Product vs. Process Innovation
Read an interesting blog post by Nicolas Michellod (http://insuranceblog.celent.com) on “Some Considerations around innovation”. Nicolas suggests that Insurers need to innovate both on products as well as processes and IT is not necessarily a “must-have” but merely an enabler to achieving innovation.
I couldn’t agree more on the role of IT, as suggested by Nicolas. It necessarily needs to be looked upon as an enabler and not a must have. The tendency to leapfrog into technology solutions has historically led to the snowballing effect of complex architectures, increasing cost of ownership and further impacting the agility of the business to respond to emerging business scenarios including regulatory changes.
That said, I would like to argue that if the goal is to differentiate, insurers need to focus back on the core for identifying innovation – product, price, distribution and marketing. Tom Davenport ( “The Coming Commoditization of Processes," Harvard Business Review, Vol. 83, No. 6, June 2005) suggested that in the new world processes will get standardized. In my view, in the long run, standardization of processes can facilitate significant improvement in the underlying processes and their performance through expense reduction and deployment of lower cost technology solutions. Standardization can also lead to cross-industry shared services that can further eliminate non-value added activity within a carrier.
While in the shorter term, innovation in processes can be looked at, the impact of such innovation on the business may not be significant. Focusing on the 4Ps, on the other hand, will call for a much better and holistic understanding of the customers, definition of newer / better products and getting the products to the customers more effectively leading to significant differentiation in the market.
What’s your take?
Comments
My recent interactions with different Insurance product solutions highlighted a common fact - The product IT people are working hard so that clients IT people do not need to work at all; rather client's business users can do more & more stuff on their own, with out needing IT's help.
In an orchestra, the most important person is the conductor who manages all the players but doesn’t play herself. Same way here, IT is enabling the business to create the difference in 4P’s while they support from behind.
Posted by: Souvik Roychoudhury | October 21, 2009 5:14 PM