Tag Archives: agile methodology

Agile, Organizational Realignment

Agile adoption for insurers has grown significantly in the past few years; most have already begun their agile journey and are at varying stages of maturity. Yet agile has financial, organizational and cultural implications that can reshape the entire organization. Adopting this methodology often leads to the flattening of hierarchies, new budgeting processes and a change in role for the project management office (PMO).

Alignment Implications: Projects to Product

Following trends outside the industry, a growing number of insurers are choosing to organize their IT value delivery around supporting products rather than delivering projects. Products are durable, whereas projects are transient; they have a clear beginning and end. The idea of well-defined ending and scope has always been in conflict with the core ideas of agile, where scope can change week to week, and the end can come earlier or later as needed.

Part of this realignment to product means that many insurers are retooling their PMOs to fit an agile delivery model. PMOs that endure in highly agile organizations tend to shift away from a directive model to one that is more supportive and consultative. Agile works best when teams are empowered to operate as semiautonomous units—this doesn’t mesh well with the controlling PMO model.

Some insurers with advanced agile organizations have chosen to replace their PMO with other organizational structures like product management. Product managers are defined by scaling agile frameworks like SAFe and are common in software organizations. The product-based nature of agile implementations also requires consistent vision over an entire life cycle, with product managers as the custodian of that vision.

Organizational Implications: Funding and Federation 

One of the biggest challenges in shifting to product-focused IT alignment is how the work will be funded. Advanced agile tends to depart from traditional ROI-based funding. Instead, teams are funded for a fixed period (usually a year) where funding levels reflect the business value of the product and the road map. 

The transition to an agile delivery approach can be a catalyst for IT organizations to move away from centralized IT and toward greater federation. This shift provides business partners with greater accountability for delivering on the business value proposition. 

Stronger IT alignment with business also means that IT metrics will measure outcomes rather than inputs, outputs and plan adherence. The lack of detailed plans render many traditional metrics obsolete. Measuring business outcomes like new sales or claims duration can supplement traditional agile metrics like velocity.

See also: A Short History of Agile Development  

Cultural Implications: Agile Innovation

Agile allows teams to collaboratively and creatively solve hard problems. It requires a tolerance for failure, a willingness to experiment, psychological safety, high degrees of collaboration and a lack of hierarchy. All these are defining characteristics of the world’s most innovative companies. Several large carriers are using agile as the blueprint to drive this kind of cultural change. They have executed aggressive plans to restructure their organizations, redefining roles and management, transforming governance and adjusting key performance indicators (KPIs) to drive the desired behaviors.

Yet some organizations resist the migration to agile because it represents a change from how things have always been done. Outdated compensation and reward structures can also impede agile adoption. Executive sponsorship is important to deal with this challenge; equally important is advocating for change at all organizational levels.

Exceptions to Agile

Insurance carriers shifting to agile are realizing benefits in improved software quality, better business outcomes, lower cost and risk and increased customer satisfaction. Yet agile isn’t the right solution for every organization or every type of technology investment. Full implementations like large-scale financial system replacements, including general ledger and ERP systems, may not be ideal candidates for agile. Rigorous testing cycles required in a comprehensive testing phase completed near the end of development inhibit the value of quicker release cycles.

Moreover, the business is often not ready to become a dedicated partner. When business partners aren’t available in day-to-day delivery of the solution, the outcomes aren’t very different from a waterfall or iterative development model. Agile also tends to be unsuccessful if IT relies heavily on full offshore development teams without a product manager on site. Insurers recognize the benefits of agile development: increasing alignment between IT/business, improving speed to market and boosting employee engagement. However, this transition is not immediate.

Insurance carriers are at different levels of maturity depending on how long they’ve been practicing and the willingness of business and IT to adapt. Novarica’s recent brief, Agile Maturity Model for Insurers, provides an overview of challenges and implications of agile adoption at insurers, as well as a capabilities model to define stages of maturity across areas affected by a transition to agile.

