With GDP rates in SE Asia exceeding 6.3% per annum, with premium growth for life, accident and other policies higher than 13% last year in the region and with insurance penetration rates of 5% or less, we seem to be looking at a slow, fat rabbit. But we don't seem to be able to shoot it. Why? See also: Innovation — or Just Innovative Thinking?   While numerous global and regional insurance carriers have created venture capital funds, insurtech incubators and grand initiatives, the carriers' fundamental view of the world has not changed. Consider the following: In 2016, there were approximately 75 deals in private tech investment by reinsurers and insurers, up from three deals in 2013. On the face of it, this is encouraging. However, of the total tech deals completed in 2016, more than 72% involved U.S.-based startups and only 12% involved ones in Asia. In other words, the fastest-growing markets of the world received only a fraction of the total tech investments from the insurance industry, which is not exactly transformational. You can't shoot even a slow, fat rabbit if you don't aim at it. If we assume an average of a $2 million for each of those private deals, this equates to $150 million in total capital commitments. Let’s be generous. If the average deal size was $10 million, the total industry commitment would have been $750 million, or less than .02% of the industry's $4.5 trillion in annual premium. Can you imagine a private equity firm like Blackrock investing only two-hundredths of a percentage point of its assets in products and ventures for the future? Neither can I. In all fairness, it is not easy to disrupt the status quo in insurance.  After all, for well over a century, insurance was a game the house almost always won. Other than catastrophic events (hurricanes, tsunamis, floods, etc. — many of which are co-insured by local and federal governments), insurance has been a safe bet if, of course, you are the house. In the face of change, many insurers have recently undertaken initiatives to break the mold. MetLife recently created LumenLab in Singapore, where a 7,800-square-foot facility is an incubator for innovative startups from outside the insurance industry. But with MetLife's earning declining more than 19% from 2015 to 2016, is it enough? Aviva, a British multinational with more than 33 million customers across 16 countries, recently launched an initiative to encourage entrepreneurs to develop disruptive solutions. The mission statement reads: “Our mission is to connect with extraordinary talent, uncover breakthrough innovations and give those breakthrough innovations the opportunity to thrive.”  That's very passionate, but what is the end game? See also: Insurers Are Catching the Innovation Wave   True innovation, transformation and disruption are cultural issues, and must be cultivated and encouraged from the top. Most insurance CEOs do not engage in high-altitude mountain climbing, scuba diving or any other extreme sport, nor do they hang out at the Google campus. Most importantly, they do not spend a lot of time in Bangkok or Shanghai. But they should, because that is where the new markets are forming. There are, of course, exceptions to the rule. The first is Axa, which has created Axa Ventures, a true, well-funded venture capital subsidiary with a mission to invest in disruptive ventures that can actually get to market. The fund is led by Minh Tran, who has a successful history in venture capital and disruption. The second and less obvious group is Munich Re, based in Germany, which has launched numerous digital and venture initiatives. Germany has become a center for insurtech, and, while Munich Re’s efforts are, in my opinion, still not completely coordinated, it is clearly making a company-wide effort. If insurance carriers want to lead the pack, they must embrace models similar to the one Axa has created, and they must make a corporate commitment to transformational change — especially in emerging markets. Disruption does not happen overnight, but it does happen. And, in a legacy industry ripe for change, it will happen sooner rather than later. The question is whether it will be led from the inside or whether the industry will be dragged kicking and screaming into the future from the outside.

