We humans think linearly. Our linear thinking have, so far, helped us in making linear predictions about the future and we often got away without a significant deviation from our predictions. This changed suddenly a few years ago when the explosion of new technologies started outpacing us in our thinking. These technologies broke the frontiers of what we know and understand and brought about not linear but exponentially paced changes in the business landscape.
The gap between what should be done and what is actually done will only get wider in future
Consider insurance industry for instance.
Insurance is a marketplace that sets its price without an adequate knowledge of the costs it is going to incur. Consequently, the industry is already used to making exceptional predictions to stay profitable. This industry had very few and infrequent interactions with its customers and it predicted that this will continue to be the case given the nature of work they do. Consequently, it continued to make only linear incremental changes in their systems based on a defined list of priorities.
But then, Ubers and Amazons emerged and spoiled customer’s behavior forever. Customers started demanding much more frequent interactions, more centricity and more flexibility. To further exacerbate the situation, non-traditional insurance companies such as Insure The Box, Oscar, and Climate Corporation started mushrooming and took out a large chunk of market share. This forced traditional industry companies to make large scale changes in their systems just to stay in the competition. Consolidation became the norm. Large system integration contracts were signed. And in this way, a few leading companies started making themselves prepare for the competition.
A decision in haste is resources wasted. A better approach to change is to make planned and gradual changes so as to allow employees and resources to adjust to changes.
The real problem is finding where to jump and how high to jump.
Some of the leading insurers are now doing just that. Going beyond immediate needs of the market, these insurers are now creating a robust platform which will allow them to respond to changes in a more controlled manner. Germany’s Allianz, for example, is rapidly enhancing its digital capabilities by partnering with young companies on Big Data, mobile and social media. Many insurers are investing in digital technologies to reduce product development time, offer omni-channel experience to customers, reduce headcount, and eliminate operational inefficiencies. A leading insurer in United States is planning integration between its CRM systems and policy administration system to allow marketers and actuaries work collaboratively to integrate future cost and demand in pricing itself. This integration will not only enable creating micro-segments in product offerings but also enhance sales efficiency. On claims side, insurers are running predictive analytics algorithms to detect frauds and anomalies, adjust reserves, predict severity and intervene by assigning appropriately skilled resources at the right time in claims workflow.
Even as insurers are building capabilities to process structured data, novel concepts like aerial and digital imagery, mHealth, natural language processing, peer to peer insurance, etc., are being introduced to tap into the huge value hidden in unstructured data. Competition has further taken a turn for the worse with technology giants such as Google and Amazon entering insurance market with innovative and customer friendly products.
There is no doubt that insurers will have to respond to these changes. But those who have already taken small steps of making themselves digital ready will find this change much more smooth and natural than those who are simply struggling to stay in competition.
Change is difficult. To keep the change aligned to business objectives is even more difficult. While the digital revolution is impacting almost all functions of a company, each company derives greatest value from only a few functions that are most important to its unique business model. Forming a clear vision on what they are and what they would want to be in the digital world is the first big step for companies in their digital journey. The next important step is to make a roadmap that identifies what capabilities should be added, when they should be added and set the scope of activities that have to be completed immediately. While this roadmap is implemented, periodic evaluation of outcomes generated helps in course correction and remaining aligned to the business objectives.
It is important to keep in mind that the changes being made are not just procedural but also cultural. The digital solution will be completely effective only if the employees, management and all other stakeholders embrace the changes it is creating and adapt to it. An early involvement in the solution development keeps all the stakeholders aligned to the change and mitigates any suspicion and fear of it. This makes it easy for everybody to adopt digital in their day-to-day activities. This, in turn, truly transforms a company into a digital company.
Companies don’t have any option but to reinvent themselves into a digital company. Even though the road to a digital company is arduous and perilous, with perseverance and planning it will lead to benefits that we cannot even predict with our linear minds.