position might be affected by new challengers and M&A
trends within and outside the industry?
K Instead of investing in traditional market vehicles, are you
looking at investing in other companies, establishing a
venture capital fund for technology, or investing in partners
that offer opportunities to “leap frog” the competition?
K Are you assessing, experimenting, 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?
K Are you prepared for the explosion of new sources of data
from third-party providers, new devices, and technologies?
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. Insurers
must redefine the process to encourage the development of strategic plans that leverage and respond to this change, not only to
safeguard survival, but to be competitive and relevant.
Maintain, Modernize, Optimize, and Innovate
Transformation through modernization, optimization, and
innovation is the price of future success. The absence or lack of
planning and investment in transformation creates significant,
levels of business risk for insurers. Through a redefined process,
insurers should categorize strategy, plans, and funding for 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 new 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. Insurers should lessen 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 business capabilities and
solutions provide a foundation for insurers to move toward optimizing and innovating in the areas of customer engagement,
products, and services. Modernization initiatives are complex,
span the enterprise, and are multi-year efforts. 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.
Optimization: Unfortunately, too many insurers stop at the
modernization level, thinking it 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, mobile, cloud, telematics, ECM, and
CCM are examples. Each can enhance the customer experience,
uncover market and customer opportunities, develop new
products and services, and gather insights about the market,
customers, and channels. Funding may come from a realloca-
tion following completed modernization projects and replaced
legacy systems or from new funding. Optimization moves the
organization to new levels of effectiveness, establishing them as
a mover with the potential to become a market leader.
Innovation: Innovation is 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, to promote R&D, experimentation,
and pilots. Examples include developing business capabilities
around the connected home, wearable devices, driverless vehi-
cles, the connected auto, the Internet of Things, or a shared-ser-
vices economy by partnering with technology companies like
Google, Facebook, Overstock.com, or others.
Companies committed to embracing outside-in think-
ing and collaborating with ecosystems can efficiently bring
information, ideas, and knowledge to the forefront and move
them toward implementation. Whether through centralized,
decentralized, or cross-functional teams, there is a focus on
innovation, which is often supported by additional or reallo-
cated resources and funding. Innovation creates opportunities
to generate a new standard of excellence, business models that
promote market leadership, and a value proposition for driving
customer loyalty, trust, and engagement to new levels.
If insurers are to be players, competitors, and leaders in this
new digital world, they must adapt. A good place to start is
with the planning process. Charles Darwin stated: “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.”
Reimagine your strategies to recognize the rapid change and
your destination as a Next-Gen Insurer. Redefine your planning
process to identify and consider the influences 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
position, relevance, and impact in the future. ITA
Denise Garth, is a partner at Strategy Meets Action. She
can be reached at email@example.com.