Other parts of this series:
Traditional operating models aren’t flexible enough to support digital strategies that need to respond quickly to sudden market changes.
Insurers looking to transform themselves into successful digital disruptors should back their new business strategies with highly flexible operating models. Sometimes, they’ll need to manage several operating models at the same time. This will allow them to move quickly to address the specific needs of specialized digital businesses.
It’s essential, as I mentioned in my previous blog posts, for insurers to keep their operating models closely aligned with their digital business strategies. Traditional operating models aren’t flexible enough to keep in sync with digital strategies that must change quickly to keep up with sudden market changes.
To create a flexible and adaptive operating model, insurers need to take four key steps:
Reshape organizational structures: Cumbersome systems and processes, as well as outdated governance procedures, can put the brakes on even the best digital strategies. To succeed in the new business environment, insurers need to move fast. Flat, streamlined organizational structures, with cross-business governance capabilities that incorporate digital-specific KPIs, give companies the flexibility they need to quickly react to changing market conditions. Insurers can create decentralized digital innovation hubs to provide swift support to specific business units or can build a central digital hub to drive change across the enterprise.
Revise incentives: Traditional incentives for executives and key employees tend to focus on the short-term. They’re often geared to producing stable quarterly earnings rather than funding riskier, but potentially more lucrative, digital ventures. Insurers need to devise new incentive structures that encourage greater risk-tolerance and innovation and steer more capital and executive attention to longer-term digital business opportunities.
Ramp up digital capabilities. Strong fundamental digital capabilities enable insurers to quickly implement new business strategies and seize emerging opportunities. For example, rapid prototyping combined with empathetic customer insights from advanced analytics systems allow project teams to develop and roll out digital products and services more quickly and at a lower cost. Insurers should ramp up their investments in core digital capabilities regardless of their specific business strategies.
Revitalize corporate culture. Digital disruptors have corporate cultures that are closely meshed with their business goals and practices. They encourage risk-taking, accommodate open ecosystems, promote innovation and are highly-focused on meeting the needs and aspirations of the company’s customers. Many traditional insurers, however, are burdened with cultures that are still rooted in the past. They’re often rigid and hierarchical. To close the gap on digital disruptors, traditional insurers need to revitalize their corporate cultures to increase their capacity to innovate and adapt to rapid change. Senior executives should start and sustain this transformation through their own example.
For further information about how insurers can increase the performance of their digital businesses by overhauling their operating models take a look at these links. I think you’ll find them useful.