June 6, 2021
Different Flavors of Transformation
by Alan Walker
Transformation and improvement are not the same, and insurers should use different approaches to the two types of innovation.
A client recently asked me to explain the differences between innovation, transformation and improvement and to suggest how they might drive innovation, transformation and improvement in their own business.
Although I’ve helped insurers with all three of these on multiple occasions, I’d never really taken the time to figure out the distinctions, or how the terms fit together. So I did some research and thought a bit and came up with an answer.
I certainly don’t think this is the only way of looking at the issue, but it certainly helped me once I’d figured out my version of the answer. And, having now clarified matters in my own mind, I thought it might be helpful to share.
Having hunted around, it seems there are no universally accepted definitions of innovation, transformation or improvement within a business context.
For me, business innovation is the delivery of something new with the intention of improving business outcomes. And that “something” can cover a wide range of territory, including products, services, distribution channels, processes, operating models, technology, and culture – indeed, any aspect of the insurer’s business whatsoever.
I then find it helpful to distinguish two broad types of business innovation (and I’m indebted to the Digital Insurer’s TDI Academy for this, as it’s a distinction we teach on their ADI Program):
- Business Transformation is the large-scale reinvention of the whole business or a material subset of the business (such as a business unit or function); whereas
- Business Improvement is focused on smaller-scale changes, typically in only one element of the value chain or within a single team. It is more about improving today than inventing tomorrow.
There is no hard-and-fast boundary between the two, but, given the definitions I’ve just offered, the primary differentiators are:
- The scope of the innovation; and
- The scale of the insurer’s ambition.
Approaches to Design and Delivery
If there’s no hard-and-fast boundary between business transformation and business improvement, then why bother to distinguish them at all?
Because, based on my experience of dozens of insurance innovation programs and projects, I believe insurers should use different approaches to the two different types of innovation.
See also: It’s Time for Next Phase of Innovation
Designing and Delivering Business Transformation
I’ve shared my tried-and-tested approach to business transformation before, within the context of digital transformation:
Given the broad scope and ambitious scale of this type of innovation, it’s not surprising that the approach is very much rooted in the needs of the customer and in the business’s overall strategy. Building on these critical foundations, the insurer then needs to:
- Paint a vision for what will be achieved;
- Drill that down to a deliverable design;
- Establish the capabilities required;
- Create a road map to bridge the gaps;
- Deliver what’s on the road map;
- Review achievements, reassessing as needed;
- Wrap the transformation with strong change management; and
- Apply good governance throughout.
Designing and Delivering Business Improvement
So how should the (somewhat less-ambitious, narrower scope) business improvement projects be handled?
As I considered all of the insurance improvement programs and projects I’ve been involved in over the years, I recalled multiple different methodologies that I’ve used at one time or another.
These methodologies typically varied according to the different problems they were trying to solve, or the different opportunities they were looking to pursue.
But as I thought about the different approaches I realized that, despite linguistic differences, they had many characteristics in common. Indeed, it was possible to see all of them as particular flavors of an overall approach that could fruitfully be used for any business improvement project.
For obvious reasons, I call it “5-I.”
The 5-I model delivers, and sustains, the desired business improvement in five steps:
- Initiate: Frame the problem to be solved, or the opportunity to be pursued, and launch the project.
- Investigate: Analyze the problem or opportunity to understand it fully, including root causes and implications.
- Ideate: Generate possible solutions or take advantage of the opportunity. Then analyze the alternatives and agree on which one(s) will be taken forward to delivery.
- Implement: Deliver the solution(s) and manage the change(s) to ensure the improvement is embedded and sustainable.
- Inspect: Review what’s been done, asking whether the insurer has solved the problem or is realizing the expected benefits. If not, iterate as needed. Otherwise, close the project.
See also: Adversity Breeds Innovation
Granted, there will be nuances between projects at the next level down, but I’m struggling to come up with a business improvement project this approach doesn’t fit.