Having spent seven years helping major insurers with digital transformation, I’ve seen the good, the bad and sometimes the downright ugly in practice.
The bad and the ugly include:
- Digital "strategies" disconnected from the priorities of the business;
- Inconsistent approaches across different parts of the insurer, confusing customers;
- Gaps and overlaps in delivery, wasting both opportunities and resources;
- Digital approached as a project rather than as a root-and-branch transformation; and
- Lots of activity but little practical achievement.
All of these issues, and more, can be avoided by implementing a model for sustainable digital transformation.
I offer you my version of such a model, below.
1. The Customer
Ultimately, all premiums and other revenues flow from the customer, hence placing the customer at the center of the model. Without strong focus on the customer, the digital transformation won’t be sustainable.
For any digital initiative, the insurer therefore needs to ask what the impact will be on the customer and design or re-design accordingly.
That doesn’t mean that the customer should be the only focus. There’s still scope for using digital to reduce costs, increase efficiency and generate new revenue streams - just not at the expense of the customer.
2. Business Strategy
How the insurer seeks to serve the customer will be set out in the business strategy. This should therefore be the starting point for the insurer’s digital transformation.
To be sustainable, any digital strategy has to be rooted in the business strategy. To give but one example, digital claims would look very different in an insurer competing primarily on price than in an insurer competing primarily on personal service.
3. Digital Vision
The digital vision expresses how digital will help deliver the business strategy.
The vision can take many forms, such as narrative statements, depictions of the future state and key re-imagined customer journeys. But much more important than the format is that all key stakeholders must understand, buy into and be able to expound the digital vision.
The digital vision provides the glue for everything that follows.
See also: 3 Phases to Digital Transformation
4. Digital Design
Once all key stakeholders are aligned behind the vision, the next step is to drill it down to a level of detail that is deliverable. Again, the precise methods and tools for doing so can vary according to the particular needs of the insurer. But in my experience a focus on customer journeys or user stories is almost always a powerful component.
What is critical is to ensure that all key stakeholders, across the insurer, are aligned behind this more detailed digital design as well as the higher-level vision - not least because trade-offs between different functions and business units are likely to be required.
If key stakeholder alignment isn’t achieved at this relatively early stage, the digital transformation is unlikely to be sustainable.
5. Digital Capabilities
Only now should the insurer ask what it needs to put in place to deliver its digital transformation - the digital capabilities required.
These can, and should, be wide-ranging, encompassing culture, people and processes as well as the requirements for new and improved technology.
The digital capabilities provide the bedrock for the digital transformation, and are likely to be fairly stable over time.
6. Road Map
Once the insurer knows What capabilities are required, the next step is to establish the How and the When. How will any required culture changes be made sustainable? Should new people be brought in, or can existing staff be re-trained? For technology capabilities, should the insurer buy on the open market, build unique capabilities in-house or rent from others in the increasingly abundant insurtech ecosystem?
More controversial is likely to be the When. By now, everyone should be excited about the digital transformation and be keen to get on with it. Unfortunately, not everyone can be first - so compromises and trade-offs will again be required. Otherwise, the digital transformation is liable to collapse in acrimony in its early stages - and never deliver in the first place, let alone be sustainable.
This is also the point at which the digital transformation’s relative priority against other strategic initiatives comes into play. Reaching alignment on the trade-offs between digital transformation and other critical programs will be essential to the sustainability of the digital transformation.
7. Delivery
And now the insurer merely(!) needs to deliver to the road map. As with any transformation program, this won’t be simple - but the same sorts of approaches, tools and techniques apply, so I won’t go into that further here.
8. Review
Many digital transformations end with delivery. But that’s a mistake. Because the world moves on, and the digital transformation of an insurer is rarely complete.
To ensure sustainability, it is also critical to implement a process of continuing review - seeking feedback from customers, assessing financial and other outcomes, considering potential improvements and translating what is learned into updated visions, designs, capabilities and road maps as appropriate.
Without this step, both the digital transformation and the insurer itself will stagnate - losing the benefit of all the hard work done to that point.
See also: Culture Side of Digital Transformation
9. Change Management
Surrounding steps two to eight in the model, you’ll see a ring titled "change management."
Having now read through those steps above, you’ll see why.
Multiple times I’ve used terms such as alignment, understanding and buy-in. And no digital transformation program will be sustainable without its key stakeholders acting in harmony to achieve common goals.
Key to sustainability, therefore, is the establishment and use of a high quality change management capability within the digital transformation program.
I won’t go into that more in this article, but you can see some of my thoughts on change management, within the context of digital transformation, here: Digital Change Management and Adapting OCM for an Increasingly Digital World.
10. Governance
Finally, no insurer’s digital transformation program is likely to be sustainable without the underpinnings of good governance.
This includes multiple elements, but experience shows that the most important to get right are:
- The RACI Matrix for Digital, showing exactly who is responsible and accountable for what, across the insurer’s functions, lines of business and transformation capabilities;
- An accompanying target operating model; and
- The processes and cadences for managing the digital transformation, at both the strategic (vision, capabilities, design, road map and review) and tactical (continuing program delivery) levels - including financial management.
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None of the above is rocket science, yet to this day few insurers, globally, have implemented a truly sustainable digital transformation.
I hope that, by publishing this simple model, I am providing some help to those who find themselves struggling.
Most insurers won’t, of course, be starting from a blank sheet of paper, so the model will need refining to meet the particular needs of each insurer.
