Tag Archives: Agile

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.

A Short History of Agile Development

Agile methodology has a long history with deep roots. It evolved across decades from an array of research and writing by individuals with diverse backgrounds. One thing they all shared was the desire to quicken the pace of development – whether it be for a product, a manufacturing line or software.

When you think about insurance, project methodologies may not be the first thing that come to mind. Yet, as business and IT professionals find themselves increasingly working together toward the shared goal of digital transformation, the topic has gained importance in the boardroom.

And with good reason. Many projects have cost much more and taken much longer than expected. Scientists, product managers and engineers have been investigating what determines a successful project ever since Walter Shewart of Bell Labs began using Plan-Do-Study-Act (PDSA) cycles to improve products and processes in the 1930s.

Shewart taught his young apprentice W. Edwards Deming the iterative development methodology that he used to create the famous Toyota Production System, the seed of today’s “lean” mentality.

See also: Emerging Technology in Personal Lines  

In 1986, Hirotaka Takeuchi and Ikujiro Nonaka published an article called “The New New Product Development Game” in Harvard Business Review. They examined manufacturers like Fuji-Xerox, Honda and Canon that were releasing innovative technologies faster and more successfully than their competitors.

These companies were not using the traditional “relay race” or “waterfall” method of development where individuals or teams hand off products after completing each phase. Instead, the companies were using what Takeuchi and Nonaka coined a “rugby” approach, “where the entire team tries to go the whole way as one unit, passing the ball back and forth.”

As personal computers and then the internet became mainstream in the late ‘80s and ‘90s, it was crucial that developers find a way to quickly implement their innovations, obtain feedback and launch their technologies to stay competitive.

This was referred to as “the application development crisis” or “application delivery lag,” where the estimated time between a validated business need and solution could be as much as three years. In some cases, it was much longer, which meant that projects were often canceled or no longer met the original business need when finally completed.

In 1993, agile co-founder Jeff Sutherland found himself with an incredible challenge working for Easel: develop a product to replace a legacy system in six months. Sutherland was well-versed in rapid application development, object-oriented design, PDSA and skunkworks methodologies. He set out to foster this kind of culture and began learning everything he could about optimizing productivity when he came across Takeuchi and Nonaka’s rugby approach.

Sutherland embraced many of their ideas and established a novel way to develop software based on the rugby metaphor, calling his approach “scrum.” This method allowed him to complete seemingly impossible projects on time and with fewer bugs. He then joined forces with colleague Ken Schwaber to structure the approach, which they presented to the public in 1995.

In 2001, a group of 17 developers, including Sutherland, met in Snowbird, Utah, to discuss their views. Sutherland was a proponent of scrum. There also were advocates for a number of approaches such as extreme programming (XP), adaptive software development (ASD), crystal, feature-driven development and the dynamic-systems-development method (DSDM).

See also: How to Partner With Insurtechs  

The group finally agreed on a new name for the movement – agile – suggested by a member who was reading the book “Agile Competitors and Virtual Organizations: Strategies for Enriching the Customer.” The “Manifesto for Agile Development” was born and hinged on 12 key principles that are being applied across industries worldwide, including insurance. Agile development has proven to be a major advance.

In my next post, I’ll discuss the top challenges and key success factors for agile development in insurance.

3 Keys to Effective Project Management

I did a Google search on the number of project management methodologies that exist currently, and I kept getting results like “9 methodologies made simple” and “15 methodologies you must know.” In the world of “methodologies galore” such as Waterfall, Agile, Six Sigma, Lean, Lean Startup, Kanban, etc., etc., with each body of knowledge or pundit preaching that they are the best and most effective, how might one “declutter” the jargon and really apply effective project management for their initiatives?

As insurtechs, we also need to take into consideration client methodologies and what is being used in their organizations. Here are three key principles that I’ve applied to my nearly one-plus decade of project management, whether I’ve implemented Scrum, Lean, etc.:

Keep It Simple: Don’t overcomplicate your project management process. Simplicity is the ultimate sophistication. I have seen slides from companies talking about their project management approach that make me go take a Tylenol. Project management is not about methodology, process or tooling (they are essential — don’t get me wrong). The focus is about people and communication.

Keep It Nimble: At Benekiva, how we manage internal projects and our road map is different than implementing a client engagement. We are nimble to adapt based on clients’ feedback. If they want status reports, they are getting them. If they want an Excel output, they get it.

Keep It Short: This relates to how we schedule iterations/sprints and work effort. Keeping them short allows us to respond to any change or “aha” moments effectively with minimal impacts. Keeping it short also eliminates procrastination, where things get pushed to the last minute.

