Northwestern Mutual's IT philosophy is right out of Aesop's Fables. By applying the strategy of the tortoise and its slow and steady approach, this insurance giant with $92 billion in assets and annual revenues of $15.4 billion gets the most bang for its information technology buck.The Milwaukee-based company has to be careful how it uses technology because it can't jeopardize its shining reputation. This year, it was voted the "most admired" life insurance company for the 19th year in a row in a Fortune magazine survey. And, it ranks as the nation's best in customer satisfaction among all financial services studied, according to a Wall Street Journal 2001 report.
Believed to be unique among large insurers, Northwestern Mutual has one executive in charge of both corporate strategy and information technology. Senior executives believe this strategic joining properly aligns capital expenditures and technology with concrete business goals.
As a result of this disciplined approach, Northwestern Mutual claims that it spends fewer dollars, as a percentage of revenue, on information technology than other insurance organizations.
"We noticed that our technology spending was going up, not down like we had anticipated once YK2 was over. Instead we kept getting more and more demands for technology as we moved out new product lines," says Deborah A. Beck, executive vice president, planning and technology for Northwestern Mutual. Beck is the first company executive to head up the combined functions of corporate strategy and information technology.
"Our business approach is driven by the creation of strong relationships," says Edward J. Zore, president and CEO of Northwestern Mutual. "That's a big reason why combining strategic business planning with technology isn't just innovative-it's necessary.
"Our financial representatives, the home office-and ultimately our policyholders-are linked by an integrated support system," he adds. But "technology is not our business strategy. It's a tool that advances our business strategy. We're making huge investments in technology, but we are doing it on our terms."
Such a growing need for technology and the demands for capital forced company executives in early 2000 to ask the question: What can we do to better align our information technology with our business strategy?
"Just the focus of that question prompted our executives to see things differently," Beck explains. Combining the two functions "raised the level of awareness and the sense of urgency that we needed to better understand strategy and information technology."
In 2000, Northwestern Mutual created a new marketing identity, the Northwestern Mutual Financial Network, for its national field sales force of 7,500 financial representatives. As the sales and distribution arm of Northwestern Mutual, the network provides insurance, disability, annuity and an array of investment choices, including mutual funds, long-term care and employee benefit programs.
Placing more marketing emphasis on the shoulders of its award-winning field force, rather than routing customers to self-service options on the company's Web site, increased the demand for using technology in new ways.
Unfortunately, many of the top executives in the company felt they didn't understand technology enough to make good value-added business decisions for the mutual company. The dollar amounts "we were spending on technology were so huge that people on the business side felt a responsibility to better understand it so they could make appropriate decisions," Beck says.
Therefore, in mid-2000, the company's top 35 executives, including Edward Zore, teamed up with about 25 up-and-coming technology mentors from the middle ranks of the carrier's information systems department. The teams now spend about one hour each month on a hands-on demonstration of technologies that executives want to understand better.
Each summer, the company's 15 top department executives go through a technology systems prioritization process whereby all requests for technology spending are heard and decions are made.
Each executive who is asking for technology funding must make a formal request, supply a cost-benefit analysis and explain the project's goals. Ideas come from the executives and can bubble up from the information systems department.
"Then those 15 executives-who must live with the decisions they make-duke it out and prioritize which projects will be funded for the next year," Beck explains.
The carrier's management committee, made up of the top seven company executives, then decides how much money the company will spend on technology and where to draw the line. In 2001, 73 projects ranked on the basis of importance to the business strategy were funded out of 100. The projects were funded with a 2001 IT budget of $240 million that will increase by 15% this year.
'The Quiet Company,' as Northwestern is known, believes this prioritizing system gives it the most bang for its buck. Yet innovation doesn't suffer. In December 1999, Northwestern ranked third on PC Week magazine's new Fast Track 100 list of IT innovators.
In December 2001, the carrier unveiled a comprehensive Web site, www.nmfn.com, to support its field force and provide enhanced customer service.
"With more than 25 years of experience in operations, product development, strategic planning and law, Deborah understands how all of the pieces fit together in our business model," Zore explains.
A key component of that business model is the company's disciplined approach to technology spending. Northwestern Mutual uses pilot projects to test new applications, rather than starting with a full-scale implementation. Its tortoise-like approach has helped it avoid some of the nightmares of the more hare-like companies that encountered costly organizational disruptions.
"You must be careful about what is trendy in technology. Data warehousing is an example of something a company can spend a lot of money on, and by the time the project is finished two or three years later, there is a newer technology you can use," Beck explains.
Northwestern Mutual has several major technology projects underway. One of the most important is a desktop case management system, from San Mateo, Calif.-based Siebel Systems, for its field sales force. When it's rolled out later this year, the program will make the field force more productive by organizing client information on their PCs.
"We've asked the field force to do their job differently and learn a new system," Beck says. "We must make sure they use the system. Otherwise we've spent money for nothing."
Beck has approached this situation as a change management challenge. In the current pilot phase, Northwestern Mutual is tapping its top financial representatives to provide testimonial and role-model training for the field force during annual meetings.
Additionally, Northwestern Mutual will organize four regional meetings where 2,000 to 3,000 representatives will hear more testimonials, receive training and visit "technology cafes."
At Northwestern Mutual, the combination of business strategy and technology planning into one executive position fosters a partnership based on creative tension. Although business strategy must drive the decision-making process, business leaders don't always see the long-term implications of information technology or heed input from the information systems department.
"To be able to pull all of this-strategy and technology-together, you need someone like Deborah Beck who has a wide background, good leadership skills and a deep understanding of our industry, as well as our clients and policyholders," Zore says.
Brian S. Moskal is a Chicago-based business and financial writer.
Deborah A. Beck
Juris Doctor, cum laude, Marquette
University Law School, Milwaukee;
Master of Arts, magna cum laude,
student personnel administration in higher
education, Ball State University, Muncie, Ind.; Bachelor of Arts, cum laude, business administration and English, Taylor University, Upland, Ind.
2000 to Present
Executive vice president, planning and technology, Northwestern
1995 to 2000
Senior vice president, insurance operations, Northwestern Mutual.
1990 to 1995
Vice president, new business, Northwestern Mutual.
1988 to 1990
Vice president, policy benefits, Northwestern Mutual.
1984 to 1988
Associate director, policy benefits, Northwestern Mutual.
1981 to 1984
Regional director, new business, Northwestern Mutual.
1975 to 1981
Attorney, assistant general counsel, Northwestern Mutual.
Member, Conference Board's council of strategic planning executives.
Member, American Council of Life Insurers e-commerce committee.
Member, Committee of 200 (an international organization of women business executives).
Chair and founder, Northwestern Mutual Internet Advisory Board. Past member, advisory board, NCR Corp.
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