Tag Archives: kaizen

Advice for Aspiring Leaders in Insurtech

Starting a company has been likened to jumping off a cliff and building an airplane as you fall through the air. Risky stuff. I mean, really risky stuff. Living in Silicon Valley and around people who do this all the time as though it were normal, you can begin to think it is. Or maybe my brain has always been wired that way.

At least four times now, I have boldly proclaimed to my wife of 21 years, “I have this idea, and I am going to do X.” And “Oh, by the way, we probably won’t be getting paid for a couple of years. And…well, there’s a high degree of risk involved, which means it is highly likely we won’t get paid…at…all.”

In starting our current company, Limelight Health, four of us had an idea, iterated, worked hard and took no salary for over two years. We now now employ 120 people all over the globe and have raised roughly $44 million in venture capital. The journey from a chief executive of four founders haggling over how to get started and what to do, to CEO of a venture-backed company with lots of employees, has been nothing short of amazing. It has required me to do one thing, placing it above all else: exercise the willingness to let go of who I am and embrace constant change. Not in a theoretical way, but in a real, difficult, deep down-in-the-gut and character-changing, emotionally taxing way.

At any company, you have to spend a lot of time talking about values. Who are you as a company? How are you going to treat employees, each other, customers and partners? It’s fun to talk about, yet much more difficult to execute.

To that end, the best advice for an aspiring leader in the insurtech space would be to fearlessly create and live by tenable, actionable values. Talk about them with new recruits, talk about them in interviews, talk about them in All Hands meetings. Be sure to recognize employees who espouse them and call each other out when you’re not living up to the values.

Below are some values that hold strong when leading a new company in this industry.

See also: Key Difference in Leaders vs. Managers  

Humility and Awareness. Leading a startup, it’s easy to think you are right or that your way is the best way. Typically, leaders don’t enjoy being wrong. It’s easy to become angry when someone doesn’t behave in a way that is consistent with your view of how the work environment should be. You want to surround yourself with people and direct reports who will point out problems.

When you are challenged and coached, you become humbled. From there, you can grow. All that is required is the humility to listen and the awareness that sometimes things need to change to set the tone for and build a great culture. If you aspire to lead in the insurtech space, find some humility. One way or another, when you innovate and disrupt, humility will meet you at your doorstep.

Kaizen. A Japanese word for “continual improvement,” kaizen refers in business to activities that continually improve all functions and involve all employees from the CEO to the “assembly line workers.” Sometimes you have to climb into a cocoon, die and come out something altogether different. When you make a mistake, it’s important to jointly work hard to focus not on blame or how badly someone performed, rather, conduct a retrospective to discover how you can improve. If you are aspiring to lead, you have to do just that, and I can guarantee that you will be the one who changes more than anyone else.

Grit.Grit is passion and perseverance for long-term and meaningful goals. It is the ability to persist in something you feel passionate about and persevere when you face obstacles.” You will invariably face obstacles: Everything will take longer, cost more and be more difficult than you can possibly imagine. Simply put, you will need some grit to push through.

See also: Setting Goals for Analytics Leaders  

It is an incredibly exciting time to be in the insurtech space. There are innumerable problems, but with those problems come rich opportunities.

How to Develop an Innovation Perspective

There once was an immutable law in business: to increase quality, you must increase cost. In other words, to make something better, you must spend more. The principle seems quaint now given the generally held expectation that we should get more and pay less at the same time.

One reason for this change in mindset is a collection of business disciplines often referred to as total quality management. Throughout the 1980s, ’90s, and into the 2000s, businesses across the world introduced techniques such as statistical process control, kaizen, quality circles, employee involvement, the Toyota Way and the teachings of W. Edwards Deming into multiple areas of their business.

What does this have to do with today and with financial services? Businesses everywhere are now challenged with delivering consistent, meaningful innovation to meet customers’ growing expectations. New technologies offer the promise of different business models that simultaneously deliver higher value to both companies and consumers.

Companies making progress with innovation adjust their traditional business processes to include an “innovation perspective.” This is particularly true in the annual planning process used to select which strategic projects will be funded and which will not.

One approach is similar to portfolio management, where a set of choices are profiled according to different factors. The result is then reviewed to determine which factors are overweight, which are under and which are not addressed at all.

The first step is to select 20 to 25 projects considered to be the most important strategic business initiatives in the organization for the coming planning horizon. There is no magic to this number, but there is a practical limit within which choices can be made efficiently.

Second, each project should be reviewed to identify its strategic intent. This is defined as the principal reason that an initiative is undertaken. Many high-profile projects are pursued for a multiple of reasons; however, it is important that one central, driving motivation be chosen for each item.

Next, identify which type of change each project seeks to make. To label these, the company must have agreed-upon definitions for different types of changes. Again, it is important to limit the number of labels. What has proven successful is a three-tiered model of improvement, innovation and disruption.

Once these two dimensions are identified for each project, plot the results on a 2×2 matrix or on a graph showing the intersection of different strategic levers and types of projects. The visual will clearly show where there are clusters of initiatives and where there is no representation at all.

Teams of senior leaders can then challenge their results and ask a number of questions, including:

  • Given our strategic intent, are our “bets” the right ones?
  • Are our resources aligned against the right initiatives?
  • Are we being bold enough regarding innovation?
  • Are there disruptive technologies that should be tested?
  • Where are we at risk of losing ground against competitors?
  • What trade-offs in the portfolio need to be made?
  • Is the organization ready for the changes required?

Research in insurance has shown a predictable concentration of initiatives that are improvement projects related to the strategic lever of efficiency and expense reduction. Disruptive efforts are not prevalent, but where they are present are usually related to product and market strategies.

