Do you have a digital strategy in place?

Odds are that a small-scale antagonist, armed with an internet connection and a $100 digital camera can pose serious threat to your business. Are you prepared for this?

After the BP disaster in Gulf of Mexico, a satirical Twitter (@BPGlobalPR) attracted tens of thousands of followers – more than the official BP Twitter account. @BPGlobalPR (mis)fed totally made-up stories on BP – from (supposedly) PR Division’s lunch menu to a lot of inane matters. @BPGlobalBP, through his efforts helped keep Americans’ rage boiling while BP was scrambling to cap the leaking well and salvage its reputation!

The rules of engagement have changed. Irrespective of your size, your strongest and most vicious critic can be a single disgruntled customer, an employee or even a self-styled crusader who has decided to launch his tirade against you. While some of the criticism may be based on truth, often a rumour or hearsay is enough to let loose a tirade and, fuelled by ‘page-hits’ continue to build the story. The most unfortunate part of the story is that the popular belief in such stories is inversely proportional to the size of the company/ public stature of the person against whom it is written!

Corporations have since long ignored the power of internet. The Internet has levelled the playing field between the large corporations and individual activists. This is not to say that traditional PR tactics are irrelevant. PR, media, advertisement still continue to influence a vast majority. However it is not enough! Companies need to integrate social media as a core building block in their strategy.

Social media does not have only a negative influence. The new generation – born and brought up in digital age – use it as a primary source of information and decision making. The traditional funnel metaphor has given way to customer decision journeys. Decisions are largely being influenced by social networking sites, product review blogs and other such forum. Another big leveller is You Tube which contains more than 50000 videos on product reviews ranging from cars, cosmetics, software, guns, financial products, mobiles.... you name it, it’s been reviewed on You Tube.

The proliferation of social media means that companies need to change the rules how they engage with their internal and external customers. You need to understand the demographics of the people who access these sites and tailor your message to help in decision making. Quite a few of us would recall ‘Second Life’ phenomenon and the advertising blitz of real-life (or first life?) companies on ‘Second Life’! It is interesting to note that most adverts on the Second-life were almost the same that you saw in real life.

Digital Strategy

So what constitutes a digital strategy for your organisation? Or better still, what is a digital strategy? Wikipedia  defines Digital strategy is the process of specifying an organization's vision, goals, opportunities and initiatives in order to maximize the business benefits digital investments and efforts provide to the organization. These can range from an enterprise focus, which considers the broader opportunities and risks that digital potentially creates (e.g., changes in the publishing industry) and often includes customer intelligence, collaboration, new product/market exploration, sales and service optimization, enterprise technology architectures and processes, innovation and governance; to more marketing and customer-focused efforts such as web sites, mobile, eCommerce, social, site and search engine optimization, and advertising. Phew! Simply put, the extension of corporate strategy to include and harness the power of digital media is a simple definition of your digital strategy.

To build your digital strategy you need to identify the specific opportunities (or challenges) that digital media imposes on your business, develop a vision on how to exploit digital media to address those opportunities/challenges and prioritise a set of initiatives to deliver them. I have come across some companies who have ‘done’ their digital strategy! As with their corporate strategy the digital strategy is ever-changing. You need to constantly monitor your digital strategy and improvise it.

Digital involvement is viral – it can go extremely well for your business and create an altogether different level of branding (heard of Blendtech? If not search them on YouTube. Remember to see the page views for each of their posts!) or can go horribly wrong. If you have got your digital strategy right you are prepared for the latter!

Solvency II – Does BPM hold the key to painless compliance?

Solvency II has forced insurance companies to relook at the business in a holistic manner – an end-to-end value chain consisting of internal and external business processes comprising of risk, finance, policy admin through to sales and distribution. No longer can executives afford to think of their functions as ‘islands’. There is an urgent need to stitch the disconnected systems, processes and stakeholders in a single ‘eco-system’.


Insurers since long have been having a flirtatious relationship with Business Process Management (BPM) tools. I guess, the time is ripe for BPM tools to shine and rescue the insurance companies from their plight.

So, how can BPM help insurance companies meet their Solvency II compliance?