In Amazon’s warehouses, there is a beehive of activity, and robots are increasingly doing more of the work. In less than five years, they will load self-driving trucks that transport goods to local distribution centers where drones will make last-mile deliveries. Soon afterward, autonomous cars will begin to take the wheel from taxi drivers; artificial intelligence will exceed the ability of human doctors to understand complex medical data; industrial robots will do manufacturing; and supermarkets won’t need human cashiers. The majority of jobs that require human labor and intellectual capability are likely to disappear over the next decade and a half. There will be many jobs created, but not for the people who have lost them — because they do not have those skills. And this will lead to major social disruption unless we develop sound policies to ease the transition. See also: May the Forms Be With You!   The industry behind these advances — and reaping huge financial rewards from them — has been in denial. Tech entrepreneur Marc Andreessen, for example, calls the jobless future “a Luddite fallacy”; he insists that people will be re-employed. But now others, including Facebook’s Mark Zuckerberg, Tesla’s Elon Musk and Bill Gates, are acknowledging a skills mismatch, with the potential for mass unemployment. They advocate a universal basic income (UBI), a payment by the government that provides for the basic wants and needs of the population. [Mark Zuckerberg tells Harvard grads that automation will take jobs, and it’s up to millennials to create more] But these tech moguls are simply kicking the can down the road and shifting responsibility to Washington. UBI will not solve the social problems that come from loss of people’s purpose in life and of their social stature and identity — which jobs provide.  And the politicians in Washington who are working to curtail basic benefits such as healthcare and food stamps plainly won’t consider the value of spending trillions on a new social-welfare scheme. In a paper titled “A New Deal for the Twenty-First Century,” Edward Alden and Bob Litan, of the Council on Foreign Relations, propose solutions for retraining the workforce. They believe that there will be many jobs created in technology and in caring for the elderly — because Western populations are aging. The authors say that young people starting careers should be equipped with the education and skills needed to adapt to career changes and that older workers who become displaced should receive assistance in finding new jobs and retraining for new careers. Government shouldn’t provide the jobs or training but should, the authors say, offer tax incentives and insurance, facilitate job mobility and reform occupational licensing. To encourage employees to gain new skills, there should be “career loan accounts” from which they can fund their own education — with repayment being linked to future earnings. [‘Coal country is a great place to be from.’ But does the future match Trump’s optimism?] To minimize the effect of wage cuts resulting from changing professions, Alden and Litan advocate a generous wage-insurance scheme that tops up earnings; enhancements to the Earned Income Tax Credit; direct wage subsidies; and minimum wage increments. They believe, too, that a voluntary military and civilian national service program for young people would help alleviate the social disruption and teach important new skills and provide tutoring to disadvantaged students, help for the elderly and improvements of public spaces such as parks and playgrounds. These ideas are a good start, but the focus was on maintaining a balance between Republicans and Democrats, on being politically palatable. The coming disruptions are likely be so cataclysmic that we need to go beyond politics. See also: Outlook for Taxation in Insurance   We have already seen the increasing anger of the electorate from both the right and the left in the U.S. elections. We are witnessing the same in Europe now. As technology advances and changes everything about the way we live and work, this will get much worse. We must understand the human issues — the trauma and suffering of affected people — and work to minimize the impacts. As Harvard Law School’s Labor and Worklife Program Executive Director Sharon Block said to me in an email: “I don’t think we can be limited in our thinking by what can get through Congress now — nothing can. We need to be using this time to come up with the big new ideas to develop a bolder progressive vision for the future — and then work to create the conditions necessary to implement that vision.” The problem here is that with this future fast approaching, not even the inventors of the technologies have a real answer. This is why there is an urgent need to bring policymakers, academics and business leaders together to brainstorm on solutions and to do grand, global experiments.

If both parties accept the proposal, we have a settlement. (Hurray!) If one party accepts, but the other does not, there is no settlement, and the refusing party never learns that the other side accepted. I only tell parties there is no settlement. If both sides refuse, I tell them there is no settlement, but, again, parties do not know if the other side accepted the mediator’s proposal. There are many benefits of the mediator’s proposal. Principally, no one has forsaken their last offer to settle. If a mediator’s proposal does not succeed, the parties can continue negotiating from their last position. Blame It on the Mediator The mediator’s proposal allows mediation participants to save face. “It wasn’t our idea; it was that darn mediator’s.” Sometimes attorneys hesitate to be completely forthright in their recommendations to their clients, particularly if they are the second or third attorney on the file. The mediator’s proposal opens the door for a frank discussion while allowing the attorney to shift responsibility to the mediator for an idea the client may find distasteful. See also: The 1 Way to Maximize Success in Mediation   Mediators don’t stick their necks out to come up with a proposal unless they are pretty sure it is going to be accepted. These things don’t happen early in the mediation. More likely, you will see a mediator’s proposal when it looks like parties are heading to an impasse. Because my mediator’s proposal is a reflection of the parties' own negotiation to this point, it is generally accepted.

