2016 Annual Coverpages Allmedia01.commpartners.com/SOA/Vegas_2016/Session04... · Session 168 PD,...

Session 168 PD, Organizational Barriers to Product Innovation

Moderator:

Kelly J. Rabin, FSA, MAAA

Presenters: Karen J. DeToro, FSA, MAAA Philip R. Murphy, FLMI, MBA Kelly J. Rabin, FSA, MAAA

SOA Antitrust Disclaimer SOA Presentation Disclaimer

Organizational Barriers to Product Innovation

Karen DeToroSOA Annual MeetingOctober 26, 2016

2

Topics and SourcesOrganizing for Innovation

The Innovator’s Dilemma, Clayton M. Christensen, 1997.

Design Thinking

Change by Design: How Design Thinking Transforms Organizations and Inspires Innovation, Tim Brown, 2009.

Innovating within an Organization

The Lean Startup, Eric Ries, 2011.

3

Lean Startup: Build-Measure-Learn Loop

4

Defining InnovationINNOVATION AMBITION MATRIX

5

Defining Innovation

Sustaining innovations improve product performance for existing markets along existing dimensions of value

oSustaining incremental innovations follow an expected path

oSustaining radical innovations follow an unexpected path, such as by leap-frogging competitors

Disruptive innovations are defined along very different dimensions of value and initially underperform in existing markets; however, ongoing evolution eventually makes these innovations valuable in existing markets, thereby disrupting the existing processes

6

Organizing for Innovation

The Innovator’s Dilemma is that the exact things that make entrenched companies successful – listening to customers, investing in new technologies to better serve the needs of existing markets, and allocating resources to the highest value opportunities – will

make it difficult to pursue innovation.

This means that companies that are serious about innovation must take high value employees out of key

line positions and dedicate them to innovation.

7

Generating Ideas

Ideas Problem: It’s hard to generate new ideas, particularly in a highly regulated industry.

Solution: Design Thinking can help companies blend the intuitive and analytical in thinking up new ideas.

8

Prioritizing Ideas

Ideas Problem: With a large number of untested new ideas, it can be hard to prioritize which to try first.

Solution: Develop rubrics for assessment and prioritization that are agreed to at the start

Sales EarningsCustomer

Experience Risk Overall

Sample business value rubric:

9

Testing IdeasProblem: Life insurance products are highly regulated and expensive to build.

Solution: Build and test an “MVP” – minimum viable product; types of tests include:

• Landing pages – An advertisement for a product or service not yet available

• Fake doors – Pretending a feature exists to see if anyone selects it

• Concierge – A manual simulation of the user experience interacting directly with the consumer

• Wizard of Oz – A full simulation of the user experience for the product as precisely as possible without the back-end plumbing, which is done manually

Build

10

Measuring ResultsProblem: Traditional metrics don’t necessarily work well for start-up initiatives – particularly very innovative ones.

Solution: Use “Innovation Accounting” to measure the results of the test – and determine whether to pivot or persevere.

Pirate metrics (AARRR) are a popular example of innovation accounting.

Measure

11

What does it take to make this happen?

Willpower within the organization

Shared vision for the future strategy

Management buy-in and air cover

Patience and persistence

12

Topics and SourcesThe Innovator’s Dilemma, Clayton M. Christensen, 1997.

• Sustaining and Disruptive Innovation

Change by Design: How Design Thinking Transforms Organizations and Inspires Innovation, Tim Brown, 2009.

• Design Thinking

The Lean Startup, Eric Ries, 2011.

• Build-Measure-Learn• Testing Methods• Innovation Accounting

© 2016 NEOS and Milliman

Organizational Barriers to Product Innovation

Kelly Rabin, FSA, CFA, MAAAConsulting Actuary

Milliman, Inc.SOA Annual Meeting

October 2016


“We know what is needed to become product leaders, but the way is blocked.”

1

• Modern, flexible technology

• Strong, clear decision-making with clear roles

and responsibilities

• Clear focus on the customer and target market

• Collection and leveraging of innovative ideas

• Skilled use of data

• Broad IT and operational capabilities

• Dedicated resources for priority tasks

• Understanding of regulatory and pricing

constraints

Requirements for successful innovation:


Three categories on the product innovation spectrum.

2

Traditional – Not a product innovator (but may be innovative in the way they sell, service, or engage with consumers).

True Innovator – Invent new products and assemble new products in new ways.

Fast Follower – Wait for others to prove new product ideas are viable and in demand, then develop similar products.

How do we move from the left to the right?


To break through the wall, it is critical to deal with the obstacles one by one.

3

Some barriers to innovation:

1) Ineffective decision-making

2) Poor knowledge of systems capabilities

3) Slow and inflexible pricing process

© 2016 NEOS and Milliman 4

Barrier #1:Ineffective decision-making


Symptoms of poor decision-making.

