Lean methodologies have been part of the manufacturing scene for decades. Ewan Duncan and Ron Ritter, both of McKinsey, recently published a paper that suggests that Lean can benefit service-sector industries as well.
As manufacturers have learned to appreciate, Lean is about taking the waste out of processes. It's about continuous improvement. It's about using data to measure results. It's about employee empowerment. It's about putting customers first and foremost.
In manufacturing, the waste and lack of innovation was obvious and very visible: idle workers waiting for approval to move on to another step, or high percentages of returned, defective products. Lean, as explained by Duncan and Ritter, was the most revolutionary management principle of the second half of the 20th century, encompassing ways to work smarter and more collaboratively.
While the authors don't specifically call out insurance, there's clearly some benefit the industry can gain from introducing Lean principles into business processes. And many of the practices they describe already are unfolding in parts of many insurance companies.
There are four words that describe the Lean approach (great for use in an elevator speech): "Simpler, faster, better and cheaper."
In the service sector, it all comes down to the proliferation of data and sensors, Duncan and Ritter note. “In the years ahead, service and product companies alike will increasingly be able to reach their long-term goal of eliminating waste as defined directly by customers across their entire life cycle — or journey — with a company,” they state. “For example, an unprecedented amount of product-performance data is now available through machine telematics. These small data sensors monitor installed equipment in the field and give companies insights into how and where products are used, how they perform, the conditions they experience, and how and why they break down.”
The value comes from linking this information back to product design and marketing, they continue. “Savvy companies will use the data to show customers evidence of unmet needs they may not even be aware of and to eliminate product or service capabilities that aren’t useful to them. Applying lean techniques to all these new insights arising at the interface of marketing, product development, and operations should enable companies to make new strides in delighting their customers and boosting productivity.”
But the bottom line in Lean is not the data and machines that are proving all this information, but the corporate culture that exists that provide front-line teams the latitude to make changes they feel are necessary. This is the most important link in Lean. To some degree, insurance is ahead of the pack in these capabilities — much of the industry is structured with both independent and captive agents who are empowered to make judgment calls on the accounts they service. Just as an assembly line worker in a Lean environment has the power to shut down the assembly line if he or she spots a problem, front-line decision-makers in insurance also can save carriers countless time and costs in misguided coverage or even fraud prevention. This needs to extend within carriers' organizations as well.
Lean doesn’t have to start everywhere at once. An emerging discipline, “Lean IT,” focuses on taking waste out of IT processes. Think about it: IT is a great place to start. Enterprise IT is bloated and broken, with millions of dollars going every year into simply keeping the lights on. What a great candidate for the continuous improvement and collaboration that Lean practices encourage.
Joe McKendrick is an author, consultant, blogger and frequent INN contributor specializing in information technology.
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