Overcoming Newton's Laws

Like many companies in many industries, and practically every human being I know, the insurance world can be change-resistant. We fight natural laws even as we recognize the very need to adapt and grow. When it comes to adopting technology — a topic I hope to explore in future contributions here — change is particularly difficult.

So how do you get your organization to change, to adjust, to transform? How can you promote and ensure a change in direction or propel a faster change? A few key lessons found in Newton's Laws can shed light on some good answers.

In 1687 Sir Isaac Newton published his work, Philosophiæ Naturalis Principia Mathematica, what we commonly call Newton's laws of motion. I am sure you remember Newton's laws of motion? Here's a layman's version (with apologies to Sir Isaac):

  1. First law: A body (mass m) in motion stays in motion unless it is acted upon by an external force (F). Picture a big boulder rolling down a shallow slope, just enough slope to keep the boulder rolling but not enough for the boulder to gain speed.
  2. Second law: A body will accelerate if pushed in the same direction as it is moving, i.e., F = ma (we'll need the formula later; I know, you were told there would be no math). Same boulder, now rolling slowly so you catch up to it and push it from behind, causing it to go faster.
  3. Third law: The forces of action and reaction between two bodies are equal and opposite. This means that whenever a first body exerts a force F on a second body, the second body exerts a force -F on the first body. F and -F are equal in magnitude and opposite in direction. Our boulder example again, only this time it runs into another boulder, which causes the first boulder to slow or stop and the one it hit to steer off in the opposite direction of the hit.

So that's what you already knew. What I bet you didn't know is that Sir Isaac Newton spent a lot of time at Edward Lloyd's coffee shop in London (Lloyd's of London). Sir Isaac was a professor, after all, and was nothing if not observant. For years he listened in on the conversations of insurance professionals as they talked about their businesses while sipping his nonfat vanilla lattes. He soon postulated the three laws of business:

  1. First law: A business (mass m) will remain on its course, good or bad, profitable or unprofitable, forever if no new forces act upon it.
  2. Second law: The larger or older a business is (big mass m), the more force (change agent F) it will take to accelerate its course.
  3. Third law: If a force (F) is exerted on a business (mass m) to try to change its course, expect some pushback (-F).

Sound familiar? Think about your own organization. Now do these “laws” ring a bell?

It is important to note that I love the insurance business and have been studying the industry from the inside for 34 years. That said, I do think Newton's laws of business have a stranglehold on our industry. While there are exceptions, many companies are in a “state of uniform motion,” and too many companies struggle to change course. Still others try but are forced to give up when change is not well received by those affected.

So what can an organization do to overcome Newton's laws or, in reality, use the laws to their advantage? Let's tackle them one at a time.

First Law in Action
Insurance is cyclical: soft and hard markets, profitable and unprofitable cycles. The common response is, “That's just the way it is, and we can't do anything about it.” To change speed or course requires a strong desire and some planning. It also requires an understanding of your mass m (your “boulder”, i.e., your company).

As Davenport and Harris state in Competing on Analytics: The New Science of Winning, you must know what you are really good at; that is, you must know your distinctive capability. So how do you get a deeper understanding of who you are as a company? How do you discover what you are really good at? You do the analysis — identify your team's talents and limitations; understand what your profitable and unprofitable clients “look like”; determine how and where you make money (or not); pin down your processes; know what additional corporate assets you have to work with; and so on.

Use all the technology tools available, including data analytics, descriptive and predictive modeling, and sometimes, outside help. You really need to understand the composition of your “boulder” and the nature of the landscape it is rolling down, including the other boulders (competition) that you may run into.

Second Law in Action
“We have always done it this way.” It pains me to even write that statement. In a young organization, you don't hear this statement that often, if at all; everything is new. There are no “habits.” Brand new companies are more like a handful of pebbles thrown down the hill than they are boulders. The smaller the mass m (the company), the less force required to change its course; Newton's second law of business.

And generally the larger and/or older the company, the greater the mass m = greater force required to change course. So if you hear, “We have 2,000 claims people scattered across the country; changing will be impossible,” ask yourself, will it really? Sure, change will be hard, maybe really hard. Therefore, F just needs to be larger, making the achievement that much more rewarding.

