Strategic plan for Digital Transformation
Lean on someone who has done this before
"None of the companies like insurance company has not yet transformed to latest digital transformations completely - One main strategy for a company to rethink over every aspect of the organisation."
The future of such companies mainly insurance will be digital.The industry might have been slow to feel digital technology’s impact, protected by regulation, the size of companies’ in-force portfolios, and customers’ tendency to stay put with their insurers.
Some see how digital technology will transform pieces of the business, but find it harder to envisage how the entire value chain and business model might change. They therefore content themselves with investing in a new sales channel, launching a service app, or automating a few processes. At other carriers, executives believe a transformation will not be completed on their watch, because the magnitude of change required will leave no part of the organisation untouched and could take up to a decade. So why bet on an uncertain future and risk cannibalising existing profits or alienating distributors when they face more pressing issues, such as regulatory compliance?
A growing number of executives, though, are facing up to digital reality. They know that digital technology can significantly improve the performance of their current business. They know that first-movers have an advantage. And they are keenly aware that digital can give birth to entirely new business models that shake up sectors, leaving companies that fail to adapt struggling to survive (newspapers are a case in point). They have therefore taken steps toward transforming their businesses.
They are far enough advanced to know that each stage of the transformation will present challenges. The first will occur at the outset, when the CEO must set the company on the right course for success. More will present themselves during the first six to 18 months—the launch and acceleration phase—when initial changes have to start taking root, and yet others will arise during the long haul of subsequent years, when digital initiatives need to be scaled across the enterprise and digital capabilities and new ways of working become the lifeblood of the company. Already, the industry’s digital pioneers are meeting these challenges and demonstrating to fellow CEOs ways in which they can be overcome. And from these early efforts and successes a set of following guiding principles is starting to emerge :
1. Secure senior management commitment
Any Digital Transformation will be a failure if the CEO and leadership team team commitment is very less.That statement seems almost glib, given how often CEO commitment is positioned as the solution to any major challenge.CEO cannot simply sanction a digital transformation; he or she must communicate a vision of what needs to be achieved, and why, in order to demonstrate that digital is an unquestionable priority, make other leaders accountable, and make it harder to back-track. Hence, in 2015, Allianz announced that a key strategic growth initiative was to become “digital by default”—indicating the extent of the changes ahead. Similarly, ING branded its transformation “Fast Forward.”
2.Set clear, ambitious targets
To set the organization’s sights at the right level, investments need to be linked to clear, ambitious targets.First, it signals the magnitude of what digital technology can deliver. Without targets, people who find it hard to accept that the old ways of doing things were massively inefficient might be content to sign up for a 10 percent improvement in cycle time, for example, when 100 percent is possible. External benchmarking can help in this respect by reinforcing the conviction that cutting the time it takes to, say, process a claims submission from 90 minutes to 20 is not good enough if someone else has reduced it to four. A company can be certain that if it does not match that benchmark soon, others will.
Second, setting clear targets at the outset prevents back-sliding when the going gets tough. And third, it imposes discipline on the process of deciding which initiatives to pursue for maximum impact.
Targets are needed for each source of value creation—cost savings, revenues, improved performance of agents, and satisfaction of employees and customers—and for new ways of working and the new capabilities required.
Digital transformation is likely to require significant investment. European insurer Axa, for example, invested €950 million over just two years. Our experience suggests that in IT alone, companies with outdated systems might need to double their current spending over a five-year period. That investment is likely to result in lower profits for a while—but without it there is a serious risk to profits in the longer term. Importantly, companies will need to allocate investment both to improve the current business and to build new businesses as the insurance model evolves. To acquire expertise in new fields and keep abreast of innovation, for instance, insurers will need to invest in partnerships or a venture capital arm, perhaps both, as well as in their own innovation labs.
4. Start with lighthouse projects
To win early support, companies should start with projects that offer potential for significant rewards with manageable risk. Such projects include customer services activities and the redesign of the claims process, from the moment a customer needs to file a claim to the moment of reimbursement. Customers will be delighted, cost savings can be as high as 40 percent, and effectiveness, measured in return on investment, can rise by as much as five percentage points.
5. Appoint a high-caliber launch team
One way to meet the challenge is to start by hiring a renowned expert to serve as an anchor hire, who will help to attract others, on the basis that they will be drawn to him or her more than they would be to an insurer per se. Some companies go further than hiring individuals and acquire agencies that specialize in design thinking. “The talent piece is essential,” says Andrew Brem. “I’ve hired an entirely new digital team. I’ve brought in people from the world of gaming, from travel, from retail, from pure digital. And they’ve brought in a lot of people too. There are some particular skills I’d call out. One would be digital product and design. Another would be digital marketing on the social side. And another would be data analytics, particularly on the customer side rather than risk.”
People leadership skills are essential too. Transformation is not just about tipping everything upside down, reinventing products, and disrupting value chains. It is partly about balancing old and new and integrating fresh talent with old, valued hands. “The reason traditional agency distribution hasn’t innovated is because it’s very hard to find someone steeped in digital who also understands field sales, and vice-versa,” she says.
6.Lean, agile, high-performance culture
Implement agile development practices; automate continuous delivery pipelines; invest in automated quality controls; deliver secure defect free code; rectify problems by fixing root causes, not symptoms.Whatever the choice, the ultimate goal has to be to enmesh the old and the new.
7.Adopt a new operating model
Whatever structures a company chooses initially, it will reach the stage when only a fundamental organizational redesign will do. Silos drawn along functional lines have always been a drag on collaboration and performance in large organizations. In the digital age, when companies need to reinvent the way they work on the fly, an inability to connect all parts of the organization to share data, expertise, and talent can be crippling.
Companies will need a network structure, organizing around sources of value, with product managers empowered to make decisions with implications that cut across functions. Teams will not be permanent. They will be dissolved when they capture the value at stake, then regroup around new sources of revenue growth or cost reductions. Some companies call them scrum teams, others tiger teams, portfolios, or tribes. Whatever the label, the ossified matrix is giving way to a more agile one. In other words, the entire organization, not just IT, will adopt an agile approach to working. “Agile principles are now standard operating procedure for software design,” says Marcus Ryu, “but they’re also applicable any time you need to orchestrate a large number of people to get something complex and multi-faceted done over an extended time frame.”
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