Transformation has become a buzzword in the corporate world. More and more corporates and government organizations are undergoing major transformations due to the advent of newer technologies, as well as Digital gaining momentum because of various economic, global, social and environmental changes.
Over the past decade the insurance industry has been faced with a number of challenges, with many new, tech-savvy market entrants providing online-only products, utilizing digital services, and offering individualized customer experience disrupting the traditional insurance business model. Many established insurers are struggling to provide the same level of customer experience as start-ups. This provides an opportunity to transform from the traditional business model and at the same time have the advantage of an established brand and customer base.
With the Internet of Things, Big Data analytics, and artificial intelligence, this opportunity will only increase in the future, as more people look for personalized policies that reflect their lifestyles, habits and digital technology footprint, supported by real-time pricing and dynamic risk models. The applicability of a one-size-fits-all approach will not be compelling any longer in an era where levels of customer engagement are increasingly important for customer retention and growth.
Typically, the key drivers for any transformation could be the changing business landscape, technological changes, or dynamic trends in the industry. Big Data, social media, mobility and cloud computing are the four critical areas of technology that drive changes in todays business enterprises, creating a perfect storm of innovation. Value ecosystem, product and service innovation, go-to market, and culture and organization are the four quadrants of transformation where executives and business strategists can exert control to drive a holistic digital strategy. First, companies must identify and monitor the shifts in the four quadrants for their industries. Next, the companies must analyze the disruptions and model the ongoing impacts. Once these are understood, a company can form a digital enterprise strategy and roadmap covering all four quadrants.
We have seen that insurance companies have been slow to fully adapt transformation services compared to other industries. Therefore, in order for insurance companies to be competitive, realize benefits and grow, they need to arrive at a Digital enterprise strategy and transform their siloed products, legacy technology, platforms and systems. The key is to be able to transform the traditional business model so that business is conducted with greater agility, and thus compete effectively.
Many factors contribute to transformation difficulties
According to a study by McKinsey & Company, most of the transformations are full-fledged, lengthy, expensive, and have alarmingly high failure rates (as much as 70%). The reasons could be multifold. Lack of clearly defined strategy and business outcomes, lack of agile and collaborative operating model, lack of executive sponsorship and rigor, gaps in rollout strategy and integration touchpoints, and misaligned talent pool (mismatch in right mix of skills and competencies) within the team are some reasons that contribute to large transformation programs fails.
Following are some of the most common factors for failures of transformation programs:
- Most of the transformations have unclear goals (or goals get diluted/change course) and objectives where the programs span across multiple years.
- Management is under tremendous pressure to realize business value versus cost and time to implement.
- Lack of strategic architecture direction and technology selection.
- Enterprise-wide buy-in or organization change management not being effective.
- Complexity and sheer size of a large transformation is often under-estimated, resulting in customer dissatisfaction due to gross miscalculation of overall program effort required.
- Overarching governance Issues: There is no structured program governance to ensure external stakeholder management, communication at all levels, swift issue resolving and transparency.
- Improper identification and tracking of challenges and risks related to contracts, security, IT, data and people can have an impact on large transformation programs.
In a nutshell, there are no concrete solutions or standard methodologies to run programs successfully, since each program is different and will have various scenarios and challenges. While transformation is the need of the hour, an insurer may decide its approach depending on the case. It is crucial to know what one is aiming for, and whether the transformation team is well acquainted with the end goals. The strategic vision for the transformation and business outcomes will have to be clearly articulated to all stakeholders for the transformation program to be successful.
In the next article in this series of blog posts, we will discuss some of the above pain points, as well as possible solutions that can be explored while executing large transformation programs with a specific focus on the role of governance.