The Insurance industry is undergoing a dramatic and
necessary disruption. This disruption
serves two purposes, one, to allow insurance to be offered at a microlevel and
to a market that was hitherto underserved and two, to ensure that the customer
is more intimately engaged. A few weeks
ago I looked at how technology is disrupting the Insurance industry in Africa
and how micro insurance promises to save Africa. If you missed it, read it here.
In this piece, we want to suggest five ways an incumbent in
the Insurance industry can change and survive. We will be using the example of
the Kenyan market, one of the most vibrant in the African continent.
1.
Develop
a digital strategy
In doing this, lies the evolution of the strategy. We have
seen it evolve from a static plan covering multiple years, to a flexible plan
that adapts to a changing environment. Today, there is a rising demand for more
strategic thinkers across organizations, as opposed to only in the
boardroom.
As a term, digital strategy went from primarily being about
marketing using digital tools to depicting a term that spoke about disruption
of old, entrenched business models. This is the stuff of Uber disrupting Taxi associations, Instagram disrupting film and photography, Netflix disrupting movie rental, and the list goes on.
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| How Software is eating the world. Source: disruptors.mx |
In Kenya, M-Pesa
disrupted traditional banking by digitizing money and creating a
trusted system where people and businesses can distribute money in
exchange for goods and services. From a virtual branchless bank, M-Pesa has grown into a virtual
megamarket with buyers and sellers peddling goods and services of every
kind.
For Kenyans this digital world is no longer a channel, but a
transformative force that is creating completely new behaviors and
opportunities.
Today more people in Kenya are turning to digital
communities and stores be it Jumuia, OLX
or Facebook. This digital world is
allowing users to self-select their experiences, thus allowing businesses to
gain feedback and build relationships.
Any Insurance company that wants to survive and thrive has
to develop a digital
strategy. What is a digital strategy? Three definitions could point us to the right
course of action. A digital strategy is:
a)
a process of identifying, articulating and
executing digital opportunities that will increase an organization’s
competitive advantage. (Digitalstrategyconference.com)
b)
a plan
that aims to accomplish something with the benefit of digital tools.
c)
the
who, what, when and where of listening and responding to customers, bridging
brand experience, iterating offerings and collecting and activating customers
relationships in order to accomplish an actionable and measurable
objective. (Bud Caddell)
2.
Define
and understand your Digital capital
We are ushering in a digital capital economy. Winners in
this era will not be determined by cheap labor or ordinary capital both of which
are being squeezed by automation. Instead, the future will be for those who
can innovate, develop new products, services and business models repeatedly at
the speed that the customer demands.
To achieve this feat, we start to talk about digital capital
meaning not just the tangible assets that most incumbents are acquiring like
servers, networks and basic software, but also the intangibles assets like the
organizational redesigns that can be realized with the right skill and mix of
employees to better engage and satisfy the customers. The complementary
business processes, work practices, patents, brand equity and even culture,
ensure an enhanced digital experience for users.
Most insurance companies in Kenya lack intangible assets or
they are only skin-deep. This needs to change. These intangible assets, if well
understood and clearly defined, can allow the incumbent to feel secure
outsourcing certain functionalities to supply chain partners thus drive down
operational costs while allowing them to rapidly respond to client needs.
3. A digital
transformation is not an IT transformation
IT Transformations are traditionally massively complex and
highly disruptive to long-standing business processes and their end-users; they
can also span years and cost a ton of money. Success is normally low. They fail
because of lack of involvement, weak support from top management and unclear
business objectives. (Source Strategy&)
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| Sourced from corbusllc.wordpress.com |
IT transformation is
comprehensive change to an IT organization that cuts across its processes,
technologies, culture, and sourcing and delivery models that enables continuous
step change improvements in business capabilities supported by
significantly stronger IT capabilities at lower unit costs (Source KPMG).
Digital transformation on the other hand is customer facing,
demand or revenue generating. Digital transformation demands more at the pace
of the market and customer expectations rather than at the upgrade cycles of IT
Vendors.
