This latest piece is by Bart Patrick, Chief Revenue Officer, Genasys Technologies and looks at the tricky matter of improving, or ditching, some aspects of legacy IT tech.
“It is not the strongest of the species that survive, nor the most intelligent, but the ones most responsive to change.”
Okay, so maybe Charles Darwin wasn’t thinking about the future of the insurance industry at the time he wrote these words, but I’d argue he knew what was coming. He was a smart guy, that Darwin.
In a business sense, evolution is happening all the time. It isn’t something that needs to take an age to occur and this is what we’re seeing in the insurance world. While there will never be an immediate ‘flash bang’ digital transformation, a digital evolution is happening every day that is incrementally changing how we perceive the industry. It’s not always immediately obvious but for those sitting still and not responding to change, it’s happening far more quickly than they realise.
The emergence of insurtechs bent on disrupting the status quo, as a result of changing consumer expectation, have accelerated a natural selection process forcing all insurance providers to (at least start to) respond to the changing environment by investing in building their digital capabilities or get left behind.
New players in the digital landscape
The pandemic created irreversible shifts in how we live our personal lives which has extended to how people buy insurance. We’re now operating in an insurance landscape where consumer expectation and buying behaviours have changed dramatically. Insurance providers with digital agility at their fingertips can better serve consumer changes much more effectively than those working with legacy systems. Research from BCG focuses on the rise of the ‘digital incumbent’ – legacy companies that are developing their digital capabilities across a range of industries – and I see direct parallels with the insurance sector. We’re seeing a number of traditional insurance businesses evolving into a new type of player in the digital landscape. So how are these legacy companies emerging to now give digital native insurance providers a run for their money? Here’s my take.
1. The brave and the bold
As companies come up with new ways to deliver a better digital experience to their end-customers or to create new products that better serve their needs, they quickly realise that the legacy tech they have relied on for years simply isn’t fit enough to compete.
These often huge, complex jigsaws of systems, moving in different directions – and glued together with something that is taking increasing effort to hold in place – simply cannot cope with the agility that a completely new multi-channel offering requires, let alone manage something with the level of personalisation that consumers are increasingly demanding.
Ripping out an entire system and replacing it not only comes with huge cost and effort, but also significant risk. Equally, moving away from a legacy tech stack to team up with a new partner to develop a new propositiIT
on requires a leap of faith with reputations on the line. This is the time to be brave, but we shouldn’t equate bravery with recklessness. This is about being sharp. It isn’t a leap of faith if you start small and build in flexibility: the really smart way is to scale down to start, and take a test and learn, agile approach.
2. Not all APIs are created equal
This bold attitude extends to companies that made a start to get ahead of the digital curve. Even the early adopters of APIs are fast realising that they may be past their sell-by date.
The APIs of three to five years ago all had different standards and weren’t designed to deliver true inwards/outwards exchanges of actionable data, with the result being a library of APIs of different vintages that don’t quite line up and can’t compete. When it comes to integrating and updating any legacy tech, it requires taking a deep breath and real focus.
3. Address the mess
The seemingly simple task of creating the business case is where you need to pay close attention – avoid rushing or treating it as a tick box exercise to get onto the exciting bit.
Let’s suppose a digital incumbent has a reasonable size architecture and needs to ditch the legacy middleware layer. They’ll need to work out the costs in terms of people, time, server costs, dev ops … it’s a long list and it’s all too easy to run out of steam. It will take time and effort but getting the business case pinned down, complemented by a clear strategy which allows flexibility in the tactical execution are vital components to getting the right outcome.
4. The power of procurement
I can’t stress enough the importance of focusing on the detail. The procurement process must get under the covers of any potential partner proposition, whether it’s to replace an entire system or create an innovation platform. Whatever the partner is offering, their proposition should be designed to evolve.
There are some key questions that any procurement team should ask the partner, such as:
· What is its ability to adapt according to various integrations and products?
· Does the platform allow products to be added or amended fast?
· What degree of self-service will the firm have to configure themselves?
This flexibility is essential as there will always be new developments that will meet an, as yet, unforeseen business need or changes to the external environment. But with great configuration, comes great responsibility – don’t configure yourself into a mess!
5. Tough love
These projects can be huge and they should be exciting, so it’s all too easy for any company to focus their eyes on the desired end result, rather than its delivery. But in order to get the best outcome, you should be open to being questioned about your digital aspirations.
A good partner challenges the scale and complexity of the project to ensure the end goal is, in fact, achievable or whether it needs to be dialled down to create a well-defined foundation and room to build.
6. Create a tech legacy, not legacy tech – whatever the scale of your ambition
Scaling down a digital plan doesn’t mean scaling down its ambition, rather evolving at a pace that suits the business. Being able to respond to the unpredictable and change course as necessary isn’t only helping these digital incumbents catch up and perhaps overtake the digital natives, it’s also the key to preventing technical debt and yet another legacy mess to clear up in the future.
The first step to building a tech legacy you can be proud of within the insurance sector is to ditch the notion that your journey to digital maturity should be an overwhelming process, that’s expensive, time consuming and complex.
Your commercial success and tech legacy are synonymous, determined by your ability to deliver what your customers expect, to deliver fast and to succeed fast while making a real difference to the way that insurance is done right now, which in the current economic climate has never been so critical.
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