Why a Great Strategy Isn't Enough

It's planning season. Across the insurance industry, leadership teams are discussing next year's strategy, budgets are being drafted and reviewed, boards are being briefed on strategic direction, and managers are scheduling meetings with their teams to set goals. Most of the big decisions that determine how next year evolves have either been made or will likely be made over the next few months.

We've all seen what happens next. The board approves the strategy, but by first quarter next year, little has changed. Usually, the strategy isn't the problem. More than likely, the heavy lifting of operationalizing the strategy wasn't prioritized.

I've spent more than 20 years in the insurance industry working in the space between a senior executive decision and the work that follows. And if I've learned anything, it's that the time to operationalize strategy is before you approve the plan, not after. That's how you get a clearer understanding of the financial and resource commitment you're about to make.

What operationalizing means

Operationalizing strategy means translating intent into the everyday activities of a business or function: who is accountable, what the work is, how long it takes to complete, where the money goes, what each person works on, and how risk is managed along the way.

Once this heavy lifting is done, you should be able to clearly see your strategy integrated throughout the leadership calendar, the budget, scorecards, the control framework and employee goals. Without it, your strategy is probably one step away from wishful thinking.

Five important moves 

1. Decide who owns what. Identify which leader approves, funds and stops each priority, document that in performance objectives and share it with the executive team. Facilitate both individual and team discussions to troubleshoot turf war challenges, face up to contentious team members, and mitigate potential passive-aggressive inertia. From my experience, leaders who sidestep these thorny discussions are more likely to experience strategic fizzle and stall!
2. Fund by priority. You have only so much money to fund next year's activities. Take a closer look at the budget. Does it reflect your strategic intentions? Is every funded line mapped to a strategic priority? Are you willing to prioritize your strategy by defunding the work that doesn't connect to it? Can you approach some of your strategic priorities in more of a testing or phased approach so you can spread funding over multiple calendar years? While there are a lot of decisions to make in this step, they are fundamental to reducing the gaps and unexpected expenses that can pop up in next year's budget.
3. Don't forget to manage risk. Establish and embed internal controls to manage the risks that can damage your strategies — such as adverse market conditions or cyberattacks — during the design of your plan, not mid-year next year. When guardrails are determined up front, such as concentration limits for investing in a particular asset class, they can reduce the company's vulnerability to market conditions. And, with cyberthreats at an all-time high, insurers should plan to strengthen their operational response to cyberattacks and improve the resilience of third-party ecosystems to protect the company's ongoing ability to deliver value. Meanwhile, traditional legacy insurers initiating a major transformation remit might identify the risk associated with that effort as a top risk to mitigate and focus on in the year ahead. Reinsurers and MGAs with underdeveloped operational risk practices may plan to mature processes with the help of AI in the year ahead and have a related budget need. My experience as chief of staff to the chief risk officer at AIG and Corebridge Financial taught me that strategy and risk management are inextricably intertwined and, as such, benefit from an integrated approach to planning and operationalizing strategy.
4. Cascade to every person's goals. Once the performance objectives of your leadership team are set, they can be cascaded to their respective businesses and functions. This step is where the heavy lifting of operationalizing strategy lives. As managers meet with their employees to discuss next year's goals and objectives, they should consider at least three questions. Which activities advance a company priority? Which keep the lights on? Which can stop? When people understand how their work connects to the overall company strategy, they are empowered to make better tradeoffs every day.
5. Keep strategy on course. Once the plan year begins, how will you know if the company is achieving its strategic priorities? If there are impasses or bottlenecks? What metrics and information do you and your leadership team need — and how often do you need them — to confirm that your strategy is on course? What information should you share with the workforce, board, regulators, investors and rating agencies? Who will be responsible for providing that information? By answering these critical questions now, during the design phase of next year's plan, you can avoid future reporting fire drills, inconsistent messaging mishaps and info dumping that just drones on and on.

Explore how AI can help

Market conditions, geopolitical dynamics, regulatory requirements, and customer expectations evolve and shift. With AI, companies can trade up from a static annual planning cycle to more of an adaptive planning approach. Identify your company's AI super users and engage them to explore how your company can use AI to keep your strategy on course. Look into getting continuing scans of the external environment, automated simulations of key forecast scenarios, real-time leading indicators that can signal a drift from strategy, and insights on factors affecting your talent and capital plan.

Five questions to consider before you approve next year's plan

1. Does each priority have a decision owner with targeted performance objectives?
2. What share of next year's budget maps directly to those priorities?
3. How are you managing the risks that can negatively affect your strategies?
4. Can each employee identify how their goals support a company priority?
5. What information will tell you by the end of Q1 that a priority is drifting?

The window for this part of your planning work is closing. By January, budgets and goals should be established. Insurers can boost the odds of delivering on their strategies by operationalizing them. Use the next couple of months to do the very important heavy lifting to successfully set your plan in motion.8. [b]Style Guide (l)[/b] – Changed "ongoing scans" to "continuing scans" (ongoing → continuing).