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Successful Transformation Initiatives means avoiding the ’10 Best of the Worst’

May 10, 2013

Transformation initiatives are complex, breakthrough enabling, requiring execution discipline beyond what you’d normally expect.  Disruptive, transformative initiatives tax organizations range of motion, established processes and boundaries – like many investments, the high ROI requires controlled risk.  Even when broken down into a  series of enhancement initiatives for execution, they  still involve organizational and personal risk, such as the CIO’s who have had to rework their careers after a Policy Administration System or Claims system failed to deliver as the Business envisioned.

P&C carriers spent the last decade minimizing IT investments, not even thinking of transformations, given how intertwined systems are in the insurance operations area.  This year, with the new regularity of 100-year events and a heightened competitive market, various studies and surveys show a marked increase in new IT spending, particularly in Underwriting, Mobile and Data Analytics.  Life and Health carriers, similarly, have increased spending due to regulatory reforms and the need for cost cutting based on new mandates.   Both are starting to realize spending over 50% of their current IT budget maintaining 20+ year old systems (even if they have received new front ends, the core remains) will not do going forward.  Two approaches are often taken, the first being specific break-fix incremental change (often labeled ‘enhancements’), and the second falling under the category of Transformation Initiatives.

In talking with P&C carriers, we are seeing a clear trend towards Transformation, defined as aggressively replacing Underwriting, New Policy Factory and Claims applications, implementing related and now possible process and operational improvements, with an operational tactical end-goal of reducing time and expense to maintain and improve inflexible systems, standardizing multiple PAS and Claims systems into a common application/process and then, once consolidated, adding Analytics to mine the now ‘Golden Masterfile’.  Mobile applications are rapidly replacing Portals for Agents and insureds, alike. Given the risks and costs, how can you maximize the chance of transformative success?

In our 30+ years’ experience, we find the most successful large scale transformation initiatives are governed, not by various levels of committees, but by a Transformation Agreement (TA), focusing all efforts, roles, policies and reporting towards a cohesive, globally accepted end-goal as defined in an Enterprise Business Architecture (as opposed to the usual meaning behind an Enterprise Architecture which is IT focused).

A key element of the TA is providing a firm foundation upon which everything is focused and built, such as what is the overarching reason for this endeavor:

  • Business Strategy standardization with local adaptations based on Voice of the Customer input
  • Leverage social networking into an ‘Internet of Businesses and Things’, i.e. Inter and Intra communications and relationships  including telematics (and utilizing the mass of data it delivers), and internal idea-innovations harvesting
  • IT empowered growth, such as agile new product development, superior claims handling, and underwriting efficiency via  Analytics-Big Data driven loss ratio improvement
  • Cost takeout and white-space creation, including redirecting the 57% of current IT spend from maintenance to growth enablers

In terms of feet on the street and hands-on reasons, exactly where does transformation or large system initiatives fail?  What is the most dangerous combination of extending initiative duration combined with that issue’s probability of occurrence?

Based on our experience, the ‘10 Best of the Worst’ in descending order are:

  1. Being labeled an IT project, not a Business project; shallow Business stakeholder engagement and commitment due to fear, frustration, and too many compromises during execution
  2. A large number of complex modifications to the purchased application to meet Business needs, usually as a result of having bought the wrong application(s)
  3. Incomplete Business requirements translated into partial systems specifications; inadequate test data from the Business to validate selection prior to negotiation; throwing tech at a business problem
  4. Lack of user acceptance or process changes wipe out any gain from new tech; low sustainability due to poor change management
  5. Either scope creep, or panic-driven scope reductions made to in-flight initiatives; inadequate funding based on newly uncovered unknowns; no Transformation Agreement as a baseline
  6. Key Business stakeholders do not understand IT people
  7. Key IT stakeholders do not understand Business people
  8. Unanticipated and not planned for complexity integrating between core applications based on new Business drivers (i.e., real time, not batch, SOA, APIs);
  9. Unexpectedly low levels of data quality, such as timliness, completeness, consistency, and the cumulative impacts of workarounds across silo’d legacy applications substantially increasing conversion Levels of Effort
  10. Project team over-dispersed or too many part-time participants; not enough SME time allocated, over reliance on commodity resources

How to avoid living the ’10 Best of the Worst’? 

Transformations are best managed differently than a project portfolio, which is usually built under the operating assumption all excellent ideas arrive within a set period of time, can be weighed during another set window, and then selected.  The PMBOK is expansive on defining and guiding ‘selection’, but does short shift on idea harvesting to make sure the projects under consideration fit into a breakthrough and disruptive strategic whole.  Thus, we recommend our clients form a Transformation Office (TO), defined in the Transformation Agreement, and run by the Business. This office incorporates all strategic planning contributors and beneficiaries (as well as the PMO) and ensures the overall project is executed in the right sequence while protecting against the reality of making so many minute course corrections the desired transformation goals are missed.  From the very beginning of transformation thinking, the TO holds ideation sessions, harvesting the best ideas, breaking inward-looking thinking and addressing more than a competitive match (if you’re the second dog pulling the dog sled, you never catch up to the leader). These best ideas are then formed into a cohesive strategic vision, followed by conversion into specific transformative initiatives and programs, addressing the 10 transformation traps listed above.

Transformations involving both technology and process and practice changes can achieve significant benefits, propelling successful companies to leadership positions while it takes other companies into internal turmoil and financial hits. First, ask yourself if you can stay pretty much as you are, with some systems and process enhancements, or if your strategy is to lead.  Your culture will determine your response; the market will determine the result.

Richard Eichen is the Founder and Managing Principal of Return on Efficiency, LLC, and is one of their senior turnaround leaders/CROs, Program Rescue and Interim Executives with over 25 years’ experience reshaping companies, Operations, IT/Systems Integration and key initiatives. Return on Efficiency, LLC specializes in those companies and initiatives where technology is the primary means of service delivery and revenue creation.  He can be reached at, and followed on Twitter, @RDEgrowroe.

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