Tag Archives: the knowing-doing gap

How Habits Stifle Strategy

Last week, we discussed a major strategy issue for insurers: What happens when we have the knowledge to move forward but are stymied by a Knowing/Planning/Doing gap? It can be difficult for insurers to get from the point of knowing to the point of planning, let alone doing. We dipped into a relevant book by Stanford professor Jeffery Pfeffer, titled, The Knowing-Doing Gap: How Smart Companies Turn Knowledge Into Action. And we drew on Majesco’s findings in our most recent thought leadership paper, Strategic Priorities 2017 — Knowing vs. Doing.

So, if insurers know what needs to be done and aren’t doing it, what is standing in their way? Is it possible that the organization has built its own barriers to progress?

Recognizing harmful habits

Habits rule our individual lives. While there are many factors and hypotheses about why we don’t do what we know we should, the root cause can be viewed by looking in the mirror.  Human decisions and behaviors are powerfully driven by habits. Throughout our evolution, we have relied on habits for things as vital as our survival and as mundane as accomplishing daily tasks.

Our brains are constantly making countless decisions and processing from an endless flow of information in our environments. In his book, The Power of Habit, Charles Duhigg says scientists believe habits form as a way for the brain to save energy or effort.  A habit is created and maintained through a three-step process, or “loop.” It starts with a Cue, a trigger that tells the brain which behavior pattern to use, followed by a Routine, which is the physical, mental or emotional response to the cue, and then the Reward, which helps the brain decide if the particular loop was beneficial and should be remembered for future use. Once a loop is repeated enough times with a favorable outcome, it becomes more automatic … a system with straight-through processing.

In this way, habits are good things. They promote efficiency. They aid in quick decisions. They become rules we can count upon. The downside is that with continued repetition, habits become more ingrained and harder to change.

And just like individuals, organizations are driven by habits. Duhigg puts it this way: “It may seem like most organizations make rational choices based on deliberate decision making, but that’s not really how companies operate at all. Instead, firms are guided by long-held organizational habits, patterns that often emerge from thousands of employees’ independent decisions. And these habits have more profound impacts than anyone previously understood.”

We often hear, “It’s always been done this way.” This is the death for innovation … something not needed in today’s world of change and disruption.

See also: Getting Culture Right: It Starts at the Top

Habits can speed up decisions and operational tasks, but they can lead to the same problems that we know as “bad habits.”  Majesco’s Strategic Priorities research suggests many insurance companies are stuck within long-held organizational habits, finding it difficult to change even when they know customer expectations, technology and market boundaries are changing the world around them.

This challenge of knowing versus doing is represented in Figure 1, which links the forces of change iden­tified in Majesco’s Future Trends 2017: The Shift Gains Momentum report with the reality of how insurers are responding, both in terms of planning as well as doing. This highlights a significant gap. In addition, those initiatives where insurers are actually doing something tend to be those that are traditional areas of priority and understanding, like security, talent and legacy system replacement rather than those that are transformational and require new thinking, different approaches and different business models.

Look around within the organization, and there may be hundreds of habits that are carryovers from past processes that once had good reasoning. In one insurer, for example, a certain type of claim is always sent to the legal team for review before settlement because one time (a long time ago) the lack of review resulted in litigation. Since that time, policy language has changed, and similar litigation is rare. But the review is a habit that has stayed in place. If the organization can remove the review, many more claims could be automated. It’s a hurdle worth moving.

A Way Forward to Doing

Duhigg describes two approaches for changing harmful organizational habits so that beneficial change can take place. The first involves the implementation of and commitment to a small number of “keystone habits” by company leadership.  A keystone habit is one that has a ripple effect on other habits that, over time, can transform the company. Implementing the keystone habit leads to improvements in other areas, much like a habit of exercising has been shown to lead to other positive habits like better eating and increased productivity. To illustrate this, Duhigg described how Paul O’Neill’s singular focus on improving worker safety at Alcoa during his tenure as CEO rippled through the company’s other processes and ended up transforming it from a struggling, dysfunctional company into an economic powerhouse.

The second approach is to wait until a crisis occurs and use it to shock the organization into change. While effective, waiting for a crisis certainly seems like a less desirable option. But sometimes it takes a major failure to motivate organizations to change their old, established ways of doing things. In fact, Duhigg notes that good leaders seize crisis “opportunities” to remake organizational habits, and some even prolong the sense of emergency on purpose.

See also: A Gap That Could Lead to Irrelevance  

The insurance companies that are not yet acting on the changes, or that don’t act soon, unfortunately may find that the gap between them and the leaders may become too large to be overcome. It’s best to weed out detrimental habits and make room for growth.

In our last blog in the series, we’ll look at some practical ways that insurers are closing the growing gap between knowing and doing. We’ll also look at the myth of stability that keeps insurers from taking much needed risks to build a secure future. In the meantime, be sure to read Majesco’s recently released report, Strategic Priorities 2017 — Knowing vs. Doing.

A Gap That Could Lead to Irrelevance

It’s been four months since many of us vowed to stick with our New Year’s resolutions.  How is yours going?  One study showed that more than half of those who made resolutions gave up within six months, and only 9% feel they successfully met their goals by year-end.  We make resolutions because we know we can improve elements of our lives, and that doing so will make us happier, healthier or more successful. So if we know these changes would be good for us, why are we so bad at acting on that knowledge?

