3D Pizza, Dark Matter & Insurance - The future of Enterprise Technology for Insurance
The world is changing very fast. Economic progress measured across several generations in the developed economies, is currently playing out over fractions of the elapsed time in emerging markets. It is said that a ‘generation’ in China is now the equivalent of around 11 years; perhaps even less.
The gaps between the arrival of significant and disruptive human/technology epochs are also shortening at an exponential rate. For example, 10% of all vehicles manufactured today are connected to the Internet. Six years from now that number is predicted to be at least 90%. Smart-phones have only really been around for about 12 years yet more than 3½ trillion devices (including all the phones) are already connected to the world-wide-web.
3D printing will enable manufacturers to largely do away with inventory management and produce their goods local to point of sale. This technology will therefore radically disrupt supply chains around the world and yes; research is being conducted into the feasibility of 3D printing for edible products such as you favorite Pizza.
Despite the fear and loathing we each of us profess, relative to security and privacy, the volume of messages exchanged across open social networking sites such as facebook and twitter surpassed global e-mail traffic, 4 years ago.
What do these trends mean for our industry? Do we find opportunity in rapid social, economic and technological change; or will we, as risk managed professionals operating in a risk transfer industry, simply wait until forced to react when change is upon us?
Then, last but not least, is the matter of our customers and those we would like to have as our customers. They are all starting to behave in ways that few could have predicted only a decade ago.
Individual consumers, the people who populate and manage the businesses that we sell to, the people that work inside brokerages, agencies, reinsurers, network providers and so forth; they are all subjected to the same global influences and local trends; as are you and me.
Business has up to this point been primarily concerned with marketing to demographic segments, managing the transactions and ‘controlling ‘ what happens both inside and outside of the organisation. However, in a world of social networks instant messaging and always connected (mobile and on the internet), the individual consumer or the employee of a customer or business partner; has become a potentially significant stakeholder; to be ignored only at our peril.
The global insurance industry has to a large extent been able to evolve at its own gentle pace for the past 200 years or so. Whilst the fundamentals of insurance risk placement are unlikely to change radically, the differences between a winning and losing insurance business might become more apparent over the coming decade.
Agile, adaptive, responsive, and innovative insurance companies that understand the strategic importance of customer centricity and customer experience will dominate in the future. This hypothesis is born out through the observation of most/all other major business/industry sectors.
Louis Vuitton described Zara as “The most innovative and devastating retailer in the world”. It accounts for more than 60% of the shareholder value in its parent company. In 2011 it increased profits by 32% to nearly 3,2 billion. The entire Zara organization is built around agility and responsiveness (to customer demand). It is also geared to the random nature of the world we live in today. Product is designed in response to global in-store customer feedback, manufactured and in the store shelves within 7 to 20 days. They work on the assumption that no one can plan for a successful product launch. If customers don’t like a product taken to-store, they stop the supply chain and manufacturing wheels within minutes. When garments start to fly off the rack, they are equally well equipped to ramp up supply chain in a matter of hours. The Zara model also fully recognizes the ‘complexities’ of different markets, having built localization into all of its supply chain and in-store adaptation. Above all, they are placing the customer front and central in virtually every single decision made across the company. They are also a company that does little or no media advertising!
Insurance carriers and underwriters will need to evolve beyond the management of transactions and start taking note of every single interaction with a consumer or stakeholder in the value chain. Every time that we interact with the customer or they interact with us; becomes a potential moment of influence on our brand, and by extension our success, not to mention whether they chose to remain a customer or not.
We have traditionally relied upon the necessity of insurance cover. We have not needed to be concerned with individual opinions or how our customers ‘experience’ our products and services. However, consumers and corporate customers are now empowered in all of their other purchasing and product selection activities. They/we are all experiencing greater consumer empowerment, broader selection, the immediacy of instant gratification, choice, choice and more choice. It will not be long before all of this becomes available from our mobile devices.
Up until now, our customers have been using our call centres but in many if not most cases are left feeling “You don’t know me”, “You are not connecting with me” and “It’s too hard”. Perhaps 10 years ago there was little alternative as more and more utilities, banks and other service provider centralised their customer contact-centres.
At a recent dinner, a man that I was meeting for the first time launched into a verbal missive about his experience of looking for and purchasing broad insurance coverage for his “Small to medium Enterprise”. He was not aware of my participation in the industry. He complained bitterly about the difficulty he had in simply understanding what he was buying. He wrung his hands at the complexity of scheduled that, to use his words, seems to be written purely for the benefit of a knowledgeable underwriter. He expressed frustrated resignation at the fact that appropriate coverage was eventually provided but only following 13 phone calls with broker and carriers and “Why couldn’t they get to know my requirements and simply get this right by the second or third call”? Our complainant is not alone. He, like the rest of us does know what good customer experience feels like.
