According to a recent survey of insurance industry seniorexecutives, a majority of respondents indicated technology is acritical element of their strategy for improving competitiveness.That's not surprising considering the important role technologyplays in enabling nearly every key insurance business process. Whatis surprising, however, is fewer than half of those executives saidtechnology actually is delivering that advantage.

With so much riding on technology, getting it right should be asimportant to insurance companies as, say, underwriting guidelines,product design, or pricing. Why then do many insurance executivesreport a considerable lag in technology results vs. expectations?And on the flip side, what are IT-savvy carriers doing differentlythat enables them to deliver great results reliably fromtechnology?

First, let me clarify an important nuance. It seldom is thetechnology itself that produces disappointing results. In fact, aseparate study of IT in financial services organizations showedcompanies using systems from the same vendor experiencedsignificantly different results. In other words, the technologyitself was but one determinant of results. The difference wasattributable to several other factors, most notably how effectivelythose organizations implemented the technology.

With that in mind, here are some common reasons technology canfail to deliver expected results:

Strategy misalignment. A company's business strategy shoulddrive key operating decisions and tactics including marketdevelopment, service model design, organizational design, and ofcourse, technology investments, to name just a few. Establishingalignment between strategic intent and operational execution oftenis trickier than one might expect. For example, a P&C carriermay pursue a growth strategy that involves building its commercialbook of business. Yet its systems and business processes are notcapable of supporting that growth due to outdated technology. Theresult might be a growing commercial book but with the unintendedconsequences of frustrated agents and policyholders, higheroperating costs, and heroic IT efforts to support the business.

Proactively aligning IT priorities with the business strategytakes commitment and leadership from the top, especially for thoseorganizations that have older, less flexible systems. You may haveto postpone certain strategic initiatives until your systems andprocesses are modernized. Just don't wait too long–six months is aneternity these days.

Focusing on technology vs. meeting business requirements.Companies commonly focus on technology as the catalyst to enhancetheir competitive position, improve productivity, and reduce costs.Properly positioned, technology can do all those things. And theaforementioned survey results indicate insurance executives areexpecting just that. But too often the focus becomes the technologyitself (e.g., a new claims system) rather than defining theunderlying business problem and designing a comprehensive solution.In order to assure the desired outcome, a technology initiative(which most times actually is a business improvement initiative)must begin with defining the business problem (e.g., an inefficientand costly claims process) and then building detailed business andtechnical requirements. This seems obvious, but too many companiesrush this step thinking the technology itself will save the day.Customers, producers/agents, internal users, IT staff, and companyvisionaries must all play an active role in definingrequirements.

Weak cost/benefit analysis. Technology cannot meet unrealisticexpectations, regardless of how many bells and whistles it has. Awell-executed technology initiative starts with a solidcost/benefit analysis. This analysis establishes objectiveexpectations for what the technology must deliver, how much it willcost, and how the organization will benefit overall. Without thisimportant stake in the ground, technology initiatives can drift andexpand well beyond the original intent, and it becomes verydifficult to measure success objectively.

Once a cost/benefit study validates a proposed technologyinitiative, then an iterative form of that same cost/benefitanalysis should become an integral part of the implementationproject. Things naturally change as a project progresses, socontinuous evaluation of changes will ensure the project remainsgoverned by an objective, results-focused discipline.

Ineffective use of existing technology. Companies routinelyacquire new technology, and just as routinely, they fall short offully integrating that technology into the organization. Commonreasons for this include implementation fatigue, lack of end-userinvolvement, poor system integration with existing technology, or amismatch between the technology and the business problem it wasintended to solve. When poorly implemented systems take root,workarounds and shadow systems crop up to compensate for theweakness of the primary system. This makes future technologyimplementations even more challenging because of the fragmentedenvironment that develops.

To combat this, subject your existing shadow systems andworkarounds to a cost-benefit analysis. Are they really necessary?How does the customer or end-user benefit? Do they save time andcost? If the answers are positive, then the related functionalityshould be seamlessly integrated with your core systems. If not,redesign your business processes to eliminate the workarounds andshadow systems.

People, process, and technology out of sync. One of the mostcommon and tempting missteps with new technology is to overlay itonto existing, outdated business processes. The apparentexpectation is new technology will bring with it "best practice"business processes. Yet without a comprehensive redesign prior tointroducing technology, the result most often is to "pave the cowpath." This approach does not leverage the true potential oftoday's technology, nor does it provide the expected productivityand service gains. In order for information systems to meet theirfull potential, a redesign of related jobs, workflows, servicemodels, and many other operational elements is required. Existingprocesses must be refined or redesigned (or sometimes eliminated)to take advantage of new technology. Techniques such as workflowmodeling and interrelationship mapping can be used to measure andquantify impacts of new systems on people and processes. Legacy jobskills must be renewed and expanded to assure optimal use of newsystems and revamped business processes.

