How Insurers Can Equip Themselves for Their Digital Transformation
Many insurance companies will define their strategy with digital transformation at its core and the corporate payback will become rewardingly clear, as strategy becomes reality and profits rocket. Meanwhile others won’t get so lucky as the investment and passion that supported their digital efforts fail to realize business value that impresses the executive board.
Get this wrong and teams can expect an extra degree of scrutiny for any further spend on digital transformation. Get it right and you’ll have the CFO and CEO eager to boost investment and increasingly interested in how digital can become integral to their overarching strategy.
When dealing with digital transformation in insurance, what many insurance firms have yet to learn is how to adopt digital strategically with business benefits in mind. While digitization is a top priority for many insurance CIOs, only 12 percent consider their organizations to be digitally progressive. Some also have an unbalanced focus on technology, with insufficient attention paid to the “irrational” aspect of transformation and change.
Long before the days of digital transformation, it’s been well-known that strategy is far more difficult to deploy than develop. The appeal of strategy and digital dreams often over-shadow how complex execution is going to be, particularly when workforces run into the thousands, tens of thousands and more, with politically savvy stakeholders to manage across multiple continents.
When strategy is accompanied by lousy execution, the strategy might as well have stayed in the box, saved the company money, spared hearts and minds, and avoided disappointing stakeholders. Because strategy is only great if it’s achievable. If it sounds like a great strategy but can’t be successfully executed upon, then it’s the wrong strategy for that point in time for that company. So how can insurers launch, manage and govern their digital transformation, and scale innovation across their organizations, while avoiding the pitfalls that many fall into when tackling digital transformation in insurance?
Two of the first questions to answer are; “how is our insurance business being threatened?” and “what opportunities will our appetite for transformation allow us to take advantage of?” These are fundamental questions because while some insurers will have CEOs that are bold enough to leverage digital to literally transform their business model, others won’t. Their scope might well be limited to digitizing operations or marketing, leaving the business model untransformed. So insurers must get clear on these questions before they can answer the next question; “how far can we go with digital transformation?”
Another question to ask yourselves at the outset is, “are we going to be responding to the evolving insurance sector in a defensive or offensive manner? – or perhaps a bit of both?”
Defensive responses can be used to fend off attacks from potential competitors, and could be seen as dealing with the digital economy threats, as opposed to the opportunities. They set out to make a possible attack unattractive and discourage potential challengers from attacking. Meanwhile, the purpose of an offensive response is to make something desirable happen, which is really the essence of truly legitimate digital business transformation. It’s about taking a pro-active offensive response to the digital economy, seizing the opportunity, and not simply waiting for the effects of the digital economy to happen to you. It’s about being the disruptor as opposed to the disrupted. But how will you combine innovation and digital in a way that enables you to disrupt?
The purpose of an offensive response is to make something desirable happen.”
Only when you know what your company’s strategic position and direction is, should you set about considering what portfolio of projects is required to enable that strategy to be as successful as possible. That’s when you can begin to understand the capabilities you’ll need, the gaps you’ll need to fill, what your transformation governance needs to look like, and what business value will be delivered.
Transformation and change of any reasonable scale will not have the luxury of only a handful of small projects to consider. It will be subject to the need to coordinate and orchestrate a portfolio of projects, which each plays its own role in the achievement of the overall transformation outcome. It’s critical to ensure that all of these initiatives are joined up and well-orchestrated from the start. The alternative will see clouds of chaos and confusion rain down on well-intentioned transformation teams that were ill prepared for complex transformation.
Many insurance firms tend to endure a painful experience for a year or so until they are forced into accepting that the operational capability that got them to where they are today, is not the same as the transformation capability they need to create a new future for themselves. Digital transformation in insurance requires perseverance.
But once firms accept this, they tend to find themselves acquiring the transformation management capability they need to continue their journey more successfully. Getting this right from the beginning can save a great deal of pain and money, and avoid your best people jumping ship.