“Digital Transformation” doesn’t work.

Challenging the status quo with the end-customer in sight

So, I’m going to say it: “Digital Transformation” isn’t working, or not how we thought it would work. We need to be realistic, cut through the hype, and view this as what it really should be: digital evolution to reflect a world that’s ever-changing to meet the needs of the end-customer. 

Let’s take a look at the hype. “Digital transformation is the process by which companies embed technologies across their businesses to drive fundamental change”, says Accenture. It’s “change—driven by technology”,says Deloitte. “Technology is the business agenda”, adds EY. 

Letting technology drive is one thing when you’re desperately hoping Google Maps will get you home in time for dinner; it’s quite another if you expect a software upgrade to chauffeur you to success. While the above definitions seem logical, they highlight where businesses are often going wrong: instigating major technological change without understanding why or what benefits this will bring to the back office and most importantly, the end-customer. No wonder 70% of digital transformation projects fail to deliver on their promise.

Of course, it’s all well and good me challenging convention, but what approach am I suggesting you take instead? 

1.     Recognise the value in ‘scaling down’

The prevailing approach to transformation is not working – and we’re seeing that at both ends of the scale. At the smaller end, insurance providers and brokers are finding that the technology they’re building or using simply doesn’t have the depth of functionality required in the medium term to grow and sustain a business. Let’s be honest, these organisations aren’t really transforming, they’re starting up. 

It doesn’t work for the larger companies either, because their transformation projects are just too far-reaching and complex to succeed. The legacy platforms that they’ve been sticking together with chewing gum and string are beginning to fall apart – so now they’re searching for simplification but spending huge sums of money in the process.

Anybody can come up with a big plan. But the willingness to change has to be driven by realistic requirements, recognising that asking any insurtech to build the next moonshot is probably not a good idea... and not going to happen!

So where to start? The true skill is starting small; after all, the devil is in the detail and is liable to wreak havoc if your focus isn’t clear. Scaling down your plan doesn’t mean scaling down your ambition but instead developing your digital maturity at a pace that suits your business, targeting longevity with a well-defined foundation and room to build. A new platform can deliver success within a couple of months, but that’s not a given, so it’s critical to build in time to reassess and pivot if it isn’t delivering. 

2.     Make the use of digital work smart for you – not just tech for tech’s sake

Without an achievable scope, the holy grail of ‘transformation’ is just a technology change that delivers no real benefits for your team or your end-customer. It's not really looking overall at how the business is running. Too often, the motivation comes from hype around a new technology – whether that’s AI, or blockchain, or robotics or otherwise. People start looking for all the possible use-cases it could be plugged into, however tenuous the need, swayed by the promise of profit. It’s almost the technology looking for a problem.

Best case scenario, lusting after the latest technology lands you in an all-night queue for the latest iPhone. Worst case, it has you millions of pounds deep into an all-consuming transformation project you aren’t sure will ever be delivered as initially scoped or designed. 

Implementing the technology is the easier part; defining and getting alignment with the objectives and the outputs is the challenging part. All organisations, large or small, need to clearly define what they’re trying to achieve through ‘transformation’ - this is not about replicating what you had before but with a different wrapper. That’s where the real skill lies. Many insurance products sold today were designed years ago and are ripe for innovation. Transformation should start by surveying and challenging that existing offering, asking “What does the end-customer want? How do we personalise it? How do we improve the supply chain?” – and then using technology to help facilitate this.

Ultimately, digital evolution should be about changing the end-insured’s life for the better. And part of that is considering the wider potential impact of change.

3.     Think about how you may unintentionally rock your wider ecosystem

For an industry where risk management is the raison d’être, insurance businesses can often play surprisingly fast and loose when it comes to technology change. Dramatic change doesn’t happen in a vacuum; in fact, it famously tends to start with “the shot heard round the world" and we all know how the financial services industry loves a trend – right?

A gung-ho approach to transformation rocks the wider ecosystem and that can be dangerous. When technology changes overnight, there’s little opportunity for you and your supply chain to catch up. Give an insurer the sudden ability to offer a daily rather than annual policy, and reinsurers are left scrambling, because they don't understand how to factor this into their own model. This is where the majority of companies are struggling – how to adapt coinsurer or reinsurer agreements, or term of contract.

4.     Consider Risk vs Reward

Technology change has to be in sync with everyone in the supply chain. Well-considered, planned incremental change which enables your digital maturity to evolve at a pace and style that works for you, your customers, and your end-customer will have a far greater transformative impact. When those changes that you're putting into the business are about creating better journeys for your individual customers, and come together in a realistic timescale, they can deliver true change. Revolution begets risk; evolution begets survival. Forget digital transformation, digital evolution is where the smart money goes. For you and your end-customer. Step change transformation is not what we should be looking for, but rather rapid evolution, enabled by agile technology.