Insurers must join the dots by taking both revenue and efficiency into account when they think about digital transformation.

Last week, I looked at what—in my opinion—are two common mistakes in approaching digital transformation: appointing a chief digital officer who has insufficient power, and carefully crafting a digital strategy, whereas there should be only one strategy for the firm. This week, I’d like to consider the dangers of looking at only one side of digital.

Here’s what I mean: it seems to me that the trap into which many insurers (and companies in other industries, for that matter) fall is to look at digital transformation through one of two lenses. The first lens is the use of digital technologies to improve processes, and thus to serve the customer more efficiently and at lower cost. Sounds good, and I suppose it is. But if all this efficiency is doing is getting out-of-date products and services to customers, the benefits of digitization will be shortlived.

In other words, it’s not enough just be more efficient—you have to be more efficient at the right things. It’s vital we look at digital transformation through the lens of growth as well.

However, and I suppose that is a reason why this single-lens approach is so common, it’s still good enough to ensure an executive survives for at least the next couple of years!

All of this is, of course, just another way of contrasting digitization with digitalization (see my previous blog for a fuller discussion of the difference between the two. Of course, digitizing existing processes is an obvious and important element of any strategy and clearly a good thing to do: change does not take place overnight. But the danger is that insurers fail to appreciate the full extent of the changes that digital technologies are already enabling, and will continue to enable—and risk continuing to live in what will turn out to be  a fool’s paradise.

Next time, I’d like to look at some of the far-reaching changes that are already threatening the sunny Island of Business as Usual.

2 responses:

  1. I like your distinction between digitizing and digitalization.

    Digitizing – saving expenses – is very attractive because those expenses are (or at least appear to be) highly quantifiable; they are right there in the income statement and a million other spreadsheets. There’s lots of money that’s waiting to be saved. Save a percent on a known cost and voila, project funded.

    Digitalization requires estimating variables that that are not yet on the income statement, but they might not yet be on anyone’s income statement. Compounding the growth challenge, digitization often promises returns in less time than investment in digitalzation. What a dilemma for innovators! (aka “The innovators dilemma” by Clay Christensen)

    While both strategies rely on technology, one “presses the brake” while the other “presses the gas.” Maybe the need for focus goes past KPIs and gets into the organizational design and approach of the divisions/areas involved.

    1. Thanks for the comment Brandon.

      I guess my point is that on both dimensions there is a series of ‘no regret moves’ that can be done (network consolidation, workplace and colloboration, increase of straight through processing on the digitization dimension par example and social media listening, harmonized web pages, omni-channel interaction, personalized web pages and multi-device accessability on the other). There is however a sometimes thin line on where to becaume cautious: If on the digitization side one may think a paper scanning cabability with OCR and automated process routing to a workflow systme to initiate an customer address change will indeed safe process costs (however requireing quite an investment…) it may not be the wisest thing with regards to becoming more customer first oriented on the digitalization side thorugh a self-service capability that in my view just has become normal in interaction with major brands in the retail space. Thus I make my point that indeed it is required to look at both and understand interdpendencies.

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