See also: How to Improve ‘Model Risk Management’  

Applying these three principles to your project management practice will allow your company to do enough project management while giving you more time to communicate to your stakeholders and adding value where it needs to be added.

Top Challenge for HR Teams in 2018

We all have that colleague who overuses buzz words and phrases such as: “synergy,” “deep dive” and “low-hanging fruit.” Yet, every now and again, a buzz word arises that actually affects your business.

In 2018, that word is going to be “agile,” and human resource teams will be responsible for making it a reality across the organization. Business agility is the ability to adapt and respond rapidly to changes in the environment while sustaining success. Depending on the size and stage of your organization, agility may require bold internal policy transformations, a new approach to hiring or paradigm shifts in company culture.

Agile isn’t new, so why will it creep up the challenges list in 2018?

With questions swirling around whether the economy can sustain its momentum, uncertainty has again set in. Organizations with the ability to quickly adapt to changing business and economic conditions, companywide and HR-focused objectives – particularly those focused on driving growth – won’t have to be compromised. Yet nearly 700 executives reported having little confidence in their companies’ ability to quickly mobilize in response to market shifts. More than 50% of those surveyed did not believe that their culture was adaptive enough to respond.

See also: The Human Resources View Of Health Care Benefits Needs To Change 

To solve this quandary, CEOs are turning to HR leaders. CEOs are providing a mandate to create a workforce and cultivate a culture that is agile and nimble enough to capitalize on new opportunities and overcome deep-rooted organizational challenges.

At Peak Sales Recruiting, we work with HR leaders from some of the most innovative and disruptive companies. Based on their collective experiences and the latest studies, we have compiled three ways human resource and talent acquisition teams can harness the power of agility to drive organizational performance in 2018:

1. Learn from Tom Cruise in “Mission Impossible:” In the popular movie franchise, Cruise leads IMF, a self-managed team that operates outside of government bureaucracy to save the U.S. from evil. In the real world, many leading companies such as Microsoft, Spotify and Airbnb have employed similar strategies. For example, “Scaling Agile @ Spotify” formed cross-departmental teams that functioned like a startup, with Spotify as the incubator. The teams – Tribes and Guilds – had delegated decision-making autonomy on key service and product development initiatives. Their work has been so important that they’ve helped the company keep giants like Apple from stealing market share in a growth segment.

Bain research studied 300 large corporations worldwide and found that the top quartile’s key to success was that they spent 50% less time on unnecessary and ineffective collaboration. That is why small, talented teams that work outside of traditional hierarchical management systems can solve mission-critical issues, faster. To be more agile in 2018, HR departments must work closely with C-suite executives on empowering middle and front-line leaders to build nimble, cross-functional teams.

2. Transform internally at scale: A Korn Ferry Institute study found that increasing investment in aligning HR practices with business objectives resulted in a 7.5% decrease in employee turnover and, on a per-employee basis, $27,044 more in sales, $18,641 more in market value and $3,814 more in profit. But in tech, HR departments have traditionally struggled to be aligned with rapid go-to-market plays and shorter product-development cycles. Workforce policy development, talent acquisition tactics and competency and performance review initiatives weren’t in sync with the changing pace of business. Using agility as its foundation, one company approached the problem differently.

McKinsey recently released a case study called ING’s Agile Transformation. Recognizing the importance of agility at scale, ING made 3,500 employees re-interview for their jobs. Remarkably, 40% of them ended up in new positions within the company or were let go. In many cases, the change was not because of an employee’s skill set. The issue was whether employees could embrace the constant state of change that financial service and fintech organizations need to remain competitive. ING’s HR department led an unprecedented overhaul of their organization, and this experience can be replicated across organizations in 2018.

3. Hire change agents with a versatile skill set: The phrase, “We have always done it this way,” is the kryptonite to success. Economic volatility and advances in technology, in certain cases, render last year’s business plan obsolete. While it is not necessary to reinvent the wheel every time, HR departments must evolve their competency models to hire people possessing change agent traits and experiences. Steve Jobs famously said that, if you want to hire change agents, hire pirates. He wanted employees who would challenge the status quo and were flexible, diverse, passionate and results-oriented. If HR departments do not bring in fresh people and ideas, the company will fail to improve in 2018.

See also: Hacking the Human: Social Engineering

Due to rapid changes in technology and the global economy, business agility will be a key differentiator between company failure and success. Being agile while maintaining company values and processes is a tightrope that CEOs are asking human resource professionals to figure out. Never has a buzz word meant so much.

The Hemingway Model of Disruption

In Ernest Hemingway’s The Sun Also Rises, a character is asked how he went bankrupt. “Two ways,” he says. “Gradually, then suddenly.”