Digital Transformation drives or can drive IT transformation
and not the other way round.
IT Transformation is about Operation Expenditure (OPEX)
control measures and increasing operational efficiency and optimization.
Digital Transformation is about using fast digital
technologies such as analytics, mobility, social media and smart embedded
devices to change customer relationships, internal processes, and value
propositions.
Because these fast technologies operate at the speed of
thought with a potential to turn the incumbent’s tangible assets into
liabilities, it is essential for the incumbent to embrace shorter cycles in
taking a product or a service from idea to deployment. For this to become a
reality, collaboration and horizontal integration is essential within an
organization.
4. Avoid the
following transformation traps
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| Source MIT Sloan Embracing Digital Technology |
Make sure you have a leader with the right temperament and
experience to take charge of the digital transformation. Most insurance
companies have few leaders having and offering a vision or a road map to
digital transformation.
The leader must be able to rally the support of all
employees across the enterprise. Remember that urgency is an imperative; not
acting soon enough could put the business in peril. According to an Altimeter
Survey, the Chief Marketing Officer (CMO) is the most likely executive to
champion digital transformation efforts, mainly because their role focuses on
customer engagement.
Manage the attitudes of older or technophobic workers
especially if they are in management and educate them on technology: Trends, disruptions
occurring and future strategies.
The presence of legacy systems that have already cost the
organization a lot of money in investment and are too complex to update should
be reviewed and a careful analysis done on how to replace them with minimum
disruption. In this situation, make sure management has complete transparency
in the costs involved in indecision.
5. Finally, have a
change checklist
Develop a checklist that defines the steps to Digital
Transformation for your Insurance Company. There are many in the wild, I prefer
the one below adapted from Altimeter’s
Digital Transformation Report.
It focuses on three areas: Leadership, the Customer
Experience and the team you constitute to make this transformation a success.
Have a leader and
articulate the vision
1.
Document the factors disrupting the market.
Generate a business case that will help make this clear to management.
2.
Develop a SWOT analysis that assesses your
current position for transformation.
3.
Develop a vision statement on how the digital
transformation will look like in the end, the benefits it will accrue, current
clients or new clients it will be able to serve.
4.
Seek an executive sponsor who becomes the
leading champion, he must buy into the vision and be willing to rally support
across the organization.
5.
Constantly educate the executive sponsor and
make sure they are effectively communicating the vision for digital
transformation throughout the length of the project and across the organization.
Create a digital
customer experience
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| Sample Customer Journey |
1.
Map the customer journey and the digital
customer journey, as they exist currently. Interview stakeholders and learn the
opportunities and challenges that exist among them.
2.
Understand the differences between current and
digital customers’ journeys. Identify any unique variations
3.
Chart a sample journey around the right
experiences for the right customers based on channel and screen
4.
Note the gaps that exist and which investments
are lacking and need to be made.
5.
Assess the processes, policies and systems
currently in place that prevent success in engaging digital customers and lay
out a plan to overcome them
6.
Review the ultimate customer journey every
half-year and adopt investments to realize a better digital customer experience
strategies.
Digital
transformation Team
1. Create
a cross-functional transformation team ideally from every function in the
organization.
2. Develop
a RACI model for the cross-functional group and an ongoing collaboration
schedule and reporting process. This allows prioritization and delegation of
projects.
3. Build
a strategic alliance with the IT Department (this must be a cross functional
team).
4. Form
a data collection and insights team as part of the digital transformation
workgroup. Create role(s) necessary to collect, analyze, and tell a story
through data.
5. Measure
impact of transformation at the enterprise level and at each touch point to
document progress and benefits. Establish a reporting process to the workgroup
and ultimately to stakeholder groups.
6. Develop
a training regimen to bridge the gap between existing and required expertise
for transformation processes and technologies.
With that, I wish you success in your digital transformation
journey.
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