Solvency II, in a nutshell, is about creating transparent processes across the organisation, which would help executives to get a pan-enterprise view of risk. The three pillars are built around identification, quantification and reporting of the risk to the regulators. In order to achieve this, insurers are building/revising their risk management frameworks. A Risk Management Framework (RMF) in a nutshell is an integrated view of risk management including consistent processes for analysing, evaluating, mitigating and communicating risks. RMF will enable an insurer to bring together a risk-based procedure, governance structure and integrated methodologies where the relationships between processes, risks, controls and regulations are made more visible.

BPM tools can help companies meet this challenge effectively. The formal processes, once approved by the regulators can be built using BPM and deployed in the organisation. Workflows are best placed to build governance structures to manage risks with built in triggers to escalate to appropriate roles in the organisation, should the need arise. Reporting (Pillar 3) can be delivered with greater certainty using the dashboards.

Solvency II is not ‘one-off’ compliance. CEIOPS expects insurance organisation to embed a culture of risk within the organisation, using Internal/Standard Model and Use tests to validate their risk management frameworks and constantly improvise the results for better quantification of risks. Building a ‘one-off’ compliance for Solvency II would entail repeated enhancements to the systems and processes. As against this, BPM tools provide the flexibility to dynamically change the processes with minimal costs and minimal down-time.

Documentation is another area of concern for insurers and regulators. CEIOPS has published guidance on this topic and insurance companies are expected to maintain comprehensive documentation on the processes with detailed explanation. While companies have been exploring Sharepoint and similar tools for this, I strongly recommend using the document management capabilities in BPM for this purpose. The document management capabilities in a BPM tools provides for scenarios where documents need to be accessed by a large group of people who need to collaborate on them. Another point in favour of BPM!

Many insurance companies have successfully deployed BPM in some functions (or majority of functions) in their organisation. It is the perfect time to extend the deployment to cover critical areas which would also help them comply to Solvency II.

Mobile BPM - Why do we have to wait so long for it?

Let’s face it. Mobile applications are here to stay. And they mean business! Gone are the days when iPhone Apps or Google Apps were for fun, or social networking. Increasingly, companies are building apps meant for serious business, designed to help their work-force and customers alike to improve their touch-point experience with the business.


Mobile apps face a serious challenge in being ‘too restrictive’. To quote Medhat Galal, If Business Process Management (BPM) is going to do for process what Google did for information, BPM must be mobile and always on. A good example is UPS or FedEx who have built their own ‘mobile BPM’ applications to meet their customers’ demands. Why can’t other companies do the same. The personnel working in the field only carries local information on his device (Laptop, Blackberry or even IPad). To a large extent they still remain locked out from the data which could help them access the most up to date information and close the meeting/sale successfully. “I will get back to you”, has a history of missed opportunities – ask any salesperson!

So what has prevented Mobile BPM to develop and be available for adoption. For one, the differing standards – Apple, versus Android versus Symbian versus RIM versus Windows Mobile versus.... has been a major barrier to adoption. Very recently Cordys has shown previews of mobile BPM for Google Apps that supports Smartphone. The smartphone support is enabled via a new Mobile Apps Composer offering, which allows users to design business processes for their smartphone. A good place to start building Mobile apps would be typically administrative and HR processes as they involve the review of limited amount of data that can be easily handled by mobiles. Imagine a senior executive logging on to the enterprise applications while waiting in an airport terminal or commuting to a meeting, and approving all the pending requests, leaves etc!!! Such a saving on time!

I believe the time is ripe for BPM vendors to take the step towards Mobile BPM. I hope to see that happening in the next couple of years!

Have you analysed the business implications of Solvency II?

In a recently published report by Morgan Stanley and Oliver Wyman, the impact on Solvency II on an insurance organisation becomes increasingly clear.

 

The report uses their proprietary QIS5 model to analyse the impact of Solvency II on four fictitious companies – a life company, a non-life, a composite and a reinsurer. The key findings were:

 

The solvency ratios for the non-life oriented insurers show sharp declines under QIS 5;
Reinsurers are likely to see a major decline in reported solvency ratio, but demand for reinsurance should increase;

• For life, the major impact is for participating (with-profit) policies;
• The majority of the industry's capital requirement would come from a combination of market risk and participating contracts;
• Diversification benefits will also be a key driver of the Solvency II capital requirements; and
• European insurers may become competitively challenged in markets with "non-Solvency II equivalent" regimes.

