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Digital Reinvention – McKinsey Report by Satty Bhens, Ling Lau

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Article Synopsis :

Digital technology is impacting every industry and sector. Companies must be open to radical reinvention, a rethinking of the business itself. It requires companies to reexamine, recalibrate and in many cases re-architect their core capabilities to find new, significant and sustainable sources of revenue.

 The Digital Insurer reviews McKinsey’s Report on Digital Reinvention

Reinvention is a board level commitment. This article from McKinsey outlines the five steps

To help CxOs expand their thinking we have “Digital Reinvention” from McKinsey. This is a comprehensive report, spanning over 100 pages. In addition to several articles on the digital transformation journey of individual companies, the report also provides McKinsey’s 2017 digitalisation outlook. The report is organized in five parts:

(I) Digital Transformation

(a)   From disrupted to disruptor: Reinventing your business by transforming the core: The importance of “Reinvention” citing the likes of Apple and Netflix who have challenged themselves to reinvent. Reinvention elements include value propositions, people, processes and technology investments. These elements are to be aligned with the business strategy. To succeed the strategy should be implemented with a coordinated approach across the 4D’s which include Discover the digital ambition, Design new capabilities, Deliver and De-risk operations. The leaders ask themselves questions such as:

  • Where have our past transformations succeeded or failed?
  • What do our customers say about their experience with our company?
  • Do we understand what the next sources of value are, and are we ready for them?
  • Are we investing in the right places and at the right levels to reinvent ourselves?

(b)   Transformation with a capital T: Digital Reinvention is about dismantling old thought process and creating something new. Such changes require high energy shifts in the combination of skills and mind-set. This is where it all usually fails. CxOs have to find the right approach, set the right tone across the organisation and slowly bring about the transformation they want to achieve. Another great way is to appoint a full-time dedicated executive such as a CTO who will drive the Digital Transformation initiative across the enterprise with no distractions.

(II) Design and Customer Experience

(a)   The four pillars of distinctive customer journeys: This survey-based article sums up the four critical focus areas to create a distinctive customer journey. They are:

  1. Focus on key essentials moving the customer – such as transparency of the process, ease of operation.
  2. Simplify by cutting down processing time with quick response timings.
  3. Create end-to-end digital journeys with no offline process integration.
  4. Build a brand and nurture existing relationships.

Along with these 4 elements, the organisation should build a customised customer journey experience which may be tailored as per customer demographics.

(b)   Putting behavioral psychology to work to improve the customer experience: Behavioral psychology helps to improve the quality of customer experience and build brand-recognition as a customer-centric organisation. Some of the points influencing customer behavior include treatment received while purchasing the product, segments, sequence of the experience (painful and pleasurable ones), and the perceived control customers have through the process.

(III) Strategy & Innovation

(a)   What makes some Silicon Valley companies so successful: The secret behind Silicon Valley’s success is bold decision making, empowered employees, strong leadership which propagates collaboration, thinking in terms of platforms and not products, thinking both like engineers and customers, and making the right acquisitions.

(b)   The economic essentials of digital strategy: Striking the right balance between the demand and supply of products and services is essential. The right way to do it is explained in McKinsey’s framework depicted below.

(c)   Digital innovation in Asia: What the world can learn: Asia is lauded for its achievements in the digital innovation space. The article captures the trends and developments in the region and what makes it exemplary to the world.

(IV) Organisation & Operations

(a)   Adapting your board to the digital age: Competition is intensifying and leadership must step up. How? The recipe for success should include:

  1. Closing the Insight Gap.
  2. Understanding how digital can help business models.
  3. Engaging and collaborating more on strategy and risk.
  4. Fine-tuning the on-boarding and fit of digital directors.

(b)   An operating model for company-wide agile development: Companies succeed in digitalisation as a result of changes they make in operating models. This includes:

  1. Organizational structures more product-oriented than application oriented.
  2. Stepped up business–IT interactions.
  3. Recasted roles and responsibilities.
  4. A fresh look at budgeting and planning.

(V) Tech

(a)   Modernising IT for a digital era: Modern IT systems serve the purpose of end-to-end upgradation. Gains include 20-30% improved productivity, 60% reduction in defects, 30-40% increase in employee motivation and 40-60% acceleration in time to market.  To achieve this organisations must:

  1. Define the target IT state.
  2. Decide the areas of change across systems, people and processes.
  3. Determine the sequence and scope of change.

(b)   The need to lead in data and analytics: Strong corporate governance structures are important for any organisation serious about driving change. Leadership has to be heavily involved in the data and analytics space and help implement sound strategies across the group. Attracting the right talent is vital.

(c)   The new tech talent you need to succeed in digital: To achieve digital reinvention, it is important to attract the right talent such as experienced engineers and designers, agility coaches and scrum masters, full-stack architects, Next-Gen machine-learning engineers and DevOps engineers. Finding and hiring the right talent is only possible when the organisation has the right vision and is willing to, for example, reimagine recruitment, create a network of digital-labor platforms, build an ecosystem of vendor partners, and acqui-hire talent by acquiring start-ups.

Link to Full Article:: click here

Digital Insurer's Comments

This report from McKinsey is a great compilation of articles addressing all the hot digital topics facing insurance CxOs today.

Simply taking an existing product and putting it on an e-commerce site or digitizing a customer experience is not digital reinvention. Netflix’s evolution from a company that rented DVDs to a company that streams entertainment for a monthly subscription to one that now creates its own content is a well-known example of continuous reinvention, and a good example, in our view, for insurers to follow, if only in concept.

Reinvention, as the term implies, requires a significant commitment. Strong leadership, sound strategy, right investments and cross collaboration are all required to transform an insurance carrier into a true digital insurer.

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