The 146-year-old Technology Startup
Persistent corporate engagement is a critical strategy identified by the entrepreneurship coalition for Iowa. The region’s small and large corporations are often first customers, source of mentors, sponsors, and where strategies align, investors in venture funds and sometimes directly in the youngest companies. I invited my friend, former boss, Principal Financial Group’s retired CIO, Gary Scholten to author the post you see below. He serves as a director for Des Moines-based Wellabe, and is a Fellow of the MIT Center for Information Systems Research. He remains a lifelong-learner even in retirement after an illustrious 38-year career.
My brief closing comments are included as a postscript to this article. My only edits include links/URLs in text or captions to the included photos.
No discussion of Iowa’s technology startup culture is complete without recognizing the influence of the state’s large, innovative companies. A diaspora of tech and business experts have left these companies to launch startups, carrying a strong culture of innovation with them. Large companies have also provided essential funding for startups, accelerators, and industry groups like the Technology Association of Iowa, while using their influence to shape legislation and attract major technology players to have a presence in Iowa’s relatively smaller market.
This post is a look at the rich technology history of one such large company, Principal Financial Group. As I reread The Principal Financial Group: 125 Memorable Years (2004) and Celebrating 50 Years of Innovation and Technological Advancement (2005), I was struck by how much Principal’s story mirrors that of a modern technology startup. This post explores Principal’s journey through the typical phases of a startup and how its history aligns with key startup success factors.
Ideation Stage
Principal was born as Banker’s Life Insurance Company in 1879. Paraphrasing the original problem statement, it was to satisfy the need for inexpensive and dependable life insurance for bank employees (later others) by challenging the insurance companies of the day that the founder, Edward Temple, thought were largely unethical. It leased coworking office space in the Des Moines Bank Building at 5th & Walnut and the original funding came in the form of $2,000 certificates of membership.
Development Stage
While not meeting the definition of a computer in the recent “Birthplace of the Computer” Substack post, I’d argue that the foundation of Principal’s technology history began in the 1920’s when punchcard equipment was first introduced to produce premium, commission and tax reports. It also was the decade that the Planning Department was established, introducing an early version of business architecture. Principal officially entered the computer era in 1955 when it ordered an IBM 650 computer. Our best research found that Iowa’s first private sector programmer was Principal’s Bob Delaney, who later became the company’s first CIO.
From the beginning, early technology leaders had an unwavering focus on agility and companywide sharing, which provided the company with speed and reliability competitive advantages throughout its history.
Gaining Agility and Scale Through Reuse and Standardized Processes
The first technologists had the foresight to instill standards that would be critical for future growth and adaptability. For example, common modules would be used to decouple business software from hardware (e.g. standard I/O modules) and for standard business logic like date handling. Storage would use variable length records.
The Consolidated Group System (CGS) was designed and developed in the 1960s to support Group Medical and Pension products and in many ways was the first of its kind in the industry. It included advanced features such as a single database to support all functions on the first direct access storage mediums available, online network capability and consolidated daily cycle approach. Its advanced features would not run on the then-available hardware so it was designed for hardware that was not yet announced, available only through a beta test site agreement with IBM. This future-ready design proved invaluable when ERISA tax law changes in the 1970s spurred the rise of voluntary pension plans like the 401(k). CGS gave Principal a first-mover advantage, providing the automation and scalability needed to efficiently offer these plans–even to small and midsize companies.
As Principal expanded its Pension business into international markets, it returned to its proven strategy of building flexible, scalable systems to support growth. In the mid-1990s, the company developed PISYS—a multi-language, multi-currency administrative platform designed to adapt to varying pension structures across countries. PISYS enabled rapid market entry of new ventures, streamlined the integration of acquired businesses, and became a valuable asset in joint ventures with in-country banks, making Principal a more attractive and strategic partner.
Cross Functional Collaboration
In the late 1980s, most of Principal’s software ran on mainframes. Staying true to its focus on consolidated systems/data, Principal became an early adopter of IBM’s Parallel Sysplex technology, which maximized infrastructure sharing and enabled data and system integration across business lines—foreshadowing the fully connected network to come.
In the late 1980s, departmental LANs connecting PCs grew rapidly, creating a need to share files across different servers and networks. The solution was to build a fiber ring network that connected PCs, servers, midrange, and mainframe computers into a single network. The network used fiber optic cables between buildings, heavy copper wiring between floors, and telephone lines from floor closets to PCs. Once the downtown home office campus was fully connected, they quickly introduced community file servers, enabling secure, centralized file storage that supported company-wide collaboration and rapid scalability.
In 1993, network technology had advanced enough to fully integrate remote offices into the company’s network. They began building a wide area network (WAN) using early-release frame relay equipment from Cisco, which had just gone public, and started converting systems to this new architecture.
Committed Team
Successful startups rely on committed teams willing to do whatever it takes to drive the company toward its mission and seize new opportunities. In much the same way, Principal’s executives not only appreciated but depended on dedicated employees to deliver technology solutions that positioned the company for growth.
That same commitment extended beyond the workplace. Principal’s tech employees were deeply involved in giving back to the community—something we were all proud of. Many Central Iowa nonprofits were founded or supported early on by this group, including Tech Journey, DSM Hack, TAI Hyperstream, the local chapter of Girls Who Code, and Pi515.
