We are all, to a significant degree, products of our own experiences and environments. We “learn by doing,” incorporating a personalized version of the Scientific Method to identify what works (and what doesn’t) in order to build a more complete set of facts and impressions that can inform future decisions. Each time we engage in a task, we have an opportunity to learn new things and better prepare ourselves for future ventures.
Hopefully touching a hot stove but once clarified the need to take safety precautions. As insurance carrier CIOs, understanding the joys and challenges associated with policy administration system conversions can also be the result of experience acquired by tackling hard, but solvable, problems. One potential issue with acquiring knowledge this way is the potential to develop a form of tunnel vision, which presumes that changes are both evolutionary and linear. Staying a course can theoretically be a lower risk, and more predictable, path forward. The challenge is that this may keep us from understanding and embracing changes that can be truly revolutionary. These types of changes can dramatically alter normal cost / benefit calculations. The challenge may be that are experiences may make us, at least, initially blind to them.
At one point, having an appreciation for music, I was on a path that suggested that bigger, more powerful and much more expensive equipment was the way to achieve a better experience. Experimentation had confirmed this was true. Of course, along the way, a series of technology advances effectively changed the game. Compression technologies created music files that were of lower quality but dramatically more convenient to use. The paradigm shift for how music is acquired and consumed has been profound. Convenience and cost have trumped other characteristics (e.g., quality) in a change that has been fundamental. Today I can consume a much broader, cheaper and more flexible music library than I could have conceived a few years ago. The jump from a linear improvement in quality in a confined space has been overwhelmed by a fundamental shift that allows me to listen to music that is “good enough” on a device that is incredibly convenient and, as an added bonus, fits nicely in my pocket. It solves a different problem than my original concern, so long as I was open to an idea of a shift in paradigms.
So what does this have with insurance technology? Plenty, it turns out. For example, our general picture of Policy Administration Systems represents a fairly linear progression from solutions that first came to market during the Nixon Administration. Yes, the systems use new languages, run on better hardware, use different operating systems and database structures, but the essential idea follows a pattern that our grandparents would recognize. Dedicated hardware in a company owned data center, likely in a company owned building, represents a solid and time tested approach. Layer on peripheral systems run in the same environment with a set of talented and dedicated company employees, and you have an immediately recognized model for insurance IT. It isn’t bleeding edge but it is also managing down risk, albeit without regard for the opportunity costs embedded in the model. Since everyone else is doing the same thing, more or less, it must be the way to go. Right? In reality, the answer is quickly becoming no, not really.
Of course there was a time when American businesses were so dependent on electricity to keep their operations running, that making your own could become a competitive advantage. That model ended a long time ago.
Part of the issue is that as fundamental changes in technology and business are taking place, we may be unaware of them or, more likely, unable to fully appreciate their implications. Senior managers and executives have built their careers by learning and understanding the current paradigm and being particularly adept at getting things done within it. Understanding the difference between a “fad” and a “shift” can be difficult, particularly of the latter happen infrequently. Since fundamental change is both uncomfortable and disorienting, there can be a natural tendency to hold back and wait for a definitive verdict. In fact, there can be intransigence at that point because of the angst over having part of one’s identity become obsolete.
For insurance technology, make no mistake: fundamental and profound change is upon us. Policy Admin Systems can run effectively as SaaS apps; CRM can easily be delivered as a cloud based solution. Other core technologies can be acquired in ways that trade capital expense for operational costs…and with these changes the role of a CIO can be changed forever. And that change can be a good thing too: more able to focus on strategic issues and the delivery of competitive advantages that make sense in the market; less focused on how well the batch cycle ran last night and when to squeeze an OS or database upgrade into a delivery schedule that is more crowded than the landing pattern at O’Hare on a Friday afternoon.
Some carriers are already onto this idea. A year ago when we asked insurance CIO’s if they would put e-mail into the cloud the response was an emphatic “no way.” Twelve short months later, a small majority said they would consider it; fully 30% of our respondents said “it would be done in 2013.” By freeing resources from the provision of a utility function, these CIO’s are freeing finite assets to focus on things that can bring real advantage to their carriers. The paradigm shift for them is underway and the new question becomes “how fast can we embrace other things like this?”
As a card carrying Baby Boomer, I posses a series of skills and abilities that are both interesting and a bit quaint! I still have audiophile stereo equipment and remember how to turn it on to play CDs and LPs. I can still wind my own watch and know what that does. I still drive a car that has three pedals on the floor and a gear shift in the console. I actually like all this stuff, but I’ve made a conscious decision to live nostalgically by using it.
It is hard to imagine being effective in a senior IT leadership position today by being similarly nostalgic. New paradigms exist. The real question now is how to embrace them!