As the June 30 deadline approaches for this year’s SMA Innovation in Action Awards, I’m looking forward to seeing the innovative strides that insurers and solution providers have made in the past year. The market is changing so quickly that adaptability is key. The SMA Innovation in Action Awards recognize insurers of all types and sizes who are rethinking, reimagining and reinventing the business of insurance. In recent years, we have recognized a number of traditional, established companies that are propelling themselves forward. They have combined the best strengths of our industry today with the best new ideas from insurtech and the digital world. And this convergence of the old and the new is the true path to success. See also: Key Trends in Innovation (Parts 4, 5)   Our winners have showcased this type of mindset by blending their existing projects and goals with very targeted uses of insurtech, emerging technologies and new data sources.

• Experiment with new technology and customer experiences. John Hancock’s Vitality Program (2016 winner) engages policyholders through gamification and personalized guidance to increase their healthy activities, like exercise and annual physicals. Policyholders can report data online or through a free wearable fitness tracker. In the next phase of this project, John Hancock has expanded the customer engagement model to now provide discounts on healthy foods from participating stores. Each time the policyholder buys a healthy food, the discount and brand appear on the checkout receipt, reinforcing John Hancock’s role as their partner in healthy living. In addition to the creative application of emerging technologies, John Hancock is shifting from a transactional relationship with their customers to one based on value-added services.
• Engage with emerging technologies. Texas Mutual (2016 winner) tackled a loss-prevention challenge, engaging workers to learn and follow onsite safety procedures by creating virtual reality scenarios to train construction workers. Texas Mutual’s Safety in a Box app was designed for easily accessible, familiar technology: the user’s mobile phone with a free cardboard viewer. Texas Mutual also distributed viewers at construction industry conferences and filmed in both English and Spanish to reach a broader audience.
• Incubate innovation. Incubating Haven Life (2015 winner) internally allowed MassMutual to test a new business model: selling life insurance completely online in about 20 minutes. Underwriting Haven Life’s policies relies on external data fed through proprietary algorithms, reducing the time and complexity for the applicant.
• Look at the big picture – but start small. Motorists (2016 winner) completed the first phase of its plan to achieve complete organizational transformation within 10 years. The ultimate goal is to operate as an “85-year-old startup” designed for innovation and collaboration, and the company redesigned a key workspace to foster this cultural shift. It built around cutting-edge technology to enable work to shift seamlessly across time zones and continents. This first step is intended to encourage more collaborative work styles to spread throughout the company, bringing Motorists closer to its vision.

One of the best parts of our awards program is to showcase how innovation is flourishing within our industry – and not just with greenfield insurers or those partnering with insurtech firms. Together, John Hancock, Texas Mutual, MassMutual and Motorists have more than 400 years of experience in writing insurance. They demonstrate how no company is ever too established to embrace change. See also: 3 Ways to Leverage Digital Innovation   For more information on the SMA Innovation in Action Awards and to create your own submission, visit www.strategymeetsaction.com/awards. Submissions are due by June 30. We will also be focusing on the power of convergence at our annual SMA Summit in September.

The rest of you may not yet be thinking about what you want for Christmas, but I already know what I hope to see under the tree: one of these exoskeletons that Lowe's is giving to a few employees in a test. The exoskeletons are only appropriate in a work setting, where people have to lift reasonably heavy objects repeatedly, but I've been anticipating exoskeletons for years now, and am delighted to see that they're finally starting to find their way into the real world. 

The implications for work (and workers comp) will be profound. It's hard to get injured lifting something if the device you're wearing is doing the lifting, while you just guide it. Jobs that have often been limited mostly to men, or even burly men, will now be open to anyone who can guide the exoskeleton. And exoskeletons are just getting started. They'll begin by taking on tasks that people already do but then expand to let us accomplish much more. Just look at this video of exoskeletons helping people walk. 

While many worry that robots will replace us, I think that augmentation is more likely. Just as computers are greatly improving our scope of knowledge (with Google search, Wikipedia and a smartphone, what more do you need?), exoskeletons will enhance what we can do physically. 

What I really want is the sort of advanced exoskeletons shown in this article. But they may have to wait until next Christmas, or even the one after that. I suppose my Iron Man suit will have to wait even a bit longer.

