new ways of working and collaborating.
This meant physically moving people to different floors of the office to form cross-functional product teams. Cubicles were replaced with open-floor layouts. Every two weeks, product teams hosted an open showcase of technology capabilities in development, along with outcomes and lessons learned, to increase transparency and hear feedback from senior leadership. The IT department itself was renamed CarMax Technology to signify the marked change in its function and accountability.
CarMax Technology’s focus became business outcomes, as opposed to IT’s traditional requirements and deadlines. With support across the C-suite, the technology team was able to grow in size, budget, and remit over the course of the transformation, preparing it for new disruptions in emerging technology. For instance, CarMax rapidly adopted generative AI to improve customer experience. Instead of scrolling through pages of reviews, shoppers can now see an AI-generated summary based on thousands of actual customer reviews for vehicles in its inventory.
Mohammad’s approach to AI began with considering internal data management, which he calls the “lifeblood of the organization,” and having the right data governance to create models for process optimization, customer experience, and digital merchandising. “We’ve now established an AI governance team to take advantage of AI and automation across the entire business while minimizing risks,” says Mohammad. His team is focused on creating guardrails around training, awareness, and security. As the technology advances, Mohammad is keen to protect CarMax by staying ahead of cybercriminals’ use of AI.
Mohammad believes transformation will only accelerate over time. Coming out of the pandemic crisis, he believes technology leaders have an important role to play in shaping the new direction of their companies, during a time when business and technology strategy should be absolutely aligned. He says, “Transformation is forever, and tech talent is a strong priority forever—that’s the only way to ensure technology drives and matches strategy.”