 

Being one of the largest regulatory programme till date, it is important to view Solvency II as a major catalyst for changing the traditional business models on insurance companies. An industry beset by declining investment returns, inefficient processes and legacy IT systems, need major overall in the way they do business in the future. The report rightly points out that the pace of strategic change will dramatically improve in the Solvency II world with the transparency brought about by the regulation. However at the same time, there exists a risk of the European insurers’ competitive advantage threatened by their ‘non-Solvency II’ competitors across the Atlantic!

 

Managing Solvency II Programme: There’s more to it than a RAID!

Solvency II is by far the largest finance change programme undertaken by insurers in recent years. And, probably the most complex till date. But the complexity does not end there. Given the nature of change involved in delivering Solvency II and the timelines, the Solvency II Programme Director finds himself at loggerheads with other Business As Usual (BAU) projects and finance projects managers. An organisation cannot afford to wait for Solvency II to deliver compliance before it can initiate other changes – most changes need to happen simultaneously! And often, the deliverables are at cross purposes to each other.


The finance teams of UK insurers are grappling with some key changes in their current operating model – IFRS, MCEV proposed changes around reporting; implementation of TAS standards for actuarial reporting to name a few. These changes are directly impacting the deliverables of Solvency II workstream. Unless the proposed changes by the respective teams are discussed and agreed, insurance companies will waste significant time doubling the deliverables at the best case, or undoing previous deliverables at the worst.

The Solvency II programme suffers from an inherent weakness of not being able to define the exact deliverables for each of their work stream, as the requirements are still emerging. Two weeks ago, CEIOPS has delivered another set of documentation which are currently being analysed for impact by the actuaries. This ambiguity is of no great help to either the Solvency II Programme Director or the other finance change directors! The BAU functionaries have to perform their day-to-day role and they cannot wait indefinitely for Solvency II.

So how does one go about efficiently managing the change portfolio within finance?

My experience suggests developing an Impact Management Framework for this purpose. The framework is a simple tool to identify the current the future ‘conflicts’, map the conflicts and the overlapping areas, broker a possible mitigation plan and continually assess the tool and update it to the conclusion of the impact / dependency.


Impact Management Framework for Solvency II

Given the nature of Solvency II deliverables, it is potentially impacted by, and, in turn could impact a number of BAU functions/projects in an organisation. The proposed framework is a methodology to identify and manage the impacts. The framework is shown in a diagram below.

The framework consists of five steps:

Step 1: Identify

Identify a list of all current and future projects in the organisation. A good starting point is the Change Board or Portfolio Governance function which has a most up-to-date list of the projects. It is useful to validate the list with key functions such as IT, Business Change to ensure that the list is complete. The change function also has a list of future projects which have been approved.

Step 2: Investigate

Typically the starting list will be fairly long. It is not unusual to have more than 100 projects on the initial list. Use a first filter to eliminate those projects which has no potential impact on Solvency II. For example, system upgrades, site enhancements, version upgrades, changes in client facing documentations, changes impacting distributor commissions. Having put the list through the initial filter will give you a manageable list to begin.

Step 3: Assess

For the shortlisted project, investigate the scope of the project, the products/processes/systems impacted to assess if they have interdependence with Solvency II. This is the second filter. During this stage, I do an initial investigation, followed by a quick conversation with the Project Lead to validate my understanding.

At the end of Step 2, you will have a definite list of projects which have potential interdependence on Solvency II.

Step 4: Plan

During this stage, identify the exact areas of overlap between the two projects. The areas could be one of more of the following:

1. Impacting product valuations

2. Impacting financial reporting

3. Impacting financial processes

4. Modifying risk categories

5. Modelling changes

6. Changes to finance data mart

The list above is not exhaustive. You will need to modify the above list based on the functional organisation and the prevalent project life cycle in your organisation.

