RFI and RFP Resources
Second Step for Insurers to Manage No-Fail RFP: Gain Internal Consensus
As we said in our first piece on this topic, the dirty secret of RFP processes is that the game may be more about creating internal consensus than selecting a vendor solution. This is particularly true for core transformation projects where the effort is high and the risk of falling short is equally high.
However, from our perspective, if team learning and consensus is going to be more than 20 percent of the effort spent on creating, delivering, and managing an RFP process, then carriers and brokers should step back to complete their development of internal objectives before subjecting themselves and vendors to an elaborate bake-off.
Why do we believe this? Simply stated, creating an RFP as a group exercise with learning happening in front of vendors can create three negative outcomes.
1. Empowering staff without setting forth their accountability for the future and equipping them with relevant information will dilute the achievement of a company`s strategic objectives.
When management pulls large groups of individual contributors and middle managers together, the group may engage in elaborate discussions (disguised as analysis) that simply arrive at requirements that preserve a strong resemblance to the status quo. New technology that is SaaS-based and accessible anywhere on any device is inherently disruptive. There are significant changes to the customer experience whether that customer is an agent or a policyholder.
And therein lies the problem. As part of an inclusive process for developing and assessing an RFP, staff members who serve those communities may generate a logical fear of losing their position. This doesn`t have to occur.
Senior management can leverage a core systems modernization to extend product lines, add coverages and otherwise create value that sustains employment. However, that may not be evident in large group settings unless the strategic objectives for the purchase have been well laid out in advance.
Even then, those invited to create detailed RFP requirements often lack the experience and access to information about markets and profitability that would allow them to see that outcome clearly. This is not something that carriers and brokers should expose their vendors to.
Can interacting with vendors help execute the change management process? Yes. We feel an RFI with boilerplate questions and standard demonstrations goes a long way. The new systems do look different and have great new features for mobility, reporting, etc. Carriers and vendors can set the stage with staff for embracing innovation without ever discussing detailed business objectives. Following an RFI, senior management can then employ consultants or a task force (or both) to issue an RFP that reflects the strategic questions that have to be answered.
2. Vendors can (gasp!) manipulate the process more easily, further diluting your firm`s objectives.
Full disclosure: we once held senior positions at both carriers and vendors. We would be the last to suggest that vendors will always behave badly when they get involved in meeting with your staff. Most of the time, vendor interaction leads to useful education and the building of relationships that are helpful during implementation. You will want those relationships in order to withstand the inevitable crisis—a frequent characteristic of core systems` modernization projects.
Nonetheless, bad things happen when the senior management team doesn`t create a consensus about objectives with the staff who are encouraged to meet with the vendors. Vendors will always steer the dialogue toward what they do best regardless of whether it meets your critical needs. And those capabilities will attract attention from your staff even if they don`t represent core needs.
Many firms that have been burned by vendors solve the problem by keeping the vendors occupied by procurement officers. Does that keep all the vendors away from the parties that will use the system and solve the manipulation problem? No. Instead we feel that undermines the accountability those middle managers should feel for the choices made on their behalf. Again, there is no substitute for consensus on objectives.
3. “No Decision” feels like failure when in fact it may be the best path forward.
We feel strongly that all problems should be worked both backwards and forwards. In terms of managing technology procurement, working the problem backward means identifying the business case and defining the probability and severity of key risks in the execution of that business case.
The business case and those significant, agreed-upon risks then serve as a benchmark for judging the solutions provided by the RFP process. The RFI process that identified opportunities for modernization works the problem forward: What can we do? The RFP process should always work the problem backwards: What should we do?
Combining a business case featuring ROI and risks with an RFP can lead to useful outcomes such as de-scoping the project, deferring it, or even completely killing the idea because it is too risky or can`t achieve the objectives set out in the business case.
However, when internal consensus is lacking about those objectives, many managers and executives feel that they must move forward even if the solution doesn`t feel quite right. Two years and $10 million later, with no solution in production, they will wish that they hadn`t made that decision.
Again, having clear consensus means that killing a project before it starts can be deemed a success, particularly since it will galvanize staff to make needed updates to extend the life of current technologies.
RFIs can be used to inform executives, managers, and staff about the scope of potential objectives. Combined with business strategy, brand, channel management and product design, these capabilities can be used to develop a business case that gains consensus from everyone. At that point, an RFP will secure the best solution to meet those objectives, or reveal that a different course should be pursued.