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Insurance IT Professionals Going Back to School

Denise Garth | November 04, 2014

Summer days are drifting away, and autumn is upon us. And along with it, the annual planning and budgeting process is well underway. There will be lots of discussion around vision, three- to five-year strategies, and plans for funding for the coming year. There will be formal processes followed to keep it fair and equitable across the organization. And there will be ranking, prioritizing, debates, negotiated budget allocations, and horse trading going on.

At the end of the process, little will change for many insurers. Why? Because the focus, priorities, and funding will primarily go to “keeping the lights on,” agreeing to a few enhancements to existing products and systems, and maybe one or two new initiatives. The problem is that this process just repackages what insurers have always done, maintains the status quo with maybe a few tweaks here and there, and in the end enables little progress toward the vision. 

This traditional process worked for yesterday’s and possibly even today’s business, but to position for tomorrow’s vision? It is seriously doubtful. Why? Because it does not create the inspiration, coherence, energy, and excitement about the strategies, plans, or funding that propels the organization forward to bring the company’s vision to life. It does, however, place the organization at a competitive disadvantage, shackling the organization’s ability to quickly move forward in a shifting market landscape. And, it does not effectively acclimate to the new levers of change that are more quick and intense than ever experienced by the industry. What will be the results? Slow, declining market relevance and competitiveness for many insurers. 

Sound harsh? Yes, but unfortunately, that’s the reality. To create a new reality, insurers must adapt and change. We must apply the three Rs of planning for the future by first reimagining the future in defining the vision and strategy, and second by redefining the planning process to move beyond a primarily operational focus, and finally by refocusing funding that keeps the business viable today while aggressively building the future.

Reimagine the Future

Reimagining insurance through a vision and strategy as a Next-Gen Insurer has never been more important. In this “new normal” of rapid change brought about by the vigorously building momentum of the digital revolution, the swift adoption of emerging technologies, advancing innovation within and outside the industry, changing and converging industry boundaries, new competitors, mergers and acquisitions, and shifting customer loyalty are practically commanding insurers to reimagine their future. 

And the vision and strategy require continual assessments and adjustments based on the insistent force of change that is influencing the industry. As part of their reimagination efforts, insurers should consider the following thought provoking areas to help reshape their vision and strategies:

  • How will your vision and strategies enable you to compete and operate in the new digital economy that necessitates new customer engagement and loyalty models? Or do your vision and strategies perpetuate a market and landscape of the past? 
  • What changes and innovations are happening outside the insurance industry that will impact, reshape, or influence the insurance industry? Are these other industries redefining, mitigating, or eliminating risk with the adoption of technology and new products or services?
  • Are your vision, strategies, and plans positioning you to win … or just not to lose?
  • What is the changing landscape of competition, both from within and outside the industry? How are the new technology companies influencing customer loyalty that will reshape ownership of the customer relationship?
  • Are you considering or exploring new business models that embrace new operational partners, capabilities, and technology?

These are but a few of the strategic, thought-provoking topics and questions that must be continuously tracked, assessed, asked, and discussed throughout the year to ensure your plans and funding remain relevant amid this rapid change. 

Redefine the Planning Approach

Redefine the planning approach to be broader than a primarily operational approach, and maintain focus. Yes, keeping the existing business viable and efficient is important. But equally, if not more important, is building the future business to enable growth and success in the new and changing world. 

This will take a unique team of people with different roles, talents, and backgrounds. The team can be centralized, decentralized, or a combination, whichever best works within the organization. These individuals must think outside the box, be creative and strategic, realize what is happening outside insurance, and understand the potential for emerging technologies.

Together, the team can identify and develop strategic and transformational plans that are important for the whole company (as opposed to departmental needs), prioritizing the strategic and competitive value for reshaping the company’s future. In redefining the process, insurers and their teams should consider the following thought-provoking areas to identify, define, and shape strategic and transformational plans:

  • Are you committing resources, via a team with funding, to track the fast-paced changes happening within and outside the industry in order to frame the impact and potential response? 
  • Do you have access to and participate in collaboration and crowdsourcing ecosystems to continually bring insights, information, and knowledge to reshape strategies and plans?
  • Have you considered how customer loyalty and competitive position might be affected by new challengers and M&A trends within and outside the industry? What acquisitions offer unique opportunities to build deeper customer relationships or acquire new business capabilities?
  • Instead of investing capital in the traditional market vehicles, are you looking at investing in other companies, setting up a venture capital fund for technology, or investing in new partners that can provide opportunities to “leap frog” the competition?
  • Are you assessing, experimenting with, piloting, and/or implementing new technologies such as Cloud, mobile, the Internet of Things, wearables, artificial intelligence, gamification, driverless vehicles, or others in order to understand their potential value to the customer and the business?
  • Are you prepared for the explosion of new sources of data from third-party providers, new devices, and new technologies? What level of data mastery, across the enterprise, have you attained to effectively leverage these new sources of data? 