5

Decision Health Symptoms

MeetingsToo many meetingsToo many attendeesLeaving the meeting without a decision

Products to MarketToo few productsProducts are generic and not innovativeSlow design and implementation, with lots of spin

Staff/OrganizationUnclear on rolesLack of dedicated resources for key tasksDecisions are made only at the top

DataIT capabilities are not knownCompliance limitations are not knownWhat is easy and what is hard is not known

New meeting, same conversation

Staff doesn’t know what decisions they can makeDecisions are unmade and remadeUnwilling to change organization and process

Pricing guidelines are not developed early

Insurers should evaluate their organizations to see if decision-making is a major obstacle to product innovation.


Critical information in a consistent format is needed to support decision-making.

6

Show interdependencies between products Document the entire flow of product growth Identify where system infrastructure is needed

Product Roadmap

Innovation Inventory

Good decisions need to be based on good information. At a minimum, you need to have the following information available and accurate for decision makers.

Compliance Guidelines

Target Market

Know what is legal and what is a company position Quantify the risk Know alternative approaches

System Capabilities

Document what is easy and hard and why Identify areas that need further strategic investment Make visible those systems that consistently block innovation

Gather and store ideas Link ideas to market goals Document dependencies

Know who you are selling to Know who is selling Know where you want to go Understand the motivations of the target group


Breaking the barriers to facilitate good decision-making.

7

Strategies:• Provide the right amount of critical information at the right time for each decision.• Meeting agendas must identify what decisions are scheduled to be made and roles for

attendees. • Create a safe environment for decision-makers that fosters risk-taking.• Document the why and share all decisions.• Build a framework for information collection and maintenance.

Objective: Make decisions quickly and accurately.

Decisions are rarely changed and changes are well justified.

Decisions are fact-based. Excellent documentation around

decisions so that everyone is on the same page.


Barrier #2:Poor knowledge of systems

capabilities


Symptoms of poor systems knowledge.

9

Systems knowledge is an obstacle if:

There is a lack of understanding of who has the

right information.

It is not clear where systems are inflexible.

The same question(s) are asked multiple times

with “different answers” given.

Time delays, cost overruns, and surprises around

new products are typical.

Product development does not trust IT.

Frequent misunderstandings about what is

difficult/easy and how long things will take.

Documentation is not available or not easily

understood.

There seems to be no single source of the truth.


Failure to create understanding undermines decisions, elongates timelines, and leads to cost overruns.

10

I don’t know who to ask… I don’t know what to ask… I think I understand the answer… I think I understand the implications… I think this person really knows…

Product Development Representative IT Representative I wonder if they know what they’re asking… I better clarify that I only cover one system… I tried to put it into context… I said that really clearly… I answered just what they asked…

Despite best intentions, there is confusion and misinformation that undermines product innovation because there is not common understanding. Teams are talking, yet not understanding.


How to think about the relationship between new product development and systems.

13

Most insurers think about this problem in one way or the other:

• Expand the system(s) to accommodate new products.

• Constrain products to fit the system(s).


Ideally it is not either/or… but both.

14

Identify and plan out the features that you need to invest in to support the product roadmap.

• Enhance systems to support products on the roadmap to give you the flexibility where you need it.

• Implement a new system only when your existing platform is adding too much risk or holding you back in getting products to market quickly.

• Invest strategically, tolerate tactically.• Enhance by platform, not only by system.

Product Roadmap

Enhancements to build specific new productStrategic Investments – New Flexibility

Strategic Investments – New Functionality

Product Buildout

Product 1 Product 2 Product 3


Strategies to facilitate good system knowledge.

13

Strategies:• Document capabilities against business functions and product characteristics.• Maintain capabilities over time for new products and product ideas.• Document where systems are flexible and adaptable, and where they are not.• Have system capabilities well documented, so that what is easy, difficult or

impossible with new products can be known up front.• Separate system features into those that are strategic and those that are tactical.

Objective: To capture and maintain IT capability data to eliminate rework, confusion, and spin in product development.

Create a comprehensive capability assessment across the entire platform.

Identify areas for strategic investment. Identify those areas that are likely to be

problematic and delay implementation.


Barrier #3:Slow and inflexible pricing

process


Symptoms of poor pricing flexibility.

15

The pricing process is an obstacle if:

Assumptions must be fully baked and blown out

before any pricing can occur.

Rates are not benchmarked against market

conditions.

The process is not dynamic and iterative.

The focus is solely on risk aversion.

Innovative products that are not yet to scale must

meet the same pricing hurdles as industrialized

products.

Pricing actuaries are siloed and dictate product

development outcomes, vs. being collaborative

members of a team.


Strategies to facilitate pricing that supports innovation.

16

Objective: Price incrementally to avoid putting significant time and cost into pricing the full product when only price validation is needed.

Determine minimum viability prior to investing substantial resources across the entire organization.