Cheers,

Paul Carroll,
Editor-in-Chief

Even before venture capitalists started funneling resources into insurtech, insurers were aware that channel development and effective distribution management was one of the keys to driving growth. Pipelines or channels have a way of either facilitating sales or impeding progress. They were governed by the same rules a decade ago that still apply today, with the exception of some new and innovative digital differences. More routes into the organization and faster journeys from quoting through policy issue have always made for better business. An examination of the significant venture capital invested in new insurtech startups leads many to believe that the world of insurance is on the verge of a revolution. And the most logical place for disruption is in distribution. This is evident in the changes taking place with how and why people buy insurance, largely now influenced by digital technologies and ease of doing business via the internet. See also: Are Crypto-Currencies Money or Property?   As further evidence for the viability of channel development, insurtech investors have gravitated toward distribution and distribution-related activities. Investors may see a quick ROI. They may perceive a low-risk investment. They must also see an opportunity for increased flow into the sales pipeline. In Majesco’s new report, Succeeding in a Multi-Channel World: Channel Efficiency, Optimization and Speed to Value, we trace recent insurtech developments and match them to parallel market changes. Rapid changes in customer behaviors, technology-driven capabilities and market boundaries are putting pressure on the insurance industry to adapt, and a key pressure point is distribution. Beyond optimizing and aligning digital front-end with core distribution management back-end and enhanced data and analytics to create operational efficiencies that accommodate all chosen channels, insurers must implement an approach to designing, developing, solidifying and protecting valuable distribution relationships, including agent and broker relationships. Further, they must be able to manage those day-to-day relationships with modern, innovative technologies and processes. In other words, channels aren’t something that insurers should build and then consider “built.” They are in need of constant change and optimization because much channel growth will happen in areas where relationships are just as crucial as digital preparedness. Majesco dispels some common business thinking surrounding channel expansion. For example, direct online sales are still reasonably slim in the marketplace compared with agent-led closings. Yet, a high volume of agent-led closings were started through online research, quoting and information-gathering. This kind of customer journey must be supported by a flexible channel structure that will allow for a start/pause/switch/close sales process flow. If it isn’t enough that the customer is clamoring for omni-channel service, agents themselves (once wary of digital preparedness) are also interested. Agents are waking up to the realization that they stand to benefit by gains in both end-customer service and agency service. While insurance companies and agent/brokers continue to dominate the customers’ research, buying and service experience, lines are blurring across all lines of business within distribution. There is strong interest among forward-thinking insurers in working with new, alternative sources and channels. These channels will work as new revenue streams, culling growth from additional markets and new products. A great example of this would be SafetyNet, a new product/channel coming out of CUNA Mutual Group’s innovation lab. SafetyNet customers pay a small monthly fee to receive a lump-sum payout in the event of a job loss or disability. The distribution channel is entirely digital, the market is entirely new (targeting individual low/middle income workers with low savings) and the product was built to fit. Viewing distribution through ROI glasses In this new and ever-changing business landscape, insurers must rethink distribution-related strategy and execution; namely to one that requires a digital, multi-channel focus—from back to front office, and from an internally focused business model to one that considers the ecosystem across the entire distribution network. Insurers need to integrate and align the right technologies, data and systems to improve existing channel development as well as to approach new channels and partnerships that leverage the insurer’s ability to properly service all stakeholders. We look at this as growing the channel ecosystem. Randomly adding channels, however, cannot work without an understanding of how that particular channel contributes to greenfield growth or additional revenue. It is best to use speed to value as a criterion for launch, with standard ROI opportunity as a gauge for prioritization. Long-term investment is no longer a viable standard. All channels are subject to frequent adaptation, expansion or closing — based on the ever-changing requirements of customers. “Show me the product!” Customers don’t think in terms of “channels.” They don’t care how a purchase happens. They just want the process of finding and purchasing to be seamless, consistent, intuitive and painless. If an insurer can become adept at being everywhere customers may want them to be — a true omni-channel environment — then they are likely to keep churn to a minimum while optimizing growth. For many insurers, this also means upgrading agent capabilities as well as data analytics. The goal is for the face of the organization, whether online or in-person or by phone, to show a consistent understanding of the customer and a predictive knowledge regarding their needs. Just as Amazon can use algorithms to auto-populate related products, insurance channels can use AI and robo-advisers to anticipate customer appetites for new products or supplemental services. See also: Distribution Debunked (Part 1)   As the channels blur, the “brand view” must be prepared to lead customers to their intended destinations. For example, the customer may wish to initiate an application on an insurer’s smartphone app, or begin on a comparison site. The customer may want to later make changes to the application using a laptop or tablet. At some point, the customer may have questions and wish to enlist a chatbot or human agent. Finally, the customer may wish to complete the app with a smartphone or in an agent office. To accomplish this fluidity, an insurer needs access to policyholder data in real time, with a complete alignment in customer, channel partner and back-office core systems. To bring this all back to where we began, an analysis of the JOURNEY and FLOW is the key to distribution growth. We see clearly where insurtech investment is headed. We see uniformly that customer behaviors are dictating an omni-channel approach. We understand the need to improve agent service while building digital direct channels. All of this leads us to one conclusion — succeeding in a multi-channel world is a matter of smart investment. For further evidence on the importance of distribution strategies, be sure to read Majesco’s white paper, Succeeding in a Multi-Channel World: Channel Efficiency, Optimization and Speed to Value.