Change that is reshaping the insurance industry is increasingly disruptive and transformative. Don’t allow the planning process to get drawn into operational morass focused on maintaining and enhancing the business with small plans. Rather, insurers must redefine the process to encourage the development of strategic plans that proactively leverage and respond to this change, not only to safeguard survival, but more importantly, to be competitive and relevant.   

Refocus Funding Across “Maintain, Modernize, Optimize, and Innovate”

Today’s reality means that operational excellence has become table stakes. Transformation through modernization, optimization, and innovation is the price of future success. The absence or lack of planning and investment in transformation creates significant, even exponential levels of business risk for insurers. Through a redefined process, insurers should be categorizing strategies, plans, and funding for each of these key areas: Maintain, Modernize, Optimize, and Innovate.

By leveraging SMA’s Business Value Maturity Matrix model, insurers can assess their plans and funding to determine where they are on the innovation and transformation journey. This assessment will provide insight into an insurer’s competitive positioning: What plans and initiatives would represent these areas? How might they be funded?  

Maintenance and Replacement+. This is about maintaining the business with the potential of some enhancements or wrapping legacy systems with technologies. The primary focus is efficiency within the existing business for business processes, products and services, systems, measurements, and more. Historically, this has represented 80 to 95 percent of plans, resources, and funding, leaving little for strategic initiatives. The result is a company managing the future based on the past, making the company increasingly irrelevant as the market changes, perhaps even falling into the laggard designation. Insurers should decrease the use of this approach as much as possible, to allow reallocation of resources to one of the other three areas.  

Modernization. This focuses on the replacement of the core business. It includes reengineered business processes that leverage new, modern core systems such as policy, claims, billing, rating, and underwriting. These new business capabilities and solutions provide a foundation for insurers to move toward optimizing and innovating in the areas of customer engagement, products, services, and more. Modernization initiatives are complex, span the enterprise, and are multi-year efforts, requiring significant levels of investment. Funding is typically from a combination of new and reallocated resources, in both people and capital. Modernization requires increased strategic funding above and beyond the operational to provide a platform for insurers to move up in the game, as a mainstreamer or mover.

Optimization. Unfortunately, too many insurers stop at the modernization level, thinking that is the answer to competitive positioning, rather than a platform to create effectiveness and levels of excellence through optimization initiatives. Initiatives such as data and analytics (including big data), mobile, cloud, telematics, ECM, and CCM are examples. Each of these can enhance the customer experience, uncover market and customer opportunities, develop new products and services, and gather new insights about the market, customers, channels, and much more. Funding may come from a reallocation from completed modernization projects and the replaced legacy systems, or from new funding altogether. Optimization moves the organization up to new levels of effectiveness, firmly establishing them as a mover with the potential to become a market leader.

Innovation. Innovation is increasingly top of mind for many insurers, but regularly lacks the commitment of resources and funding. Forward-thinking insurers are committing new resources and funding that initiates the incubation of new ideas and a new culture while modernizing, in order to promote R&D, experimentation, and pilots. Examples include developing business capabilities around the connected home, wearable devices, driverless vehicles, the connected auto, the Internet of Things, or a shared-services economy by partnering with new technology companies like Google, Facebook, Overstock.com, or many others.

Companies and teams that are committed to embracing outside-in thinking and collaborating with ecosystems can efficiently bring information, ideas, and knowledge to the forefront and move them toward the implementation of those incubating ideas. Whether through centralized teams or decentralized, cross-functional teams, there is a laser focus on innovation that is often supported by additional or reallocated resources and funding. Innovation creates the opportunity to generate a new standard of excellence, and new business and revenue models that promote market leadership and a compelling value proposition for driving customer loyalty, trust, and engagement to new levels. 

If insurers are going to be players, competitors, and leaders in this new digital world, they must adapt. And a good place to start is with the planning process. Charles Darwin stated it best: “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.”  

So adapt. Reimagine your vision and strategies to recognize the rapid pace of change and your destination as a Next-Gen Insurer. Redefine your planning process to identify and consider the influencers of change, their rapid pace, and the force of their impact. And refocus funding to invest in and fund the future, moving you beyond a laggard or mainstreamer to a mover or market leader, so that you have a position, relevance, and impact in the future. 

 Denise Garth, is a partner at Strategy Meets Action. With a combination of strategic and operational experience in the industry, Denise is committed to helping insurers create and accelerate new ideas by capitalizing on established and emerging technologies. Denise can be reached at dgarth@strategymeetsaction.com.


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