Before moving forward with suggested solutions, let’s take a quick look in our own back yard…
Dark Matter is a theoretical concept and an assumption of modern cosmology; yet physicists and cosmologists have so far been unable to find convincing evidence to prove the actual existence of this phenomenon. This is perhaps a metaphor for what it means to succeed in business today, especially on the global stage. There is little that hasn’t been done before. Most successful innovations are direct decedents of other ideas. Some of the greatest business innovations arise from combining, or intersecting two or more existing ideas or fields.
A former boss and mentor of mine used to talk about continuing to drive profitable growth in mature economies whilst solving the complexities of transitional and emerging insurance markets. We sense the opportunity ‘out there’ so we keep applying our tried and trusted business models. We make plans. We execute on those plans. Sometimes things work out but, more often than not, when it comes to emerging markets, we are faced with unpredictable outcomes. The competitive landscape doesn’t seem to behave as we might expect based upon US, European or ‘Anglo’ terms of reference. Regulators and legislative bodies also play to a different set of ‘rules’ than we are accustomed to.
I have worked in ‘emerging markets for more than 12 years and am very much acknowledging the challenges of newer markets such as the Middle East and Africa. That being said it also seems clear to me that such difficulties present us with a unique opportunity.
Put simply, it is much harder for very large organisations that have evolved over many decades; to restructure themselves and unwind legacy operations, processes and technology; even where they do accept the postmodern business and consumer trends. Here in the Gulf and MENA, we have an opportunity to leapfrog, by taking our organisations towards a different future. We are not hamstrung by the inertia which holds so many larger/older organisations back.
There is a nexus of forces at play across global markets and all business sectors. These are:- Customer Experience, Mobile ‘smart’ connectivity, Social media, and Data (lots of it).
I sincerely hope the implications of these trends have to some extent been explained above. Customer centricity and customer experience should be considered as business strategies and imperatives for future success. One might be forgiven for thinking the other forces are all technology driven. That is not the case. Whilst they might be technology enabled, these should be viewed as market realities that need to be embedded in our value chains.
The successful insurance provider of the future will place customer centricity at its core in terms of organisation (people), skill-sets, processes and technology. Such a company will be wired to adapt and respond to customers and markets with competitive agility. Products and services and the delivery of those services will be designed with customer experience placed on an equal footing with profitability. It is customer experience rather than ‘product’ that will differentiate in a competitive landscape.
Technology inside the enterprise clearly has an increasingly strategic role to play. How we chose to deliver and manage technology services must be thought of within the context of the ‘nexus of forces’ described above but, more importantly, with agility and adaptive-ness built in.
For most insurers, the traditional focus has been on managing transactions, control, and compliance and – of course – analytics.
Going forward we need to design and construct agile value chain enablement using technology. Those value chains need to be adaptable across multiple channels including web and mobile but, more importantly, should be able to adapt to the inclusion of different business entities that will participate in the insurance value chains of the future. It is not just the boundaries between banks and insurance carriers that are blurring. How we source our customer is going to change going forward. Evolving beyond management of transactions and towards collecting the myriad data arising from every single interaction with prospects, customers, counterparties, brokers and providers; increases the complexity of technology and processes – at least ten fold – if not by greater orders of magnitude.
A Smarter ET
Enterprise technology for Insurance is therefore moving towards greater complexity in an environment that also demands greater agility. Combine those somewhat opposing forces with the realities of competition and margin pressure, which certainly don’t work in favor of IT budgets; then we have some very interesting challenges ahead of us!
An emerging meme: “Every budget is an IT budget”
Apart from very few exceptions, every insurance company in the world should be developing a digital strategy. In emerging markets this becomes an opportunity to leapfrog prevailing market conditions. This will translate into a strategic competitive advantage if pursued effectively.
The enterprise technology organisation must therefor evolve beyond managing operations and transactions. Given budget and headcount constraints, businesses also need to look at what capabilities must stay inside the organisation and manage these capabilities very differently from the rest.
How can we realise such aspirations?
It all starts with Credibility
Business executives have long mistrusted and/or misunderstood their IT organisations. It would take another lengthy discussion to explore the whys and wherefores of this. Such perceptions are based on two things: Fear of the unknown and a track record of broken promises. IT professionals need to acknowledge it is their responsibility to move the organisation beyond such concerns and to a place where stakeholders turn to IT (ET) as a valued partner.
