Orlando, Fla. – Insurance carriers who make transient improvements and do not focus their resources on innovation and differentiation will meet with failure, according to Bill Pieroni, operations vice president for State Farm Insurance Co., Bloomington, Ill.
Pieroni challenged insurance executive attendees at El Segundo, Calif.-based Computer Sciences Corp.’s Future Focus event in Orlando to ask themselves whether the changes they want to make will be incremental or fundamentally new.
“Sustainable advantage comes only from moving beyond incremental changes,” he said. “For an evolutionary system like the ones you would find in insurance, you must do more than just make marginal changes or tweaks,” he said.
Pieroni offered the Red Queen effect as an analogy. “Alice [in Wonderland] is running and running with the Red Queen and never gets ahead,” he said.
Studying more than 600 insurance company failures while a partner with Bermuda-based Accenture, Pieroni reported that when asked why they failed, 40% of the insurers responded that the culture didn’t allow for the strategic change required; 33% noted a skill gap in being able to accomplish its goals; 30% reported limited IT support; and 27% attributed their failure to investment constraints.
Research into these numbers reveal what Pieroni called “organizational slack;”—no sense of urgency to the call to change. Other factors included an incomplete vision, or lack of direction caused by passive resistors. Weak sponsorship amounted to senior management making no clear commitment, or the inability to cut through the company’s bureaucracy culture, structure or systems. Premature victory was the final ingredient listed in the study.
Pieroni offered attendees some critical success factors, or stepped advice on how to avoid failure and achieve success.
“You can’t rely on traditional market research, product development and standard resource allocation,” he said. “Strategy and resource allocation should go hand in hand.”
By placing an emphasis on learning-by-doing, executives can encourage individual risk-taking, another success factor. A carrier should anticipate and exploit early information, added Pieroni. “And be prepared for surprises.”
Pieroni also advised attendees to eliminate the tendency to treat non-action as action. “We think it’s all about going to market,” he said. “We beat the leadership out of people with additional layers of bureaucracy and then we just throw more people at the problem.”
Pieroni concluded that if insurers understood the difference between culture and a strategically appropriate culture, they’d win. “Strategy alone does not separate high-performing companies,” he said. “Put the focus on execution, and develop a portfolio approach to learning and a comprehensive approach to managing change.”
Source: INN staff
Register or login for access to this item and much more
All Digital Insurance content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access