Resiliency
Throughout its history, Principal faced multiple crises—business, economic, technological, and natural disasters. One event that highlighted Principal’s identity as a software and network-centric organization to the business executive team was the Des Moines flood of 1993.
At the time, most disaster recovery plans focused on prolonged power outages but rarely accounted for extended water loss—but water was essential for cooling infrastructure and allowing office operations. Principal’s two downtown data centers lost both power and water during the flood.
Addressing the crisis required rapid, creative, cross-functional collaboration. One memorable solution was installing an above-ground kids’ swimming pool on the roof of a building that housed one data center to recycle water and keep a multi-million-dollar mainframe running.
Customer Centric Innovation to the Core
In the late 1990s, Principal launched its first true digital customer experience with a secure website that allowed customers to view real-time information about their products. From the start, it offered a unique, consolidated view where U.S. customers could see all their relationships with the company in one place—a rare feature in financial services at the time. This capability was built on Principal’s consolidated customer database, originally developed in 1993. By 2002, the company expanded this by including other stakeholders into a third-generation Affiliate File, effectively creating a master data system before the concept was even a thing.
One example of “bar napkin" style of innovation was Direct Connect, an internet-based system that allowed employers to securely submit 401(k) payroll data along with electronic funds transfers. At the time, transferring accurate payroll data was a major challenge across the 401(k) industry and a major friction point for customers. After visiting satellite offices to hear directly from frontline employees, a group of Principal team members came up with the concept and first design for Direct Connect during the car ride back to Des Moines. Remarkably, it was launched and serving customers within just five months.
Celebrating Successes Together
Founders know that celebrating company successes and milestones matters—it’s a way to honor the extraordinary effort it takes to reach them. At Principal, a key part of the technology community’s success was the ability to have fun and celebrate wins together—something downtown Des Moines bars came to appreciate! It was also important to recognize external recognition that tech employees received. Especially noteworthy, Principal’s women technologists earned an uncommon level of recognition in technology circles. Two standout examples: Louise Billmeyer, who won the first TAI Women of Innovation Large Company Leader award, and Susie Thomann, who was the first woman named as the TAI Prometheus CIO of the Year (in 2016).
The Exit
Principal’s first exit occurred in 1911 when it converted to a mutual insurance company, which began the process of changing company ownership to policyholders. But a second type of exit happened in 2001 when the company demutualized and IPO’d. A couple of interesting facts about the IPO…
The IPO was originally scheduled to occur a few days after the September 11th terrorist attack occurred. In fact, much of the senior management team was in Europe for the IPO roadshow when the attacks occurred so were marooned until air travel began again. The IPO eventually occurred on October 23, being the first large IPO to occur after the markets reopened from the attack. It gave a sign to the world that American markets were back and open.
Shortly after Principal’s IPO, we were hosting a large institutional investor conducting due diligence on our stock. The night before the meeting, Principal’s investor relations leader called to say the schedule had changed—the investor specifically requested an hour with me to discuss our technology, though he wasn't sure why.
Early the next morning, I quickly pulled together three possible slide decks using publicly available information, anticipating they might want to hear about our security practices, how we track emerging technologies, or how efficiently we manage IT spending.
To my surprise—and delight—the investor team opened the meeting by explaining their real reason for meeting with me. During their due diligence, they consistently heard that Principal had the best technology across several business lines. They weren’t just evaluating us—they wanted to learn from us to improve their own technology.
Although I didn’t have time to walk them through the full history, I shared a key takeaway: Principal approaches technology like a startup. We center innovation around the customer, adapt quickly, aren’t afraid to try new things, and our entire executive team understands the strategic impact of technology on our business and customers.
It’s fun to think of Principal being a part of the fabric of Iowa’s startup community—hopefully helping to inspire the next generation of builders.
Tej Comments - A highlight of Principal’s presence as a fabric of the Iowa startup community is the foundational AND continuous support for the Global Insurance Accelerator. At the GIA’s formation in 2014, Principal’s CEO Larry Zimpleman guided a strategic element critical for its success. Another highlight is the engagement with startups, venture funds, accelerators, and venture studios in various locations where Principal has offices or customers.
The entrepreneurship coalition, a volunteer group working with
of the Greater Des Moines Partnership is working closely with several technologists at area corporations as they are one of five stakeholders in a region’s entrepreneurial success amongst Governments, Universities, Risk Capital and, of course, Entrepreneurs.Thank you for being a part of this Substack’s subscribers and readership. I appreciate your comments and feedback, as well as your invitation to others in your network to
I am a proud member of the Iowa Writers Collaborative and the Iowa Startup Collective. Each writer is independent and publishes via Substack across Iowa and I hope you are able to explore my fellow amazing writers’ work.
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What a great trip down memory lane!
Thank you, Tej, for inviting Gary to share this incredible look back at Principal’s technology journey. And thank you, Gary, for the rich history and insights. Your story captures just how foundational Principal has been not only in building its own innovation-driven culture but also in shaping Iowa’s broader startup and entrepreneurial ecosystem. It’s inspiring to see how Principal drew from its own history, starting as a scrappy challenger in 1879, to support and invest in the next generation of builders and entrepreneurs. I learned a great deal!
Your reflections highlight the crucial point that large, established companies have a responsibility and a unique opportunity to foster innovation by supporting startups, sharing expertise, and building infrastructure that benefits the entire community.
Appreciate you shining a light on this important piece of Iowa’s startup story!