New World of Business Process Management
Processes, those institutionalized rules written years ago for “how we run our business,” are finally being dragged out of the bottom drawer and placed on the center of the desktop. At nearly every weekly meeting, business managers are discussing end-to-end processes and their impact on service levels. Executives are demanding performance metrics, and entire organizations are embarking on Six Sigma initiatives. What’s going on here? Why the newfound focus on processes?
The new realization in life insurance is that the processes play a major role in managing operating costs, as well as providing customer service. Historically processes have evolved based on transaction engine capabilities and deficiencies. This has led to an organizational model structured around functions, not processes. The underlying application architecture has typically been highly fragmented with limited system-to-system communication. Performance across the enterprise is still measured in many companies by manual data collection and reporting. These dated, stale and inefficient processes are finally being reviewed and discussed as companies come to grips with the fact that these processes are key determinants of operating cost and customer service.
The Problem with the Processes
Based upon research and interviews with a wide variety of life carriers over the last 24 months, we have identified a number of problems that continue to trouble the industry:
- Difficulty in achieving a customer-centric environment
- Inefficient business processes leading to high operating costs
- Service levels that are difficult to achieve and monitor
- No management visibility into the organization
- IT challenged by interfacing and integration requirements
- Inflexible organization unable to change the operating model and form new alliances
- Difficulty in managing cross-departmental processes.
- Organizations and work teams structured around multiple policy systems, leading to redundant processes.
Beginning in the mid 1990s, life insurance companies began implementing imaging and workflow systems to solve some of the process problems. Many only got as far as back-end scanning and work item routing, which improved the productivity of the operation only marginally. New thinking around process dynamics, as well as the growing need to integrate both customers and business partners into a seamless, electronically connected network has led to an expanded set of requirements, moving beyond the traditional limits of workflow to “Business Process Management” (BPM).
Business Process Management: The New Frontier
BPM extends the concept of workflow to managing all aspects of the process, including human tasks as well as application-to-application transactions. It extends as well to incorporate the “end-to-end” process—moving beyond company boundaries to integrate customer, supplier and partner interaction. This implicitly requires incorporation of sophisticated integration and messaging technologies found in Enterprise Application Integration (EAI) tools with more traditional “desk-to-desk” routing, queuing and assignment techniques to manage human interactions. The combination is intended to provide an environment where tasks are automatically routed to either a human or a computer, in a coherent and seamless fashion based on predefined business rules.
The competitive landscape for BPM is very confusing at present. Vendors for integrated document archive and retrieval, EAI, image/content management, and workflow are all moving into new areas, bridging gaps in functionality to deliver the “silver bullet” solution. Gartner refers to BPM as the convergence of integration tools and workflow software products, with the integration vendors having rich integration capabilities and limited process management, and workflow vendors having rich process management but limited integration capabilities.
Capturing the Benefits
Suppose your company is in the group that is coping with policyholder retention issues, producer service problems, cost reduction initiatives, or all three. The industry evidence is clear that efficient business process management will help, and the technology to enable it is there. However, there is no technology “silver bullet” and the range of choices around products and techniques is almost overwhelming. What is best for your specific environment and how can you get from “here” to “there” within reasonable time and without an overwhelming technology development effort? Our customers tell us that all projects must have a solid return on investment (ROI), and an overall project payback within 2-3 years. In addition, most companies want to experience and measure real benefits within one year of project start.
The best path to results starts with careful planning. Recent experience with over 50 process improvement and management initiatives has allowed CSC to develop a base of facts and best practices we now routinely use to predict the specific technology that best addresses a client’s actual problems as well as the expected ROI, payback and time to initial benefits. The analysis process combines this insurance-specific experience base with details of the client’s actual environment, typically gathered in a highly structured on-site review lasting approximately three days. The resulting document details a business and financial “case for action,” including specifics on process improvement opportunities, benefits capture strategies and technology specifics. Costs and benefits are quantified across potential improvement scenarios to identify ROI and other financial measures as well as the “internal” costs for change. The objective is to create a clear “path for action” and provide a realistic plan against which the effort can be measured. Companies can use this document to determine whether to proceed with this type of technology.
Technology Is Not the Objective
Achieving breakthrough results is not just about the technology—it’s about transforming the way your company does business. The insurance industry’s long-term winners will need to exploit advances in process management to improve or secure their competitive position. But the most astute companies will implement process management technology as a driver to orchestrate specifically planned changes in how and where work is done, how results are measured and how internal and partner resources are leveraged. For the enlightened few who take the journey there will be both risks and rewards. Our customers have received great results, and BPM should receive serious attention within your organization.
CSC's Point of View
Over the last 10 years, CSC has worked with a large percentage of the insurance companies to transform their operations. We found, however, that just re-engineering the processes without technology did not deliver the results our customers required. In 1993 CSC partnered with DST, the developer of a process management solution called Automated Work Distributor (AWD) that was driving dramatic productivity improvements and cost savings in the mutual fund industry. Based on our deep knowledge of the life insurance market, CSC determined that this product could also bring those same results to life and annuity carriers.
Results achieved through implementation of AWD and a continuous improvement cycle have proven to be significant—on average a 20-30% cost savings, and a 25-35% productivity improvement. The degree to which companies deployed the technology and aggressively re-engineered the processes led to increasingly higher productivity gains such as those shown on the chart.
Computer Sciences Corporation distinguishes itself through its time-tested ability to plan, build and operate highly reliable, efficient and secure business and IT solutions. To complement its extensive capabilities in consulting, systems integration, outsourcing and re-engineering, CSC provides financial services industry knowledge and experience, a comprehensive portfolio of financial services application software and an extensive network of industry and technology partners, to more than 1,200 major banks, insurers and investment management and securities firms.