Insurance in its simplest form is about understanding the probability and cost associated with an uncertain loss event and then charging a premium based on that information. With such a clear dependency on accurate data to write insurance, it seems odd that so many carriers don't infuse that same scrutiny on information into the daily operations of the entire business.
It's essential that organizations base their decisions on facts instead of conjecture. A data-driven culture can lead to better, faster decision making, greater customer insights, fewer mistakes and ultimately a competitive advantage. Taking advantage of the torrent of available data, instilling the right information into everyday processes, and mandating that facts support decisions are pillars of an information advantage. However, overcoming organizational inertia to create a data-driven culture isn’t always easy. Here are eight steps to help you get started:
1) Know statistics – Starting with the hiring process, build and train an organization that knows statistics. A thorough understanding of statistics, correlation, and causality is critical to designing data collection processes, measuring and interpreting results as well as recommending action. Building an organization that has these skills is critical.
2) Employ an expert – In order to prevent mistakes, there needs to be at least one expert able to mentor colleagues and champion analytics — not everyone in the organization is going to be an expert in analytics and statistics, but at least one person should be. This person can validate proposed test scenarios and collection techniques and interpret results. This individual should spend 30 to 50 percent of their time on unstructured data analysis and insight development. It is just as important that this person also champion creating a data-driven culture, being evaluated on how effectively the organization's culture changes.
3) Ensure you can measure benefits – Make measurement part of the process, not an afterthought.
Creating a data-driven culture starts with being able to accurately measure and present reliable and actionable information. Companies should think about outcomes when creating key performance indicators (KPIs) and make sure that they can measure them accurately.
4) Remove emotion (for the most part) – Good decisions rely on data first, experience second, and then intuition.
The best decisions overwhelmingly tend to be fact-based and unemotional. Knowing they can rely on accurate data to make decisions enables leaders to spend less time worrying about making the right decision and more time thinking strategically, developing their people and leading their organization.
5) Test, Learn and Fail Fast – Don’t be afraid of mistakes, but instill processes that help make them happen quickly and economically, and to produce lessons.
Any business inevitably has to take risks. In a data-driven culture, the ability to rapidly establish tests and learn about scenarios is critical. Companies that do this well have both a culture that acknowledges the importance of taking risks and a technology platform that is flexible enough to support rapid prototyping. However, it can be difficult to create these attributes, especially in corporations with conservative cultures and legacy systems.
6) Go for insights (not data) and analysis (not reports) – Usable knowledge comes from true analysis; true analysis comes from empowering analysts.
Most business leaders say they get plenty of reports but not enough information. Analysts should have the right tools, training and support to spend their time doing true analysis. If your organization's analysts are spending over 20 percent of their time creating reports, then the processes that enable a data-driven culture are not in place. Analysis also should support well-defined KPIs, not just ad-hoc metrics. KPIs should be tied to what drives profitability and motivates employees.
7) It’s all about the process – Fact-based decision making starts with building a process to measure facts and creating a decision-making process that incorporates them.
Outside a data-driven culture, metrics and measurement do not get the respect they deserve. They’re often an afterthought and the first area to suffer cuts when programs run over budget, scope or timeline. Metrics deserve their own budget, and an independent business group should be accountable for ensuring the right measurements are in place. A true data-driven culture cannot exist until metrics are ingrained in an organization's program management and development processes.
In addition to building measurement techniques into business process, similar rigor must apply to the decision-making process. Institutionalizing these processes and ensuring everybody asks “Does the data support this decision?” will help make your organization a data-driven one.
8) Have an executive sponsor – An ideal sponsor advocates organizational risk-taking and insists that facts support decisions.
A strong sponsor is critical to convert the desire to change an organization's culture into a reality. Corporate culture usually exhibits a high level of inertia that cannot be overcome without an executive sponsor. Accordingly, the sponsor should be a senior executive in a role with a strong analytics and data focus (e.g., e-commerce, marketing, sales, etc.), who also should act as an advocate for informed risk taking. The company should give this person sufficient time to instill in the organization the importance of a data driven culture, and allocate time for communications that advocate the transition.
Scott Busse is a director with PwC’s Insurance Practice.
This blog was exclusively written for Insurance Networking News. It may not be reposted or reused without permission from Insurance Networking News.
The opinions of bloggers on www.insurancenetworking.com do not necessarily reflect those of Insurance Networking News.
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