Canada’s P&C insurance industry has been undertaking digital transformation initiatives for a while now, some of which have been accelerated by the ongoing COVID-19 pandemic.
But how does a brokerage or carrier know where to focus their investment, and understand what kind of digital transformation they’re really after? According to the authors of a recent blog from Harvard Business Review, where to start depends on context, needs, but also your digital maturity.
The four pillars of successful digital transformation are:
Digital marketing; and
IT uplift involves modernizing existing IT infrastructure as well as mobile infrastructure data lakes, and the cloud.
Digitizing operations involves optimizing existing business through digital tools such as artificial intelligence, 5G, and the Internet of Things to streamline business growth.
Digital marketing includes initiatives such as building brand awareness, profiling clients or simply selling online.
New ventures refer to new business models and products.
“All four are part of most companies’ digital transformation journey,” write Nathan Furr, Andrew Shipilov, Didier Rouillard, and Antoine Hemon-Luarens in The 4 Pillars of Successful Digital Transformations, published Jan. 28. “But without understanding how they are different, it’s confusing to understand what to do next or how to invest — the resources, tools, goals, C-Suite sponsors and [key performance indicators] required for success are totally different in each case. Being clear about their differing demands can help you make smart tradeoffs and clear progress.”
Below are the four pillars in more detail as presented by the four authors. Furr is a strategy professor at business school INSEAD. Shipilov is a professor of international management at INSEAD. Rouillard is the corporate vice president of Quadient, a global customer experience software company operating globally. Luarens is a senior DigitalNOW! partner at Quadient.
Essentially, IT uplift is an opportunity to use budget allocated to “digital initiatives” to modernize IT and communications platforms within your enterprise. When completed, an IT uplift provides your company access to up-to-date tools that offer increased employee efficiency, lower IT maintenance costs and increased employee satisfaction.
Typically, the chief information officer or chief technology officer should lead this pillar of digital transformation. KPIs indicating success include access to new tools, reduced maintenance costs, improved employee satisfaction, and better business performance.
The second pillar, often tackled earlier in the digital transformation journey, is using digital for optimizing, simplifying, and rationalizing existing processes.
In its most basic form, this pillar can mean swapping out analog activities with digital ones, the authors write. But other times, it involves re-architecting the system to meet the needs of today’s customers. For example, this could involve merging once separate division for payments and compliance into one entity.
“Digitizing operations is a fundamental pillar of digital transformation in the sense that, without it, your company will be left behind by more efficient operators,” the blog says. “A company may begin its digital transformation journey by digitizing processes and as it matures, re-architect processes entirely.”
Digitizing operations often fares better when led by the CFO or chief operating officer. “It does require time and technology, but the benefits, measured by the central KPIs, are savings in time, money, and people to solve business problems and serve customers.”
If you are looking for digital solutions to win clients, build brand awareness, profile clients or simply sell online, then you are pursuing the digital marketing pillar.
This pillar is different from the others: its focus is on digital tools to interact and sell to customers. Not surprisingly, it requires different resources, such as investing in capturing clean data, digital tools including AI to understand customers, and omnichannel presence. For example, companies using AI to identify and act on critical customer behaviours may be able to identify customers likely to leave and then interviewing before they do so.
Typically, the chief marketing officer leads this initiative and should focus on KPIs such as return on marketing investments, reduced customer acquisition costs, and generation of a large amount of valuable data that can be used to acquire new customers and better serve existing customers.
Finally, digital opens up many new opportunities for established companies. Seizing these opportunities, some of which may be quite disruptive, requires both developing the innovation and digital capabilities to test and pivot to new sources of growth. Digital may provide the opportunity to create new business models, new products and services, or even collaborate with a large ecosystem to create new sources of growth.
Typically the CEO, or head of sales, leads such initiatives because of the requirement for investment, agility, but most importantly, “a team capable of running experiments to validate the new business opportunity,” the authors write.
The payoff is new sources of revenue, but KPIs are more nuanced, “typically unit economic measures that you are creating solving a significant customer problem and growing profitably.”
Most companies begin with IT uplift and digitizing operations, followed by digital marketing and new business building, the blog says. “But all four pillars are important to digital transformation, so they may happen in another order. The key to success is simply getting clarity that digital transformation is not one thing, but rather many different things. Having the right leader, resources, and measures of success for the journey towards each different pillar can contribute greatly to success.”