Majesco’s recently published research report, Strategic Priorities 2017 – Knowing vs. Doing, illustrates that insurance companies are struggling with their own “resolutions” to respond to a rapidly changing marketplace, and make changes to create growth opportunities. There is a growing gap between insurers that know about the changes and insurers that are doing something about them. Responses to the Strategic Priorities survey reflect an awareness of the pace of change that is unfolding unheralded challenges and opportunities. Unfortunately, turning awareness into doing, with actionable initiatives, is elusive, creating an ever-widening gap between leaders who are taking action and those who are not.

The gap between knowing and doing is a common phenomenon most can relate to both personally and professionally. Many have picked up new ideas from a conference, learned new best practices in a best-selling business book, or paid for consulting advice to improve our strategy or operations. After we return to the office, put the book on the shelf or review the consulting recommendations, we too often return to doing things the same ways we always have.

See also: How to Plant in the Greenfields  

Expand this individual pattern to a larger, organizational level to put our survey results in context: even though most companies know they should respond to key internal and external challenges to create promising growth opportunities – and more importantly to ensure survival – many are still only thinking about doing something, at best. Why is there a gap between knowing and doing?  How can it be overcome?

A good starting point for answering both of these questions is the book The Knowing-Doing Gap: How Smart Companies Turn Knowledge Into Action, by Jeffrey Pfeffer.

Knowledge unused is opportunity lost

Stanford professor Pfeffer called his research and writing of The Knowing – Doing Gap,

“…a quest to explore one of the greatest mysteries in organizational management: why knowledge of what needs to be done frequently fails to result in action or behavior consistent with that knowledge.”

Almost as if he didn’t want his book to fall into the same lot of business books that make the best seller list but result in no action, Pfeffer hedges against the actionability of his own recommendations, saying,

“We found no simple answers to the knowing-doing dilemma. Given the importance of the knowing-doing problem, if such simple answers existed, they would already have been widely implemented.”

Pfeffer’s research uncovered eight recurring themes that help understand the causes of the problem and, by extension, lead to ideas on how to overcome them:

  1. Why before how — Philosophy is important. Knowing why you should do something is as critical as how you do it.
  2. Knowing comes from doing and teaching others how – Learning by doing, coaching and teaching can be more impactful than by simply thinking or talking.
  3. Action counts more than elegant plans and concepts – Taking action before plans are fully formed can accelerate both learning and results, compared to relying on end-to-end, complex plans that rely on flawless execution.
  4. There is no doing without mistakes. What is the company’s response to mistakes? – In building a culture of action, one of the most critical elements is what happens when things go wrong. Are mistakes used for learning or as a trigger for punishment?
  5. Fear fosters knowing-doing gaps, so drive out fear – If failures are viewed as grounds for punishment (instead of learning) employees will avoid acting on knowledge and new ideas, and continue to take the “safe” route of old habits.
  6. Beware of false analogies: fight the competition, not each other – Free markets are based on healthy competition with other companies, but competition within organizations is not healthy.
  7. Measure what matters and what can help turn knowledge into action – Just because something is easy to measure (i.e. data is available) doesn’t mean it should be measured; companies have too many metrics that are backward-looking and outcome-focused and too few that are future-looking and process-focused.
  8. What leaders do, how they spend their time and how they allocate resources, matters – Good leaders know it is not their job to know and decide everything, but instead create an environment where there are a lot of people who both know and do.

All of these themes are relevant to the current state of insurance companies, but four, five and six are especially relevant in a fast-paced insurance marketplace. Insurers are in the midst of profound change, fueled by trends that are converging and pushing a sometimes slow-to-adapt industry. This seismic shift is creating leaps in innovation and disruption, challenging the traditional business assumptions, operations, processes and products of the last 30-50 years.

Our Strategic Initiatives research links the forces of change identified in Majesco’s Future Trends 2017: The Shift Gains Momentum report with the reality of how insurers are responding, both in terms of knowing, planning and doing. The results highlight a significant gap. In addition, those initiatives where insurers are actually doing something tend to be those that are traditional areas of priority and understanding, like security, talent and legacy system replacement. This doesn’t take account of vital areas that require transformational thinking, new approaches and different business models.

See also: Innovation — or Just Innovative Thinking?  

InsurTech entrants and new competitors within and outside the industry are introducing new products, processes, customer engagement, business models and more. Experimentation and innovation, with a fail-fast/learn fast approach, flies in the face of traditional planning, particularly for the risk-averse insurance industry. When a new business model or product idea does not exist, it is difficult (or nearly impossible) to prove it will work, highlighting the gap between knowing and doing.

Contrast this with InsurTech startups who are at the opposite end of the spectrum – they epitomize innovation and experimentation. Many will fail, but their “No Fear” lessons will be leveraged to create a string of new ideas and approaches, eventually landing on one that achieves success and rocks the foundations of the status quo.  Just consider those that failed and eventually succeeded, but in the process disrupted the music, automotive, book, and retail businesses.

Who will be the disrupter for insurance? Clearly, it will be an organization with the power to act on its ideas. Insurers need to create an environment where:

  • A portfolio of new ideas is like a pot of gold, ready to be invested.
  • Testing ideas is common (and fast).
  • Mistakes and failures are learning tools.
  • The organization is unified behind an action-oriented, innovation-led approach.

In our next blog in the Strategic Priorities series, we’ll discuss how changing some harmful habits will liberate our organizations and enable them to focus on real action. Meanwhile, you can find more transformational insights and insurer survey results in Majesco’s latest report, Strategic Priorities 2017 — Knowing vs. Doing.