Product development may be the largest obstacle to growth in the insurance industry, but it doesn’t have to be.
Part one of a series.
By understanding challenges and developing a thoughtful strategy, companies can prevail.
What does product development success look like? In this series, Centric’s Insurance experts uncover product development challenges and explore the six fundamental components needed for strong strategy development. This is the first post in a four-part series.
Part II: Product Development – Ideation and a Culture of Innovation
Part III: Getting to Product Launch
Part IV: Product Development – Defining Product Success Measures
The situation – Insurance markets continue to evolve
Today’s insurance landscape is constantly evolving. Carriers are forced to adapt to ever-changing customer expectations and preferences, adopt disruptive technologies, navigate acquisitions and consolidations, and deal with increased scrutiny from regulators. Adapting to these changes is challenging, but successfully overcoming these shifts allow companies to truly stand out from the competition.
Success requires a focus on delivering great products and minimizing go-to-market time. While many carriers are developing digital strategies and integrating new technologies such as mobile and portal, many others struggle with defining products quickly enough, successfully implementing new products or embracing meaningful changes that would make products better.
What is really going on? – Challenges with successful product development
When considering potential product development limitations, it is important to dig a little deeper to understand underlying causes.
In early Q1, 2015, Centric Consulting performed an analysis on insurance carriers’ product development lifecycles. We discovered that those who encounter challenges often experience the following:
- Product innovation is not structured or streamlined and, as a result, access to new product ideas is limited. This happens when product managers cling to antiquated methods of understanding policyholder wants and needs.
- Product development projects are usually not prioritized across business units, constraining valuable capital (including human capital) for low-return product ideas. If teams aren’t on the same page, in the beginning, precious time and effort can be wasted or misguided.
- Roles and responsibilities are not clearly defined. Without clear leadership, there can be an over-reliance on “heroes” to carry projects, which can strain timelines and limit scalability.
- Product development processes are not clearly defined. Companies following waterfall methods do not have sufficient controls or entry/exit criteria in the process. And those who attempt agile approaches but do not have the full buy-in of the organization often experience an increased level of frustration and progress delays.
- Challenges arise in converting policies to new platforms, or when acquiring new companies or books of business. These challenges can result in application silos where specialized knowledge is required. Often times, these application silos include legacy systems that further constrain the product implementation process.
- Once products are launched, carriers are challenged to measure the financial returns of those products against implementation costs. This type of data is rarely used to influence future product ideas and implementation strategies and it should be.
It’s important to remember that challenges can exist even after a product is launched. One hurdle to look out for is diminishing margins – the top line may be growing, but costs are squeezing out margins. As a result, meaningful, bottom-line growth that shareholders expect cannot be achieved.
When contemplating these challenges, make sure to consider the following questions:
- What can we learn from managed innovation to identify and prioritize new ideas/products?
- How do we integrate less-flexible legacy systems with modern technology?
- How do we handle organizational changes associated with product and process transformations?
- How can we use the “best of breed” technology in order to enable an effective product development process on an ongoing basis?
Optimizing the product development process is a daunting challenge, but an achievable one. Success begins with recognizing and understanding the company’s specific challenges. Is the company stuck on ideation and developing optimal product ideas? Is the largest hurdle implementation, where the challenge is executing and accelerating the speed to market? Or finally, challenge more process-oriented, where the company lacks a data-driven culture and constraints innovation rather than fosters creative thinking?
Where do we go from here? – Developing a sound product development strategy
It is essential to establish a strong strategy that aligns with overall company goals in order to overcome or avoid product development challenges.
The strategy should include the following elements:
- Creation of new ideas for product development
- Prioritization and tracking of those ideas
- Identification of potential opportunities to convert those ideas into a new product
- Implementation of a flexible and efficient IT solution architecture
- Development of the new product
- Evaluation of product performance post implementation
And with those components, consider these essential questions:
- Does the product meet the customer needs today and 5-10 years from now?
- Is the product being introduced at the right time? Is there a need for this product?
- Does the new product fit into the company’s overall strategy and risk appetite?
- What is the business value obtained by introducing this new product?
- Is there a similar product in existence already? If so, is there a way to leverage this existing product?
- Is the distribution channel properly educated and incentivized to sell this product?
- Is the company ready and willing to change and embrace this new product?
To the extent that the product satisfies a need in the marketplace, aligns with company strategy and enhances growth and profitability, every effort should be made to move forward in a thoughtful way.
Ultimately, each carrier will define their own strategy for developing and marketing products. However, the truly exceptional carriers will evolve their products based on an integrated strategy that is not limited by inefficient systems or processes, but rather focuses on the evolving needs of policyholders and shortens the lifecycle between product ideation and delivery.