In my experience covering innovation for nearly three decades, that’s how disruption has come to a host of industries: IT, newspapers, books, retail, music, etc. What I think of as the Hemingway model for disruption — gradually, then suddenly — is thus how I expect transformation to come to the four main areas that have yet to see huge changes driven by IT: healthcare, higher education, government and our favorite, insurance.

If history is any guide — and it usually is — many insurance executives will miss the warning signs and be caught unawares, just as executives in other industries have been. In 1997, my frequent co-author, Chunka Mui, and I sat in the office of the CEO of Sears and tried to convince him that the gradual change he was then seeing in retail would become sudden once the Internet matured. We argued that he should search for a new business model, using Sears’ brand name and experience with tools and appliances to become the nation’s handyman. He demurred, convinced that the “sudden” part of disruption wasn’t coming. That same year, we sat down with the president of a very large distributor of music and told him that “sudden” was just around the corner because of MP3 players. We argued that he should sell the business and run for the hills. He, too, was unconvinced.

Even though insurance executives now have two decades of disruption in other industries as evidence, I’m seeing many focus on the “gradual” part of Hemingway’s formulation and hoping that “suddenly” either isn’t coming or doesn’t hit until after they’ve safely eased into retirement.

I came across an article the other day by an old friend and colleague of Chunka’s and mine that takes a different tack and offers some concrete ways to monitor for disruption — or, rather, for what the article, How Old Industries Become Young Again, calls the “dematuring” of an industry. The author, John Sviokla, was a partner of ours at Diamond Management & Technology Consultants, now part of PwC. Before that, he was a professor at Harvard Business School, where he co-wrote a thoroughly prescient piece in Harvard Business Review in the early 1990s (years before most of us even discovered the Internet) that described the contours of what the authors then referred to as the “marketspace” and that we now think of as e-commerce.

In describing how to watch for coming problems and opportunities, Sviokla writes, “What most industries experience as disruption is typically not a sudden change from one source, but the accumulated impact of a range of interacting factors. If you want to be prepared for disruption, it’s critical to understand the more gradual, prevalent and multifaceted dynamic that underlies it: a phenomenon called dematurity….You can think of dematurity as a crescendo of mini-disruptions that add up to great effect.”

He says to look for changes in five areas, to understand how rapidly the industry will change and to see how to prepare:

  • New customer habits
  • New production technologies
  • New lateral competitors
  • New regulations
  • New means of distribution

Because Sviokla only touches on insurance, I’ll channel my inner John and offer some thoughts on the five areas, three of which are clearly dematuring the industry and a fourth of which seems to be well on its way.

New customer habits

This is clearly an area of change. The discussion among insurers mostly concerns Millennials, and that’s fair enough as far as it goes, but the issue is much broader. All sorts of customers have come to expect more transparent pricing and convenient service because of the examples that Amazon and other e-commerce giants have set. Mobile technology drives even more changes in customer behavior, increasing demands for immediacy, among other things. Other technologies, such as health-related wearables, are catching on, with consequences that are unclear at this point but that could be profound. Demographics are changing, and not just because of Millennials. And so on.

New Production Technologies

Another area of clear change. The inputs that can go into the writing of an insurance policy are exploding — cameras, sensors, previously unscrutinized notes from salesmen, from customer service reps, from social media, you name it. Silos within companies mean that insurers can’t yet take full advantage of the new inputs, but change is coming. Agile production technologies will soon mean that it won’t take six to eight months to get a new product to market. It will take six to eight weeks or even six to eight days.

New Lateral Competitors

There has been lots of speculation. Is Google coming? Facebook? Amazon? Will there be an Uber of insurance? Some other start-up that revolutionizes the industry? The answers are still a bit unclear, but it seems to me that new competitors are emerging and that the pace will pick up. You can already see effects in reinsurance, where some risks can be so fully quantified that they are being covered in the capital markets rather than through traditional insurers.

New Regulations

Obamacare has certainly shaken up parts of the health insurance market, but, in general, regulations will slow the dematuring of insurance, not accelerate it.

New Means of Distribution

This will take a while to sort out, but at least parts of the sales process will go direct — the agent may still advise on the content of the policy but won’t handle as many logistical details. The increasing reliance on mobile devices will accelerate the move to direct interactions with insurers.

However, you see Sviokla’s checklist of five areas to watch, I’d encourage you to read his article. A lot of the discussion about the potential for disruption can get emotional — The British are coming! The British are coming! No, they’re not! No, they’re not! — but John, as usual, has managed to take a dispassionate, scholarly look at the issues.