The Southeast Asian insurance market is ripe for disruption. With a growing middle class, rising incomes and a propensity to use digital technology for real-time purchases, the market is now looking for innovative, real-time solutions for growing insurance needs. The past 15 years have truly been disruptive in SE Asia, with real regional GDP growing at an average rate of 6.5 per annum and household incomes growing to $38,000. Technology development and dissemination is equally impressive. Internet penetration is expected to grow from 260 million users today to 400 million by 2020. The overall SE Asia internet economy is expected to grow to $200 billion by 2025. Growing economic prosperity is translating directly into rapid and sustained growth in the SE Asia insurance market. Munich Re Economic Research is forecasting overall premiums to increase more than 9.5% in 2017. Life products are expected to do even better, with growth of more than 13.5% per annum. With almost two-thirds of the vast population of Asia-Pacific now using smartphones, insurtech is expected to grow quickly. For example, in Malaysia, the online life platform and startup U for Life allows consumers to purchase life insurance products instantly online. All these factors are laying the foundation for the imminent disruption of the SE Asian insurance market. See also: Insurtech Ecosystem Emerging in Asia   True disruption in SE Asia will require a blend of high-tech and high-touch approaches so that insurance companies can keep their relationship with the consumer personal while concurrently ensuring that they optimize the efficiency of the relationship. Technology will continue to develop rapidly, with an increasing use of artificial intelligence, facial recognition and telematics. Winners in the age of disruption will also maximize the use of robotics, process automation and data analytics to make the customer pleasant -- or at least not painful. True disruption will only come when we throw the proverbial book out and leverage technology to reshape insurance. What if you had the ability to purchase insurance, as you needed it, as long as you needed it and at the moment you needed it? Taking it a step further, what if your insurance provider could anticipate your needs and provide you with the opportunity to purchase a temporary policy before you had even thought of it? Let’s say that you are planning a three-day deep sea fishing trip with your friends. You receive a text from your insurance agent, who has been notified of your trip via social media. He is wishing you a great adventure and for $25 a day suggests an additional $75,000 in accident/life insurance just for added comfort. As you are spending $1,200 on the trip, the extra $75 is a small expense, but the additional comfort is significant. This is situational insurance, and to get there a number of things will need to happen. First, insurance providers are going to need to develop very robust data sets for the individuals they plan to cover. Providers need to know the basics: age, marital status, income, etc. and then they will need to dive deeper. Providers will need to know people's hobbies, aspirations, fears, passions and more. Providers then must keep building on the data and keep it timely. Of course, the devil is in the details! For situational insurance to become a reality, providers will need artificial intelligence, as they must begin to anticipate behavior so that they can begin to develop relevant products and know when a client is going to potentially need them. Getting to this point will take time, as it will require the support of behavioral scientists, statisticians, mathematicians and of course, AI specialists, all working together. At Soteria, in Hong Kong, we are actively working on this situational model with the support of Mapfre and Allianz. Actuaries like situational insurance products, as the statistical odds of death or a serious accident during a limited period are quite low, even if extreme sports are involved. However, the model will require the support of insurance carriers and regulators, even though continuity and predictability have been thrown out the window. See also: How to Respond to Industry Disruption   How close is situational insurance to becoming reality? Five years ago, did anyone really believe driverless cars would exist? Just don’t be surprised if you get a friendly text before heading out on your next scuba diving adventure.

