Strategy misalignment. A company's business strategy should drive key operating decisions and tactics including market development, service model design, organizational design, and of course, technology investments, to name just a few. Establishing alignment between strategic intent and operational execution often is trickier than one might expect. For example, a P&C carrier may pursue a growth strategy that involves building its commercial book of business. Yet its systems and business processes are not capable of supporting that growth due to outdated technology. The result might be a growing commercial book but with the unintended consequences of frustrated agents and policyholders, higher operating costs, and heroic IT efforts to support the business.

Proactively aligning IT priorities with the business strategy takes commitment and leadership from the top, especially for those organizations that have older, less flexible systems. You may have to postpone certain strategic initiatives until your systems and processes are modernized. Just don't wait too long–six months is an eternity these days.

Focusing on technology vs. meeting business requirements. Companies commonly focus on technology as the catalyst to enhance their competitive position, improve productivity, and reduce costs. Properly positioned, technology can do all those things. And the aforementioned survey results indicate insurance executives are expecting just that. But too often the focus becomes the technology itself (e.g., a new claims system) rather than defining the underlying 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 inefficient and costly claims process) and then building detailed business and technical requirements. This seems obvious, but too many companies rush this step thinking the technology itself will save the day. Customers, producers/agents, internal users, IT staff, and company visionaries must all play an active role in defining requirements.

Weak cost/benefit analysis. Technology cannot meet unrealistic expectations, regardless of how many bells and whistles it has. A well-executed technology initiative starts with a solid cost/benefit analysis. This analysis establishes objective expectations for what the technology must deliver, how much it will cost, and how the organization will benefit overall. Without this important stake in the ground, technology initiatives can drift and expand well beyond the original intent, and it becomes very difficult to measure success objectively.

Once a cost/benefit study validates a proposed technology initiative, then an iterative form of that same cost/benefit analysis should become an integral part of the implementation project. Things naturally change as a project progresses, so continuous evaluation of changes will ensure the project remains governed by an objective, results-focused discipline.

Ineffective use of existing technology. Companies routinely acquire new technology, and just as routinely, they fall short of fully integrating that technology into the organization. Common reasons for this include implementation fatigue, lack of end-user involvement, poor system integration with existing technology, or a mismatch between the technology and the business problem it was intended to solve. When poorly implemented systems take root, workarounds and shadow systems crop up to compensate for the weakness of the primary system. This makes future technology implementations even more challenging because of the fragmented environment that develops.

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

People, process, and technology out of sync. One of the most common and tempting missteps with new technology is to overlay it onto existing, outdated business processes. The apparent expectation is new technology will bring with it "best practice" business processes. Yet without a comprehensive redesign prior to introducing technology, the result most often is to "pave the cow path." This approach does not leverage the true potential of today's technology, nor does it provide the expected productivity and service gains. In order for information systems to meet their full potential, a redesign of related jobs, workflows, service models, and many other operational elements is required. Existing processes must be refined or redesigned (or sometimes eliminated) to take advantage of new technology. Techniques such as workflow modeling and interrelationship mapping can be used to measure and quantify impacts of new systems on people and processes. Legacy job skills must be renewed and expanded to assure optimal use of new systems and revamped business processes.

Successful Traits

Having described some common technology-related challenges faced by insurers, here now are some of the competencies and characteristics that epitomize successful IT organizations. There is a group of insurance carriers–the "usual suspects"–that consistently are heralded and admired for capitalizing on technology. They're known for using technology as a competitive differentiator. While we most often hear about those usual suspects, in fact, there are far more carriers achieving such success. What makes these companies more adept at leveraging technology? Here are some common characteristics of those insurance IT leaders:

Innovation. A restless spirit tends to permeate the culture of carriers that are innovative with IT. And size is not a prerequisite. This spirit can be found in smaller carriers as well as the nationals we all recognize. To these companies, the status quo is never good enough. Achieving this kind of norm requires strong leadership and a difficult cultural shift. It requires a change in thinking style from "we're finally finished" to "what more can we do?" One way to promote this kind of culture is to subject your operations and technology to regular performance reviews. Establish cross-functional teams that use "desired state" planning to target operational improvements. "Desired state" doesn't necessarily mean "attainable state," but it promotes free thinking that leads to innovation. Keep in mind innovation is seldom a big-bang occurrence. It happens in little steps over time, but collectively those steps can be the difference between a carrier that's leading the pack vs. one that's chronically playing catch-up.

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

Business/IT collaboration. Despite universal acknowledgement of the problem ad nauseam, the great divide between IT and business still 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 the business and serving customers. They are not always tech savvy and sometimes are embarrassed to admit it. How do successful carriers close the gap?

o Acknowledge the gap. It's there, it's always been there, and to a degree, it always will be there. Each player (business and technology) is a specialist and is necessarily focused on his or her area of expertise. Acknowledgement is not acceptance, so make clear the goal of creating a true partnership between business and IT.

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

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

o Establish information exchange forums in your organization. These should be in person, not conference calls or webinars. Get business and technology people together in an informal yet business-focused setting. Define a topic of discussion for each session. For example, someone from IT might provide a high-level explanation of BPM systems and how they might benefit process owners. Likewise, a business person might describe challenges in serving agents (for example, the diversity of agency technology impacting service delivery). These are not solution sessions or kumbayah group hugs. These are open communication sessions that promote mutual understanding of the respective domains. Create a summary at the conclusion of each session and share them companywide.

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

o Invite vendor presentations. Technology vendors are happy to introduce you to their products. Along the way you'll learn concepts and be exposed to different ways technology may benefit your operation. You'll have to put up with a little hype, but the learning is worth it.

o Offer rewards tied to successes. Each time you achieve an on-time, on-budget technology implementation that delivers its projected business benefits, award bonuses to the team members responsible. Establish the expectation that bonuses are awarded only after the business benefits are achieved. So, if the goal is to reduce average claims handling by one day, don't award bonuses until that reduction is achieved.

Blocking and tackling. IT organizations that consistently deliver great results all have one thing in common: They've mastered the basics. Today's most successful IT organizations have mastered the following core competencies: project management, people/skills management, system integration (integrating disparate systems whether purchased or home-grown), requirements development, process modeling, and being customer focused and easy to do business with. Assigning a "competency czar" for each of these disciplines establishes accountability for building and maintaining them.

On the Horizon

Of all the suggestions for getting IT right, the blocking and tackling factor makes the most impact. Indeed, those competencies are increasingly important given insurance IT is ever more fragmented by outsourcing, multiple systems and platforms, and diverse functionality requirements. Turning again to the survey results, it is clear carrier executives are counting on those competencies to deliver their top-priority technology initiatives including e-signatures, improved Web self-service for agents/producers and policyholders, document management and workflow, and analytics. Perhaps a few of the suggestions offered here will help your organization be better prepared to deliver.

Rod Travers is senior vice president of technology for the Robert E. Nolan Company, a management consulting firm specializing in the insurance industry. The survey mentioned in the article was conducted by the Robert E. Nolan Company and released earlier this year.

The content of "Inside Track" is the responsibility of each column's author. The views and opinions are those of the author and do not necessarily represent those of Tech Decisions.