For the external projects (i.e., those other than solvency II), identify the areas of overlap, their delivery time line and the resource utilisation. The delivery timeline needs to be compared with that of the relevant work packet of Solvency II programme. The comparison should result in a mitigation plan with defined activities at pre-defined time to ensure that the interdependencies are tracked. Given the evolving requirements of Solvency II, a typical mitigation plan can be to reassess the interdependence. For those work packets within Solvency II where the requirements are clear, a mitigation plan can be picking up relevant deliverables of external project and including it within Solvency II deliveries.

Step 5: Mitigation

This step refers to activities in the future where Solvency II work packet manager and the external project manager need to re-assess the identified interdependencies. The mitigation plan should be included in the main Solvency II programme Project Plan to ensure their monitoring.

I have found it a good practice to be in regular contact with the change board to ensure that new projects are brought to my attention immediately. It is a relatively simple task to communicate the potential dependencies early in an external project’s plan, than doing so at a later date.

The list of dependencies does not end here. Solvency II programme need to be cognizant about the forthcoming papers from the European Regulator, resource availability among a host of potential dependencies. I will cover them in a later blog.

Who cares about your business processes – and why you should care about them!

As change manager, I often find myself in a situation where there are many stakeholders pushing, pulling, wanting a say or ready to veto on any or (most often) every initiative related to change. Quite often I found myself in the thick of conflict resolution issues rather than progressing the change initiative. And once in, it takes a significant amount of effort to pull out of the hurricane.

Let’s admit! Change is hard and evokes strong reactions from the people who are (potentially) affected by it. And hence their reaction! I learnt it the hard way to stay calm in the eye of the hurricane and find the right balance between the competing perspectives.

Any project in an organisation affect people – some directly; some indirectly. It is important to identify the affected groups, group them on the basis of the impact and handle them accordingly. Easier said than done.

Who Cares?

Whatever be their impact on our project, we need to realise at the outset that they care about our business processes. And hence we need to care about them. We have to recognise that we have relationships with

• People outside our organisation
• People inside the organisation who are in the value stream
• People who manage and direct the functions within the value stream
• Peers and associates
• Systems/technologies that orchestrate the work in value stream.

They are often referred to as stakeholders as they have a stake in the outcome of the change initiative. Anyone of them has the potential to cause difficulties and stop progress and prevent success.

Let’s take a closer look at them.

Customers and consumers: those we are in business to serve. This group may not be easy to identify. With multiple routes to market, multiple products and services for different markets, there is significant overlap within this group.

Owners: those who invest in us and direct our activity. This group includes the investors, board and senior executives. As before this group can have multiple sub-levels exercising varying degrees of control.

Staff: those who work on serving and supporting the business and its stakeholders. This group can be external (as in manning those functions that are not affected by your project) or internal.

Suppliers: those who provide products, services and resources to us. These can be further segmented based on what they supply

Community: Those who govern, guide or influence what and how we do what we do. This group includes the the regulators, watch-dogs, influencers and general public.

Competitors: those who fight in our market for our customers.

Enterprise: the organisation itself. We need to consider organisation itself as different from tis staff, owners and customers in its ability to be sustainable and freedom to act in its best interests.

Oddballs: Those who play conflicting roles. There are always a group who do not fit into the above categories as they may be playing multiple roles.

What do they care about?

Roger Burton, author of Business Process Management: Profiting from Process uses the ten principles of BPM to explain what the stakeholders care about. Honestly, the list can be used for any stake analysis. Here’s what he has to say:

• Business change must be performance driven - Performance is on behalf of the external stakeholders such as shareholders and customers.
• Business change must be stakeholder based - Change that does not deliver value to outsiders just adds cost.
• Business change decisions must be traceable to the stakeholder criteria - If we do not know and agree what is of importance to each stakeholder then change becomes a political process.
• The business must be segmented along business process lines to synchronize change - Processes serve stakeholders and are served by them. This is the heart of true cross functional process management.
• Business processes must be managed holistically - Managing the parts without managing the whole delivery of value to outsiders is a sure recipe for sub optimisation.
• Process renewal initiatives must inspire shared insight - The insight must be shared by stakeholders externally and internally and be the basis for design decisions.
• Process renewal initiatives must be conducted from the outside in - Process analysis and design starts and ends with assessments of outside value creation. Lean thinking is built on this concept. Bottom up (inside out) leads to broken processes.
• Process renewal initiatives must be conducted in an iterative, time-boxed approach - Stakeholders and change agents do not know what they do not know. This is the learning and trust building that delivers changes tested and accepted as they are developed.
• Business change is all about people - If all the people, both internal and external stakeholders, do not change, then performance will not either.
• Business change is a journey, not a destination - The management of stakeholder relationships will continue to be required since the destination is a moving target. Trust will have to be constantly assessed and built with all of those who care.