This article is part of a series on key forces shaping the insurance industry. Parts One, Two and Three can be found here, here and here. Trend #4 and #5: Innovation in commercial lines Solutions will continue to evolve from protection to behavioral change, then to prevention — even across complex commercial insurance. Although proliferation of data and increasing transparency of both the buyer and seller will cause disintermediation for simple covers, it will also create opportunities for brokers and intermediaries to innovate solutions and channels for their B2C (non-standard risk pools, retirees/older generation, healthcare gaps) and B2B (emerging and unknown risks, cyber, global supply chains, cross-border liability, terrorism). We believe the potential for innovation in commercial lines is actually larger than personal lines. Because of the complexity of the commercial insurance ecosystem and new emerging risks, however, the level of innovation seen so far has been relatively modest. See also: 3 Ways to Leverage Digital Innovation   Demand and supply of commercial insurance solutions is evolving, driven by:

• developing markets looking for new solutions
• the digital economy driving a move away from property risks (which are decreasing as a proportion of the overall economy) to casualty
• increasing demand for catastrophe insurance (driven, in part, by increasing concentration)
• macro trends creating emerging and “uninsurable” risk classes
• new sources of structured and unstructured external data that are changing how commercial insurance is sourced, bought, underwritten/priced and serviced

The competitive landscape is also changing with large global conglomerates setting up captives to self-insure emerging market champions and the continued involvement of alternative sources of capital. Excess underwriting capacity is placing strain on profitability. In addition, new entrants and primary distributors are seeking to take greater control of the value chain, including pricing and risk selection. This impact is further enhanced by primary carriers retaining more risk as a result of global scale and balance sheet strength providing diversification and increased understanding of their own risk from solvency modeling. Many incumbents are already starting to respond. In the London market, a key component of the modernization program being driven by Lloyds is PPL, a new platform where face-to-face negotiation is supported and facilitated by electronic risk capture, placing, signing and closing. Brokers are also aggressively evolving their risk analytics capabilities through the creation of open architecture platforms that deliver a two-way information flow while leveraging knowledge to shape future risk transfer solutions for evolving needs. Many carriers are piloting monitoring technology in property (partnerships with security, pest control and energy companies) as well as casualty (sensors and wearables) to drive improvements in risk selection and risk mitigation. How innovation will drive value creation Risk monitoring, mitigation and prevention One of the key trends driving change is the move from risk transfer to risk monitoring, mitigation and prevention. Organizations are looking for risk prevention and mitigation solutions as they move away from traditional risk transfer mechanisms. We see three main areas:

• Telematics for commercial lines (for example in property and marine);
• Real-time, contextual data capture and AI for risk selection, risk mitigation and monitoring, client on-boarding as well as re-underwriting; and
• Use of preventive technologies (health tech, slip and fall, work place safety) to mitigate lost time injury and workers' compensation losses.

Insurance sourcing, buying and selling As businesses gain greater transparency into their risks, they will continue to optimize their risk management solutions. While direct SME cover, self-insurance and use of captives will continue to grow, emerging risks will provide opportunities for intermediaries and brokers to carve out and source new solutions for their customers. Examples of these will include global supply chains, cross border liability, cyber, catastrophe and terrorism. Operating model improvements The commercial market has always been very strong around product innovation, but the operating model has largely stagnated. In some parts of the market, the underlying process hasn’t really changed for more than a hundred years. System limitations further reduce the ability to leverage the data that is captured. There are significant opportunities to enhance operational efficiency in many of the basic functions, including payments and regulation and also in automating underwriting and claims. Application of technology and data to enable digitalization There are a number of risk classes where there is significant potential to harness technology and data to improve underwriting, risk selection and pricing, as well as to help businesses understand and then manage their exposure. These include cyber, flood and SME. Platform-based solutions Platform-based solutions (rather than point solutions) have the greatest potential to create value, and incumbents will need to assess how to incorporate innovative solutions based on a build, buy or partner strategy. See also: Q&A With Google on Innovation, Risk   We hope you enjoy these insights, and we look forward to collaborating with you as we create a new insurance future. Next article in the series will be about Trend #6. The ability to dynamically innovate (new risk pools, new segments, new channels) and deliver on the customer promise will become the most important competitive advantage (as known risks continue to get commoditized and moved to the direct channels).

