Other parts of this series:
Insurers need to constantly balance their spending on new digital ventures with their investment in traditional core activities.
Many big insurers recognize that they need to change their organizations substantially and put digital technology at the heart of their businesses. Only by leveraging the benefits of digital technology will they be able to ward off growing competition from their traditional rivals as well as from a host of newcomers to their markets. Often, however, they find themselves hamstrung between the need to invest in new digital initiatives and the on-going demands of their core operations.
Balancing investment in new digital ventures with spending on traditional core activities is one of the biggest challenges facing insurers embarking on major change programs. It’s a dynamic process. As digital technology becomes increasingly important to the organization, investments in digital and core capabilities will converge. Digital activities, once peripheral to the main business, will become central to the company’s future.
Flexibility, as I mentioned in my previous blog post, is crucial for any digital change strategy. Investment in digital and core activities needs to be regularly reviewed and, if necessary, rebalanced. The process we call “pivoting to the new” allows companies to transform their core businesses to reduce costs and maximize growth, in that way releasing funds to invest in new digital ventures. As these new ventures mature, and confirm their potential to generate value, companies can prudently shift their focus from their legacy activities and scale up their new businesses. (See diagram below).
Balancing resources during a pivot to the new is a key leadership responsibility. Even when directing funds to new digital initiatives, business leaders need to constantly manage how and where resources are applied. Programmatic investments in promising digital ventures need to be balanced with seed funding for riskier “moonshot” projects and tranche financing for continuous change.
Business leaders need to be bold when deciding whether to terminate the funding of digital initiatives. If a project doesn’t clearly add value to the organization, by securing new customers or growing revenue streams for example, it should be stopped quickly. Similarly, if it doesn’t support the company’s new business model, there’s little point in it continuing. Delays in terminating failing or misdirected projects starve more promising digital initiatives of scarce resources.
Once insurers have identified a project with the potential to generate significant value, they need to quickly increase its funding, align the resources it requires and scale up its capacity so that it can drive the growth of the business. This approach applies to innovation projects that insurers have developed with partners, such as insurtech firms, as well as initiatives that have grown out of extensive in-house transformation programs.
For further information about managing change to meet the demands and seize opportunities of the digital economy have a look at these links. I’m sure you’ll find them useful.Insurance Change Survey 2017: Lead in the New.
Professionalizing Change in Financial Services.
Join the Revolution: Agile Change Revolution in Financial Services.