Digital transformation is inevitable for global insurers in the face of steep challenges created by interrelated factors, including low interest rates, regulatory changes, and disruptive innovation led by fintechs. A PwC study affirms that the digital native customer has taken over the insurance market, and consumer attitudes have changed. With survival at stake in todays ruthlessly competitive markets, insurers cannot afford to have transformation programs drift away from their core objectives.
As stated in part 1 of this series, although there are no standard methodologies to ensure transformation program success, it is vital your team stays focused on the overall objectives throughout the program. Here are some of the key challenges in implementing transformation programs — and possible solutions, with a specific focus on governance.
Ensure a compelling vision and strategy.
Often, IT initiatives do not have a compelling strategy. Sponsors fail to establish or communicate a clear view of the initiatives strategic value, thereby diluting the goals or changing the course of the transformation. Overcoming this challenge requires a value-driven approach right from the planning and business case development phase. The case for business change should be laid out by defining compelling, feasible and quantifiable business benefits linked to planned system functionality down to the requirements level.
Revisit business benefits at key project milestones to assess their realization potential. By involving business in prioritizing and controlling the scope of the changes, you can ensure the objectives are not lost, even if the project scope changes mid-way. The senior program sponsor must assume an active role in communicating critical messages to the wider stakeholder community all through the program. It is also important to reiterate the vision and strategy of your program at intermediate stages based on facts and recommendations.
Enable a quick path to value.
In many insurance transformation cases, management comes under pressure to extract benefits as soon as possible, at the lowest cost. By realizing business value incrementally throughout the transformation journey, you can win the confidence of business. With the help of business users, you can prioritize requirements to realize business benefits, categorizing requirements by line of business, product, components or region for a meaningful implementation across multiple releases. It is critical to choose the right set of requirements that give the highest value early on and provide meaningful outputs that business is comfortable with.
Avoid underestimating complexity.
Transformation teams often underestimate the complexity of large transformation initiatives in terms of overall program effort and rollout, business user expectations, infrastructure requirements and operational readiness. This happens because teams are often lulled into complacency by the ease of the first rollout. It is essential to set aside a 15% to 25% buffer. This is because not only do issues and specific customizations multiply in later stages, but business user expectations might also demand more effort and time during regional or product-specific rollouts. Also, large transformation programs are likely to have unknown components, such as implicit or unstated requirements, user documentation, and operational readiness efforts, that are discovered only at a later stage.
Ensure critical skills for effective governance.
Large transformation programs are complex and require rigor, discipline and structure to achieve progress across many years and during times of crisis. The program sponsors mandate is to drive change, make decisions and rally support from all stakeholders. The sponsor is accountable for realization of the objectives. Throughout the program, you need to identify, measure and track success factors, tangible measures for success, and targets for achieving success. Some important aspects of effective governance include:
1. Systems integration: Most transformation programs are complex and impact the ecosystem in which the business operates — and hence require early identification of potential risks with respect to people, process, systems and infrastructure. I It is critical to deploy a core transformation team with prior experience in managing system integration challenges.
2. Stakeholder management: The sponsor has to manage internal and external initiatives, resources, groups, external vendors and third-party consultants who might not be directly controlled by the program manager. The ultimate deliverable of a large transformation program is composed of the deliverables of all such sub-groups. The deliverables of inter-dependent sub-projects must follow the same timeframe.
3. Structured program governance: Transformation program management requires a major focus on how the team thinks, rather than what the team knows. It is critical to bring all key stakeholders together and establish a common governance platform to help them align with the larger transformation objectives. This governance structure should be able to influence decisions across sub-projects, groups, external vendor, and consultants, to ensure timely delivery of all components at the agreed time. A robust performance management framework helps drive accountability and a performance-oriented culture.
No two transformation projects are the same, but effective governance is a consistent key to success. What kind of governance program do you have in place to address the unique transformation challenges you face?