Successfully implementing a core system — in any industry, but especially in insurance — is challenging. One of the most difficult aspects of implementation is simply knowing where the finish line is — while you’re standing at the starting line. Mapping out the course from the starting line to the finish line is impossible if you don’t know where both are. The difficulty of this task is compounded by fact that the finish line is different for each carrier. For one carrier, it might be a minimum viable product (MVP) that in turn serves as the new starting point for a broader implementation. For others, it might be a particular component, after which everything else is just icing on the cake. For others still, it may be the full solution including conversion. As such, the finish line — and the course —  should be uniquely mapped out for each program, rather than a “one size fits all” approach. Are You Ready for This? Your step into core systems transformation will benefit from a bit of scrutiny to help determine the proper location of your finish line. Where do you start? How do you figure out where your finish line is and what it looks like? A good starting point is to look at the many factors that can answer these questions for you:

• Organizational risk appetite: How much risk is your organization willing to take on at once?
• Program budget: What is the board willing to approve for the program? Will it invest the full amount or just the initial chunk?
• Organizational ability to handle large programs: Do you trust your organization to manage a long, large budget program, or is the organization better at managing a series of (or parallel set of) smaller efforts?
• Buy-in of various divisions: Do all of the potential stakeholders across different distribution channels, product lines, etc. agree to having their core systems replaced, or do some prefer a “fast follower” approach?
• Desire to process new business only/convert on renewal/avoid conversion: Is there a commitment to move off of legacy completely, or to only move portions where it makes financial sense to do so?
• Need/Lack of need to replace particular components: Can part of the solution wait? That is, do you need to do policy, billing and claims today, or can/should one or more of these wait?

See also: How to Transform Core Systems   Among other possible constraints (such as selecting a vendor that only supports commercial lines or group life) or parameters (such as a board mandate to be live end-to-end in 12 months for three lines of business), these factors can help establish where the finish line should be. While business parameters change, the finish line should not be moved — if at all possible. It would be better to instead add new phases with new finish lines. Moving the finish line once you’ve started can create a host of unintended problems, ranging from morale issues to creating a never-ending cycle of chasing moving targets. It’s best to keep that first finish line fixed. Once complete, the organization will have more confidence to build on its success. Keeping It Real In reality (and perhaps we can keep this a secret just between you and me), there is no finish line. Once you’ve achieved the first goal, there will still be much to do. Business needs tend to change from quarter to quarter and from fiscal year to fiscal year. Accordingly, changes to the system(s) will be needed, including: extending functionality beyond what was additionally planned, adding products, extending to new geographies, adding new partner integrations, upgrades and more. Rapidly changing business dynamics and needs constantly move the idea of being “finished” further and further out.  Of course, this means you may never truly be “done.” Welcome to transformation in the digital age! So, with this in mind, how far away should your first finish line really be? Beyond what’s been answered for you by organizational parameters and constraints, several factors should be considered. First, the finish line should be clearly visible to all stakeholders and team members from the beginning. Second, getting to the first finish line should be clearly achievable, real and not a “moon shot.” This is no secret. You can write this phrase in a cloud bubble on your white board: “Success begins with an ACHIEVABLE FINISH LINE.” (And maybe then you should write, “Do not erase” with one of those red arrows pointing to your cloud bubble.) Show Me the ROI Another key factor should be setting a “first” finish line that delivers measurable results. If you get to the first finish line and all that’s been delivered is a foundation, it can be easy for sponsors or others to question the ROI. Try to bundle foundational work with something functional, and try to make it something that can be deployed on its own (this could range from a single product and one module — such as term life or personal auto quoting — to implementing the end-to-end suite but with minimal configuration). However you define your minimum viable product, your first finish line should get you there. Take Me to Your Finish Line (Then Prove to Me That I’m There) So how do you know when you get to your finish line? If you defined it clearly, it may be obvious. But to make sure everyone knows how close they are to the finish line, a few important steps can help. One key is to clearly communicate what defines the finish line and what defines successfully getting there. Are there metrics for being on-time/on-budget? What about quality? Is there a benchmark for adoption? Another key is to make sure that these success criteria are clearly communicated to all stakeholders and team members. In addition, consider some sort of scorecard, scoreboard, dashboard or other very visual cue that indicates progress day by day. See also: ‘Core in the Cloud’ Reaches Tipping Point   Following these guidelines, you can help ensure that all participants are marching in the same direction, at the same speed and with the same goals. When using an agile approach, this can be especially important given the dependencies of all the moving parts. Just as important is the ability to get to the finish line and have the stakeholders and sponsors know you’ve arrived there so that success can not only be achieved but also recognized. With a clear path to completion, clear goals and a clear way to know that success will be recognized, teams can be motivated like never before!