This model is not intended to replace current budgeting tools or planning methods used by project management offices or finance teams but is meant to introduce the concept of innovation into the control process. The desired outcome is a plan that considers the impact of more, or less, innovation in an approved project portfolio. As the annual budgeting cycle begins for firms on a calendar-year reporting schedule, companies are encouraged to include an innovation perspective in their deliberations.

New Way to Spot Loss in Workers’ Comp

You’ve heard it before, “It’s not the tip of the iceberg that cost you so much; it’s what you can’t see. It’s what’s below the water level that costs you real money.” We hear that the total loss to a company from a workers’ comp loss is six to 10 times the value of that work comp loss. But risk managers have neither the right tools to understand and measure the loss, nor the right tools to improve productivity to capture the cash flow that comes from preventing that loss.

During my initial journey into lean sigma consulting, a seasoned Japanese colleague shared an important concept. While this principle was developed to improve the quality and efficiency of output in manufacturing, it has many other applications, including in improving safety and reducing workers’ comp costs. Understanding and applying the rule has improved the profitability of many companies.

Dr. Genichi Taguchi, a Japanese engineer, theorized (and ultimately proved mathematically) that loss within any process or system develops exponentially–not linearly–as we move away from the ideal customer specification or target value.

An example of Taguchi’s Loss Curve is shown below:


Another way to look at it is this: Anything delivered just outside the target, (labeled as LTL and UTL in the diagram above) creates opportunity for exponential financial improvement as we move toward the center of the U-shaped curve. And the farther away from the target we are, the greater the opportunity.

I explain Taguchi’s principle using an example from a kaizen event that dramatically improved machine setup times within a CNC shop.

For years, our client assumed it took 46 minutes to set up and change over machinery. After all, for 10 years, it did take 46 minutes. But our kaizen team was hired to challenge this thinking.

If the CEO and his team were right, setup times couldn’t be completed any faster. But if setup times could be better, loss had been occurring beneath the water line, which meant the iceberg was growing, but no one knew.

Machine setup time is loss because no value is produced during the setup process. And setup times can represent 35% of the total labor burden, so there’s a lot at stake. While employers can compute labor and overhead costs easily, when their assumptions are incorrect about setup times, they’re losing big money. But rarely do they know it or how much.

Here’s our client’s story:

Our client used people and machinery to produce aircraft parts. Machines were not dedicated to product families or cycle times. In other words, the client could build a Mack Truck or Toyota Corolla on the same machinery. And because setup times were slow, the client built large batches of products. When defects struck, they struck in large quantities, and, financially, it was too late to find causes. The costs were already sunk.

Our client borrowed capital to purchase nine machines, leased the appropriate space to house them and purchased electricity, water, and cutting fluids, as well. Each machine had affiliated tool and dies, and mechanics to service them. In other words, when you own nine machines, you need the gear, people and money required to operate and maintain nine machines. And all of this cost was based on 46-minute setups.

Think about that for a moment.

If the client didn’t need nine machines, it wouldn’t have had to spend all of that money and for all of those years! And a wrong assumption in setup times could be leading to loss that never appeared on any income statement. What would show would be the known labor, materials, machinery and overhead costs. But what wouldn’t show would be what wasn’t needed if the team could complete a setup in less than 46 minutes.

After videotaping, collaborating and measuring cycle times on the existing operations and processes, it was evident: The team had ideas that would challenge the 46-minute setups.

After some 5S housekeeping, the team produced a 23-minute setup. One more day of tweaking, and the team got it down to 16. By the last day, the team was consistently producing 10-minute results.

Now let’s talk about the impact.

Under the better state, the client could indeed produce parts faster. It also needed far less capital, insurance, labor, gear, electricity, fluids, tooling, floor space, etc. And because our client’s customer would now get parts faster, the company would get paid faster.

While banks may not like these facts, clients and employees do. Employees can do their jobs more efficiently, and the company makes more money while borrowing less.

Here’s an explanation of the 5S tool the team used to make their setup times faster. This tool–when used properly––not only improves operating efficiency but removes or reduces safety hazards like: tripping, standing, walking, reaching, handling, lifting and searching for lost items.

In addition, the kaizen event itself creates an opportunity for employees to improve their own job conditions and use their curiosity and creativity to solve production-related problems. The event also creates a more engaged employee, one less likely to file future work comp and employment-related claims.

The 5S Process consists of five steps.

  1. Sort the work area out.
  2. Straighten the work area out, putting everything in the right place.
  3. Clean the entire area, scrub floors, create aisle ways with yellow tape, wash walls, paint, etc.
  4. Create standardized, written work processes.
  5. Sustain the process

Using the tools like 5S, I continue to improve my thinking relating to identifying, and managing work comp risks. But during each kaizen event, I also gain perspective about why stakeholders rarely change their ways. What I’ve learned is this: Clients typically need to have one of two conditions met for good change to occur.

  1. They need to have something to motivate them––which often means facing a crisis.
  2. They need to physically see and experience things to believe them.

If you’re like me, you probably need proof, too. Here it is: A reduction in setup times from over two and a half hours to just over ten minutes.

What the Lean Assessment Does

The lean assessment helps find improvement opportunities. That’s because assessments study and measure cycle times, customer demand, value-adding and non-value-adding activities. The assessment helps everyone—including the executive team— see how people physically are required to do their work and understand why they are required to do it the way they are.

In the week-long assessment process, we’re no longer studying the costs of just safety; we’re studying all of the potential causes that drive productivity and loss away from the nominal value. Safety is not necessarily why we are measuring outcomes. Safety is the benefactor from learning how and why the company adds value, and precisely where it creates loss.

That is the power of good change. And good change comes from the power of lean.

The best approach is to dig out and eliminate problems where they are assumed not to exist.” – Shigeo Shingo