Other parts of this series:
- Zero-based planning readies insurers for an uncertain future
- Zero-based approach helps insurers drive up digital returns
- Insurers need new performance metrics for digital transformation
- Zero-based mindset helps insurers up workforce performance
- Three key steps for insurers aspiring to be zero-based organizations
Zero-based business planning enables insurers to build an operating model that aligns resources and supports the creation of new business value.
Insurers throughout the world are applying digital technology to improve their efficiency and to capitalize on new business opportunities. Many of them, however, are not getting the full benefit of these investments.
An outdated operating model is one of the biggest stumbling blocks that stops organizations getting the most out of their investments in digital technology. Resources, systems and processes are often not properly in line with the objectives of the organization and fail to create sufficient value for the business. We found that 82 percent of companies are looking to free up funds to invest in growth initiatives. However, only 25 percent of executives believe their company’s operating model has evolved sufficiently to be aligned with their business strategy.
Why are so many companies maintaining operating models that are impairing their performance? The fast pace of change in markets such as insurance is one of the main reasons. Companies are investing in digital technology in response to the shifting demands of their market. Often, however, the leadership of these companies fails to question the long-term goals of the organization. These are questions that need to be asked, frequently.
In my previous blog post I discussed the benefits of zero-based business planning. I mentioned how zero-based organizations (ZBOs) improve their profitability by shifting underperforming resources to parts of their business where they can be more effective.
One of the big benefits of a zero-based approach is that it prompts the leaders of an organization to step back and reassess its strategy, capabilities and performance without the bias of the past. Starting with a clean sheet, they can identify clearly the aims of the organization and the resources that are required to achieve them. From this assessment, they can then build an operating model that ensures that the organization’s resources are aligned and support the creation of new value for the business. Such an assessment identifies the organization’s critical activities, how they are performed, by whom, and where.
To build a successful zero-based operating model, that directs critical resources to where they’re most needed, organizations need to address two distinct drivers of business growth.
Core growth: To be “brilliant at the basics” companies need to reduce costs and complexity and optimize pricing. They should increase customer loyalty by providing exceptional personalized experiences across physical and digital touch points; extend the market boundaries of products and services; and improve their interactions with customers and partners.
Disruptive growth: To “cut new ground” and generate additional sources of value, companies need to use digital technology to create disruptive experiences. They should deploy intelligent technology to deliver outcome-based services; use digital platforms to quickly extend the reach and scale of their customer channels; and apply the insights from data-intensive applications to build value within the business.
In my next blog post, I’ll discuss the new performance metrics needed to measure the benefits of zero-based business planning. Meanwhile, take some time to follow these links. I’m sure you’ll find them useful.Technology Vision for Insurance 2017: Technology for People.