When all is said and done, enterprise technology is marketing and selling ideas. Once ‘sold’. Outcomes based on such ideas must be executed flawlessly – in the eyes of the ‘buyer’.
The art of developing Ideas between business and ET must become a priority. Real business analysts and ET managers that develop empathy and superlative communication skills, allowing them to literally ‘become the business’, should be valued above all others in the new smarter ET.
In order to gain credibility, ET needs to repeatedly demonstrate; “Make a promise then deliver on that promise”. This is by no means unreasonable, nor is it unrealistic. Enterprise technology needs to pursue this relentlessly. It should be measured against appropriate ‘promise’ based MBOs. This puts coinage in the credibility bank account.
Developing a strong project management office “PMO” inside the organisation is therefore something that needs to be maintained inside our smarter enterprise. PMO alone will not however, suffice. Shifting mindsets and behaviors across the whole smarter ET organisation is the other crucial ingredient.
Credibility can and will does shift perceptions.
Enterprise Architecture
This is the second critical enabler in terms of moving the focus of ET to higher value activities. It takes commitment and resolve to start this journey and, most importantly, to persevere with it. This is a big topic that can’t be addressed here. Suffice to say, that we need a floor plan of the target business, technology, information (data) and processes that our business is going to pursue over the coming years. We don’t turn to consultants for this. It is ours (business and ET) to develop and own on our own.
The target architecture is one thing; but in order to know where you are heading towards, you need to understand where you have come from. We use our internal architecture practice to work with stakeholders, infrastructure managers and solution providers to help us develop an architecture road-map. This becomes the how and when of translating architecture into a series of decisions, investments and projects; for the organisations.
Service oriented architecture “SOA” should be part of this journey. We want to build towards a future where nuclear transaction and other services; are embedded in our technology architecture and built for agile re-use across a multitude of larger ‘aggregated’ business applications; that can be delivered internally, to other business entities and consumers alike. Such applications and services will be available across desktop, web and mobile.
Talking ‘architecture’ is pointless unless the organisation is prepared to resource this appropriately and defend its place inside the organisation relentlessly.
Data Centric Organisation
On one level, an insurance company is little more than a conduit of data and information. Over the past few decades, insurance companies have become competent at managing their transactions using technology. They have also, out of necessity, bought into analytics to a greater or lesser extent, depending on where you look.
However, their focus has largely been on insights gained ‘after-the-fact’ of sales, claims, etc. The complex forces around market, economic pressure, competition, rapidly changing consumer behavior and so forth; should all be driving us towards far greater sophistication around data centricity. We need the capability to translate insights into outcomes; which are more forward facing in addition to the retrospective.
I like to throw the comment around that “Big-Data” is less the solution than it is the problem”.
Once again, this is too big a topic to address here. Suffice to say that building competency inside the organisation is once again of strategic importance. This doesn’t necessarily mean constructing large teams focused on building solutions. Such expertise can be purchased on demand; but we do need to build business-focused analytics, predictive modeling and other information insight competence; that is conversant with architecting and managing our decision support outcomes.
Customer Centricity & Customer Experience
Given the arguments put forth at the top of this discussion; it is clear that insurers need to strengthen their capabilities in these two domains.
Customer relationship management “CRM” along with all of its dependent components such as master data management “MDM” require another set of atypical skill sets within the enterprise. Building systems architecture, information and business processes that facilitate CRM, actionable customer insights and sales automation should also be viewed as high value. The technology space moves very rapidly. We can get our solutions built by external vendors and system integrators. It is the shaping and management of these ideas and outcomes inside the organisation that determines how successful we will be; not the technicalities of software development.
Desktop PC sales are now in their 10th quarter of a declining trend. Like it or not, all users whether consumer or corporate, are moving onto tablets and mobile. People are increasingly comfortable using collaboration and social networking technologies.
Technology clearly has a role to play here but overdependence on a traditional ‘engineering’ approach to customer experience should be cautioned against. It is design, sociology, psychology and marketing sensibility that will afford us the best chance of creating commercially powerful customer ‘journeys’ and experience, as they interacts with in the inevitable digital future. As such, the design and realisation of such ideas becomes of far greater importance than the construction of the underlying technology. We will increasingly turn to expert suppliers for the construction and delivery of customer experience outcomes as opposed to buying or building from the inside. We need a whole new set of skills and competencies inside the organisation to work with business partners and solution providers on this journey as well.
To end
We are in the insurance business; not the technology business.
The Middle East and Africa present significant opportunities to the insurance and financial services industry. We live in very exciting times where the pace of change increases with the passage of time.
Carpe Diem!