The WannaCry attack, the biggest ransomware attack in history, is not over. It has had an impact on companies in at least 150 countries, leaving organizations around the world wondering if they might be affected by subsequent waves. It’s critical to keep in mind that effective mitigation of ransomware (and similar) attacks is accomplished with good governance and risk management, not with the acquisition of expensive security solutions. Detecting and mitigating risks effectively requires an integrated approach. It requires understanding the dependencies and overlapping activities between entities or departments. See also: Quest for Reliable Cyber Security   Technology necessary for a robust cybersecurity program already exists in most organizations. The missing piece — strong governance — is the key to putting internal policies into practice and maximizing the effectiveness of existing technology. With that in mind, there are a few fundamental steps organizations should take. Enterprise-wide risk management procedures must be used to automate the assessment and monitoring of these processes. Timeliness and frequency are key to sustaining protection. The creation of corporate policies does not assure that those policies are followed equally across business areas out to the front lines. In fact, without enterprise risk management, they rarely are. Back up data; use patches The first step is to make sure off-site backups are kept up to date. Automatic notifications should alert the security team at preset intervals, reminding them to verify that data is fully backed up at an off-site location. It’s critical to use a risk-based approach to prioritize which data needs monitoring and testing. Once data has been protected, companies should ensure approved patches are implemented. Although most organizations have approval procedures to force implementation, inconsistency causes massive, preventable vulnerabilities. Without risk-based monitoring, critical assets are left unprotected as priorities interfere with one another. Virus detection software is typically reviewed and updated in a similar manner. Security teams need the guidance of centralized governance so they can monitor systems effectively. Limit access Managing access rights — which can be achieved by first implementing internal password policies and asset management — is critical when minimizing cyber exposure. The “principle of least privilege,” by which the company grants employees only the access rights they need to perform their job responsibilities, is particularly important. This also should apply to vendors and other third parties. Conceptually this is simple, but, in practice, a risk-based approach is needed to connect process owners to the security team. This is where most access rights programs fail. Automated monitoring also should be applied to company virtual private networks. VPNs are important tools that sustain security and access, but if they are not managed correctly and don’t time out according to a preset timeframe, they create vulnerabilities that can be exploited. Once again, vendors should be held to similar standards. Business continuity and disaster recovery (BC/DR) plans, much like data backups, must be tested (and optimized) at regular intervals. If a company has a plan in place but does not regularly test its ability to implement a “clean recovery,” it’s highly unlikely it will get back on its feet after an attack within the required time period. Keep recovery time short Centralized risk management allows subject-matter experts to assess each device, application and data store. Recovery time objectives (RTOs) measure how long business objectives can be met without a particular asset. The security team, after receiving automatic notifications, should test to ensure the clean recovery timeframe is smaller than the shortest RTO. See also: 10 Cyber Security Predictions for 2017   The steps above remove cybersecurity vulnerabilities by improving governance, not by mandating the acquisition of new IT resources. Good governance enables the operationalization of security procedures, closing the gap between senior leadership and everyday activities. A risk-based approach reduces both exposure and the cost of effective security operations. This article originally appeared on ThirdCertainty. It was written by Steven Minsky.