Here is where talented leadership is very important. Gain a following first (a big part of being a leader), paint a clear picture of where and how fast you want your boulder to roll, and people will get behind and push. Once the momentum picks up, you may encounter many competing forces; therefore, put some governance in place so the most important projects get everyone's attention. And have strong project management to keep the force applied in the right direction. Strive for quick, small successes so people “see” progress. People in IT will help you; they are trained in the discipline of managing projects and portfolios of projects.

Third Law in Action
You have taken a good assessment of your company, you have good leadership in place, and you have charted a new course and speed. You initiated projects with governance in place to assure they are the “right” projects. Everything is rolling along, but Newton's laws are still present. Now the troops start pushing back.

People tend to know the third law best. Proactive collaboration with your teams goes a long way to overcoming human pushback. When people participate in the process and know what they are doing, -F is minimized. Business intelligence and analytics can help here, too — even something as simple as who is using what technology and how often. Metrics on adoption are great.

Eight Steps For Leveraging Newton's Laws Toward Positive Change
Changing course isn't easy. The larger or older an organization is, the harder the course change. Quality change management is worth its weight in gold (even at today's price), and these eight steps can help.

Step 1 — Understand your “boulder.” Get outside help if you aren't really good at introspection. Analyze past history. If you buy into Newton's laws, your history will repeat itself unless acted upon by an “external, unbalanced force.” Today's technology provides unprecedented capabilities to study historical data in ways that were not possible (or at least were really hard to accomplish) just a few short years ago. There are so many ways to gather data and analyze the buyers of your products. Make sure you know your current business and your market.

Step 2 — Recognize that Newton's first law of business exists and that change requires hard work and good, strong leadership. It fact, leadership is the most important aspect needed for changing course. Effective leadership at the top is a must, but it's also a required factor of others who lead people in your company.

Step 3 — Determine your new direction. Use what you learned in Step 1 to establish the speed you want your boulder to go and in what direction. Once you know in which direction to head, you must figure out how to shove your boulder with the right amount of force. Typically, you must shove it hard to get it to change course, pick up speed, or both.

Step 4 — Recognize that talented leadership can exert a significant force. Talented leadership involves cultivating a following of believers, so that the third law is minimized and your team will eagerly follow the new course. It means painting a clear picture of where you want your boulder to roll. Your team must know the “destination” so they can help move your team, department, and company toward it.

Step 5 — Get governance in place. When an organization has bought into change, really bought into it, then there can be many competing forces. Governance must be strong so the “right” forces affect the direction of the company. Governance helps by identifying which way to “push” and ensuring the right amount of force. Remember the first real law: the force has to be unbalanced. If competing projects cancel each other out, the boulder will keep rolling in the same ol' direction, at the same constant (probably slow) speed.

Step 6 — Establish strong project management. A new course is set; the proper force is applied, and is applied in the right direction. Now the change must be monitored. Leadership should be kept informed. Course corrections may be required. It's all part of good project management. At my firm, we are huge Agile Methodology zealots (that's redundant). Breaking the work into manageable chunks and keeping people informed are great ways to accomplish what needs doing. It also helps to address the third law. People like to “see” progress and feel a sense of accomplishment.

Step 7 — Don't forget your people. People are subject to Newton's Laws too. Make sure you have human change management in place. Proactive collaboration with your teams goes a long way to overcoming human pushback. Train early and train often. When people participate in the process, know what they're doing, and understand what's expected, then -F is minimized.

Step 8 — Assess and amend. It is so easy to get off course, since there are many forces F and -F exerting influence on your company, both internally and externally. As you work to change or accelerate course, Newton's Laws will always be in play. Making adjustments as you go is critical to success.

Change is inevitable, whether you're changing your boulder's course or letting your competitors' boulders get in the way. But change can also be fun.

Over the course of 34 years, I have been called many things; one of the good ones is a change agent. I hope this article will help you change your organization in many positive ways. When you think about change, remember Newton's Laws and let them guide your actions. Embrace change. You can make it happen.