Successful Traits

Having described some common technology-related challenges facedby insurers, here now are some of the competencies andcharacteristics that epitomize successful IT organizations. Thereis a group of insurance carriers–the "usual suspects"–thatconsistently are heralded and admired for capitalizing ontechnology. They're known for using technology as a competitivedifferentiator. While we most often hear about those usualsuspects, in fact, there are far more carriers achieving suchsuccess. What makes these companies more adept at leveragingtechnology? Here are some common characteristics of those insuranceIT leaders:

Innovation. A restless spirit tends to permeate the culture ofcarriers that are innovative with IT. And size is not aprerequisite. This spirit can be found in smaller carriers as wellas the nationals we all recognize. To these companies, the statusquo is never good enough. Achieving this kind of norm requiresstrong leadership and a difficult cultural shift. It requires achange in thinking style from "we're finally finished" to "whatmore can we do?" One way to promote this kind of culture is tosubject your operations and technology to regular performancereviews. Establish cross-functional teams that use "desired state"planning to target operational improvements. "Desired state"doesn't necessarily mean "attainable state," but it promotes freethinking that leads to innovation. Keep in mind innovation isseldom a big-bang occurrence. It happens in little steps over time,but collectively those steps can be the difference between acarrier that's leading the pack vs. one that's chronically playingcatch-up.

Pace. On the same wavelength as innovation, pace is anotherelement endemic to IT overachievers. In these organizations, changeis a way of life and the pace of change is intentionally brisk. Forexample, a carrier may roll out a new Web-based agency interface.Then in three months' time, a series of usability enhancements arerolled out, some of which were not even known of when the initialrollout began. Despite being partially undefined, the follow-uprelease already was on the calendar and the resources alreadyassigned. The expectation is there. A good example of this kind ofpace in practice is that used by the leading package deliveryservices. They routinely (some might say relentlessly) enhancetheir delivery options, customer interfaces, and pricing. This paceis not disruptive to them; it's routine.

Business/IT collaboration. Despite universal acknowledgement ofthe problem ad nauseam, the great divide between IT and businessstill exists in many carriers. Technologists, by their nature,thrive on technology. It comes naturally to them just as it should.Business users, on the other hand, are focused on running thebusiness and serving customers. They are not always tech savvy andsometimes are embarrassed to admit it. How do successful carriersclose the gap?

o Acknowledge the gap. It's there, it's always been there, andto a degree, it always will be there. Each player (business andtechnology) is a specialist and is necessarily focused on his orher area of expertise. Acknowledgement is not acceptance, so makeclear the goal of creating a true partnership between business andIT.

o Lead the way. Senior leaders must demonstrate their commitmentby serving actively on steering committees and by supportinginitiatives with financial and organizational support.

o Appoint business users to serve in key positions on technologyplanning committees. This fosters engagement and accountability bythe business side and forces the technology side to explain thingsin terms relevant to business.

o Establish information exchange forums in your organization.These should be in person, not conference calls or webinars. Getbusiness and technology people together in an informal yetbusiness-focused setting. Define a topic of discussion for eachsession. For example, someone from IT might provide a high-levelexplanation of BPM systems and how they might benefit processowners. Likewise, a business person might describe challenges inserving agents (for example, the diversity of agency technologyimpacting service delivery). These are not solution sessions orkumbayah group hugs. These are open communication sessions thatpromote mutual understanding of the respective domains. Create asummary at the conclusion of each session and share themcompanywide.

o Appoint a cross-section of business and technology personnelto attend an industry conference every year. Osmosis can be a greatway to become familiar with trends and emerging technologies.

o Invite vendor presentations. Technology vendors are happy tointroduce you to their products. Along the way you'll learnconcepts and be exposed to different ways technology may benefityour operation. You'll have to put up with a little hype, but thelearning is worth it.

o Offer rewards tied to successes. Each time you achieve anon-time, on-budget technology implementation that delivers itsprojected business benefits, award bonuses to the team membersresponsible. Establish the expectation that bonuses are awardedonly after the business benefits are achieved. So, if the goal isto reduce average claims handling by one day, don't award bonusesuntil that reduction is achieved.

Blocking and tackling. IT organizations that consistentlydeliver great results all have one thing in common: They'vemastered the basics. Today's most successful IT organizations havemastered the following core competencies: project management,people/skills management, system integration (integrating disparatesystems whether purchased or home-grown), requirements development,process modeling, and being customer focused and easy to dobusiness with. Assigning a "competency czar" for each of thesedisciplines establishes accountability for building and maintainingthem.

On the Horizon

Of all the suggestions for getting IT right, the blocking andtackling factor makes the most impact. Indeed, those competenciesare increasingly important given insurance IT is ever morefragmented by outsourcing, multiple systems and platforms, anddiverse functionality requirements. Turning again to the surveyresults, it is clear carrier executives are counting on thosecompetencies to deliver their top-priority technology initiativesincluding e-signatures, improved Web self-service foragents/producers and policyholders, document management andworkflow, and analytics. Perhaps a few of the suggestions offeredhere will help your organization be better prepared to deliver.

Rod Travers is senior vice president of technology for theRobert E. Nolan Company, a management consulting firm specializingin the insurance industry. The survey mentioned in the article wasconducted by the Robert E. Nolan Company and released earlier thisyear.

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