Enable ‘Decision Velocity’ to Keep Insurance Technology Projects on Track
As individuals, we face decisions every day. Some are made easily; others can be difficult. Often, our decision-making involves one or two people and very little complexity, making the process a relatively short one. But in large projects, months-long decision-making is not uncommon, especially if it involves a transformation-type project with many stakeholders.
We see this often in the insurance industry. Insurers looking to transform their businesses with new core systems face hundreds or even thousands of decisions as part of these implementations. Common examples are business decisions related to future state processes and workflow, defining insurance products on a new platform or striking a balance between straight-through processing and underwriting touch. There are many examples.
More technical business requirements also require important decisions. For example, how will existing business be migrated to the new platform? How will historical data be handled? Other key decisions might be related to how data will be captured and sent downstream to enable regulatory, operational, and analytical reporting.
Interestingly, the number of decisions is not the culprit in project overruns; rather, it is the speed at which those decisions are made—decision velocity—that greatly influences project cost and complexity.
Consensus: Good Idea for Dinner Plans; Bad Idea for Large-Scale Projects
In her 2012 article, “The Six Enemies of Greatness (and Happiness),” Forbes contributing writer Liz Hagy wrote, “Nothing destroys a good idea faster than a consensus.” While that assertion may not be true for, say, a small group deciding on where to go to dinner, it most certainly applies to insurance core system replacement projects. The thing is, consensus-driven decision-making is historically part of an insurer`s culture, and when that culture is matched with the hundreds or thousands of business decisions to be made, the results can be incredibly costly.
Let`s consider this hypothetical scenario: Insurer X is in the middle of transforming its business with a modern core system. Before initiating the first release of its new core system, the system vendor gave Insurer X a moderate complexity factor of 200 percent as part of its project implementation estimate. The complexity factor assesses a company`s ability to make efficient decisions. This includes empowering team members to make decisions as well as avoiding the revisiting of decisions already made. In general, the larger the company, the more complexity in decision making (i.e. consensus driven, more stakeholders, complexity of environment, revisiting decisions, team empowerment, etc.). Over the course of the deployment, Insurer X relied on team consensus to make decisions for the handling of its business requirements. With so many hands in the pot and no real steering committee guiding the project, it ended up with overruns in terms of both time and complexity (and money).
When it came time to deploy the second project phase, Insurer X was given a complexity factor of 100 percent—half the previous estimate—based solely on its ability to streamline decision-making based on lessons learned during its first deployment. This lower complexity factor ultimately determined a lower estimated cost of deployment for the second project phase.
As mentioned, another contributing factor to an insurer`s decision velocity involves the revisiting of decisions already made. Rethinking previously decided upon decisions slows down projects and ultimately increases costs. Revisiting of decisions is often the result of a lack of trust or empowerment within the team.
So, if consensus-driven decision-making or revisiting decisions made previously are the enemy in large-scale insurance technology deployments, what is the preferred approach? What steps can be followed to increase insurers` chances of having a project deploy on time and on budget?
Achieving Decision Velocity
Insurers that have achieved decision velocity have ensured their decision-making encompasses six key elements.
The first is to have in place a clearly defined governance model to guide how decisions will be made during the project and to make sure the project team knows who they can go to when they need a certain decision made within the project. As discussed earlier, there are hundreds or thousands of decisions to be made within projects like this. Having a clearly defined model that the entire team understands and can use as a reference to get decisions made on a daily basis is imperative.
The second critical element is to have active business engagement at all levels within a project. These projects are not simply IT or technology transformation projects; rather, they`re business transformation projects and the majority of decisions that are made are really centered on the business. Active business engagement reinforces the business case and helps keep the big picture front and center.
The third element is to have the right business sponsor. This person or small team drives the vision, prioritizes, and reinforces the business case, goals, and objectives that map back to the original reason for undertaking the project. The business sponsor may be an individual, a couple of individuals or a small team. (Any larger and it becomes a committee, which brings the insurer right back to consensus-based decision-making.)
Fourth on the list is team empowerment. The business sponsor must entrust individuals in the trenches to make 80 percent to 90 percent of the daily decisions. Problems arise when the business sponsor is unable or unwilling to delegate or let go of making the daily decisions. When this happens, decisions are revisited. For example, a team makes a decision; a week later, the business sponsor learns about the decision and wants to rework it. This, of course, prolongs not just the decision-making process, but the project itself.
Fifth is to have a clear set of guiding principles that are communicated, reinforced, and measured. As is often the case when a large-scale project gets under way, the business case can be easily forgotten when the project teams are mired in those hundreds of business decisions. Establishing a value framework aligned with your project and company objectives serves as an invaluable tool that forces the team to regularly look at cost, benefit, and whether they are leveraging the system to its full capacity can help keep the big picture in mind. (For example, every scope decision made should be reinforced with a business reason as to why it was made.)
Finally, the sixth element is to schedule a regular ‘decision` meeting with key stakeholders present. Inevitably, there are tough decisions or issues that the team may need to escalate. During these ‘decision` meetings, these tough decisions and issues are tackled and solved in real time, ensuring progress is made.
Don`t let decision-making delays derail your project and, ultimately, your business transformation objective. By abandoning consensus-driven decision-making and embracing a more streamlined approach, insurers can achieve decision velocity and keep project cost and complexity manageable.
(Brian Moore is vice president, field consulting at Guidewire Software, a provider of software products to the Property/Casualty insurance industry. Guidewire`s customers have successfully executed more than 300 core system projects to date. Moore can be reached at email@example.com.)