Established expected profitability to support development of a business case.

Build an iterative, interactive pricing capability.

Strategies:• Create a stripped-down model office (a few cells) for which distribution has

provided indicative premiums.• Develop rough, ballpark assumptions.• Use modeling tools that allow you to tweak product design easily.• Share results early and often to facilitate decision-making.• Strive to have actuaries be treated as team members vs. barriers.


Where do we go from here?


Assess where you are on the innovation spectrum and develop the necessary competencies to succeed.

18

Take distribution recommendations Target market focus Know what motivates your market

Ad hoc Decision-making Structured and well-documented

Slow Data analysis and ability to react Fast and accurate

Traditional capabilities Technology Very flexible

Discover as we go Advanced knowledge of internal & distribution capabilities Well-documented

More traditional More innovative

Can be slow Pricing Creative and streamlined


Recommendations for success.

19

Work with your internal IT group to help you identify what is easy, difficult, and/or a strategic investment.

Document reasons behind the decisions you make.

Align product innovation to markets you are trying to reach.

Define a repeatable product development process.

Create a plan that will help you separate strategic IT investments from tactical investments in your infrastructure.


Questions and further discussion


Thank you!

Kelly Rabin, [email protected]

Obstacles to Product Innovation Alignment and stakeholders – a case study2016 Society of Actuaries Annual Meeting

Philip R. Murphy, FLMI, MBAOctober 26, 2016

Quelle: Verwendung unter Lizenz von Shutterstock.com

Goals

Reinforce key considerations Underscore non-actuarial perspectives Share lessons learned

21 September 20162

Challenge Profitable in respective markets,

but sales are flat and core demographic is shrinking

Targeted future customers are not receptive/accessible through traditional channels

Mission Develop a new sales process geared

toward chosen market Introduce competitively priced

product that offers both streamlined and fully underwritten processes

Leverage technology, including automated underwriting

Stakeholders Executive – strategic initiative,

dedicated executive sponsor Marketing & Distribution Product Pricing New Business/Underwriting IT

The Scenario – two companies, similar issues

21 September 2016 3P. Murphy | © 2016 Munich Re, U.S. (Life)

Brokerage market

Strong brand recognition

Product chosen for new market = Term

Similarities


Brokerage market


Product chosen for new market - Term

New target markets – degree of separation from core business

Current core product emphasis –term versus perm

Existing distribution versus access to new “non-life” distribution

Differences


Brokerage market


Product chosen for new market - Term

Outcome and status


Launched late

3+ years in production, inaugural product selling well

Poor sales for second product (Perm)

Updating current program - product limits, distribution, applicant experience, specialty plays

Expanding underwriting platform across entire business

Launched on time

One year into product and selling “fair” (adoption rates are low)

Working to increase straight through processing rates

Company A Company B

Lessons Learned – Underwriting and Pricing


Requirements

Process

Mortality

Ability to account for new underwriting paradigm Lack of fluids & value of proxies (e.g., data)

Impact of Sentinel Effect

Less flexibility in customer experience

Company AUnderwriting well represented day 1

Company BSet process to pricing target

Filing considerations Impact of customization versus “black-box” on mortality assumptions

Lessons Learned – Marketing/Distribution


Marketing helped drive vision day 1

New market niche one degree of separation from core

Built an entirely new online sales process, including marketing support

Onto phase 2 and other initiatives by the time the product was built

Access to “middle market”

Same platform

Pushed to distribution

2+ degrees of separation from core market

Company A Company B

Lessons learned – IT


An “enterprise project” - Underwriting and Pricing were well represented

An “IT project” – Little underwriting representation – no timeline to build automated rules

Company A Company B

Integration with new vendors and data sources Technical specs Impact on underwriting rules and workflow End-to-end testing

Controls and reporting capabilities to key stakeholders Executive Marketing Underwriting Pricing

Organizational readiness Executive sponsorship & regular connection to

project manager (no misinterpretation)

Enterprise/strategic buy-in

Deadlines can’t be set in a vacuum

Account for consumer experience and rules development

Lessons learned – Project Management


Conclusions – increasing chances for success

Ensure strategic initiative and executive sponsorship Strategic vision versus reaction to competition Phase 1: Don’t stray too far - leverage core competencies

Marketing - design, advise, apprise Upfront development Back-end reporting and accountability (sales and mortality)

Full-time, multi-discipline project team, no silos, run by the business Project Management Pricing Underwriting IT

Commit to post-launch refinements STP rates and rules enhancements Sales & agent behavior New underwriting tools and pricing adjustments


Thank you!

?21 September 201612

2016 Annual Coverpages Allmedia01.commpartners.com/SOA/Vegas_2016/Session04... · Session 168 PD,...

Documents

Transcript of 2016 Annual Coverpages Allmedia01.commpartners.com/SOA/Vegas_2016/Session04... · Session 168 PD,...