Managing stakeholder relationships
Having tried various options, I am certain that while managing stakeholder relationships, one size DOES NOT fit all. Having said that, there exists a broad framework within which we can develop and nurture the relationships. Key areas to focus on and monitor are:

• Stakeholder expectations and goals. Having an unambiguous idea of stakeholders’ expectations and connecting them to the potential benefits realised ensures that they are aligned to the project objectives from the start. Failure to include the stakeholders in project objectives often results in ‘skewed’ viewpoints about the initiative.

• Stakeholder interaction and exchange. Communications ALWAYS helps. It brings transparency to the project; rallies support and can provide useful insights during crucial phases. A triage like assessment of recent communications also helps in understanding relationship issues and opportunities.

• Knowledge shared. This ties in to the previous point on interactions and exchange. Weekly dash-boards and project status reports are helpful to an extent. However, in a change programme – especially a large initiative spanning across functions, stakeholders often seek more information than dashboards. What will the ‘new’ organisation look like? How do I perform the tasks that I am responsible for? Such questions are natural and should be answered to the best of ability. As the project team gets further insights, the previous answers should be revised and re-communicated. I have found that if you go back to the stakeholders with revised/updated knowledge, it helps to build a lot of confidence in the project, the team and wins you critical support.

• Commitments made. Commitments – very easy to make; difficult to deliver. Be sure to make a note of every commitment that you make to your stakeholders. It can be as small as forwarding an email to sending a detailed report/document which may require several person-days of work. If you are unable to meet the committed time-line, be sure to inform the stakeholders about the delay and indicate a new delivery date.

Relationships are never easy to handle. In a change environment, it becomes more difficult to manage relationship with a large and varied set of stakeholders. In our personal lives most of us are able to manage our relationships fairly well; we fail to use the same rules in the profession environs. Creating and nurturing effective relationships in change projects are critical since without getting them sorted out, our processes simply cannot and will not perform.

Thats my view.  Would be happy to hear what others have to say about this.

Change Management - Revisited!

I tried to keep away from this topic. It's sticky; ambiguous and does no one good. However my fascination to the subject keeps on tugging the ropes.

And I'm back again!

Someone - not so long in the near past asked me the 'A B C of Change'. Well I answered to the best of my understanding. But within an hour, I was tempted to go back and withdraw what I said! Given this choice, I'd have redefined the ABC as "Anything But Change". Strong, isn't it?

I cannot claim to be an expert of change - but I cringe when someone seeks me out for a 'change' role! What I end up doing eventually is "A B C". And I wonder why we carry on the facade of change, if deep down within we do not want anything to change! I am still searching for answers!

Change is challenging; change is painful; change is laborious and expensive. Yet! Change is a MUST. And once we set our (real) intention to it - it is an exhilarating experience in itself.

We experience change in our everyday (out-of-work) life. We are used to it - or at least get used to it fairly soon. But the moment it comes to work (read organisation), the concept of change assumes gigantic proportions! We think of organisational change as something BIG! Something that needs to be handled with extreme care, by specialists. Something that would take months - if not years - to implement and at considerable costs! Large scale changes, enterprise overhaul, enterprise redirection are passe!

Change need not always be out-of-the-world-ish. A simple innovation - if nurtured - can leash enough potential energy to rock an enterprise tectonic plate. But how often their ideas and/or suggestions are given shape? They get lost in the corporate noise or swiftly amputated to preserve the status quo.

I just finished reading the oxymoronically (not sure if there's such a word, but hey, ho! its innovation!) titled book - Borrowing Brilliance by George Carlin. He gives six simple steps to corporate creativity. And to me it makes perfect sense. Here they are:

Step 1: DEFINING: Define the problem you are trying to solve
Step 2: BORROWING: Borrow ideas from places with similar problem
Step 3: COMBINING: Connect and combine these borrowed ideas
Step 4: INCUBATING: Allow the combinations to incubate into a solution
Step 5: JUDGING: Identify the strength and weakness of the solution
Step 6: ENHANCING: Eliminate the weak points while enhancing the strong ones.

While the first five steps are linear and build off each other, the sixth step is more of a haphazard one. It’s more organic, a self-organising process, one in which the process creates itself and is unique to each project. After passing judgment, you return to the problem, reconsider it, perhaps redefine it or decide to solve a completely different one. Your positive/negative judgments will develop your creative intuition and give you greater insight into what to borrow and where.

Once you understand this process, you can then build an innovation program within your organisation to foster this type of thinking. In fact, you can use this process, through collective collaboration, and involve your entire organisation in the creative process.

Corporate Creativity
Never before has the need for innovation and creativity felt more than now. Recession, fledging customer base, tightening regulations, shortest-ever product life cycle and xut-throat competition has led organisations to seek creative solutions to fuel their business growth. New ideas are being market-tested and implemented at more feverish pace than ever. Innovation and creativity now drive the market, replacing scarcity and price as the primary keys to success. It’s a wave that’s just beginning to crest, and you’ll need to ride that wave or else drown in the turbulence of its wake.

Most companies have very formal innovation function. Most often manned by skeletal team and facilitated by outside resources. The great misconceptions that result from formal/assisted innovation sessions are - often - more detrimental to the creative process than anything positive that results from the process itself. The constraints may leave out many important aspects of the creative thinking process. Carlin (again) suggests a simple receipe to incorporate creative thinking process into the daily processes in your organisation: Separate the concept development process into four different meetings, each with a different goal and different set of rules. These are:

1. A problem-definition meeting;
2. A borrowing-ideas meeting;
3. A new-idea meeting; and
4. The judgment of these ideas at a separate time.

The first meeting is essentially a data-dump. You are not interested in the solution, but in the problem itself. The problem needs to be analysed on all dimensions, separate the symptoms from the root cause and arrive at a hierarchy of problems. This step helps you delimit the scope of the problem. Quite often we 'jump' into the problem - only to end up identifying solutions for wrong (at worst) or less important (at best) problems.

Once you have identified your problems, organise them by sorting and grouping them. The next step is to assign different members of your team to different groups and ask them to research competitors, other industries or domains for similarities and the approach they adopted to solve them.

During the second meeting, teams present their research to each other. Essentially, they describe the problem that was assigned to them and explain how the same (or very similar issue) was handled by the competitors, or other companies or companies in other domains.

The third meeting is the idea generation meeting. You evaluate the results from the second meeting into what can work for you and in which way. This is a creative session and invitees should be encouraged to be creative but ready to shoot their ideas. Brainstorming? Yeah! Very close to it. In the initial days, when you are trying to instil the culture of innovation in your company, you are probably better off considering egos, organisation culture etc in mind.

The fourth (and there can be subsequent meetings as well) are about evaluating the shortlist of solutions and prioritising to take them further. You many have more than one good idea which you want to try them. Using a department, small group as a pilot to beta test the idea is always a healthy practice. More important, it wins you some early converts in your change programme.

Change is personal. Each person has a varying degree of adaptability to change. The level of resistance varies with the (perceived) impact on the person experiencing the change process. The 4 steps to corporate creativity helps dispel a lot of fear factor and ensures a wider participation from the organisation. Corporate creativity can work if, and only if, the sponsors understand the nature of creative thought and the process of innovation. Your teams are most effective when you use them to gather materials (remember police asking for citizens' help in search and rescue operation?). However, their search needs to be directed. This requires a leader - someone to coordinate the efforts!

I am a firm believer in the intellectual property residing in an organisation. Unfortunately, we pay outsiders (consultants) to flush them out of our organisation. Most often, once the assignment is over, the outsider walks away with most of the knowledge captured during the process. When have you scanned across the hall to seek a potential consultant in your organisation? What stops you from doing that?