argument in favour of the genetic modification of insurers
Organisational change is much the same as the evolution of organisms.
Over time the genetic makeup of an organism changes to ensure that it
prospers and survives within its environment. The environment changes
it, and it in turn has an impact on the environment. From the organisational
standpoint a similar parallel can be drawn between knowledge and the organisation.
Recent controversy around genetic modification altering the functions
of plants and animals alike puts effective knowledge management into context
within an organisation. For example, the input of hot and new knowledge
has the potential to fundamentally change the rules by which an organisation
operates. Optimising the deployment of knowledge fundamentally alters
the structure and direction of an organisation, enabling an insurance
company to achieve significant bottom line value.
At the risk of repetition this definition of knowledge management can
be seen in the context above. For example; genetic fingerprints and business
rules are similar, they map out what an organisation is, based on the
genes or knowledge available to them. Hence in an effective organisation,
as knowledge changes so does the direction of that organisation. It is
well understood that the advent of the 1 per cent environment has fundamentally
altered the UK life assurance marketplace. Insurers who rapidly engaged
and deployed knowledge that is market driven throughout their organisations
via technology are in a significantly stronger position than less nimble
competitors. Equally, at a lower level an insurer providing motor cover,
who can analyse the trends in motor accidents and apply this knowledge
to their business rules faster than their competitors confers a small
but important advantage.
Approaching knowledge in either of the above calls for a paradigm shift
in the culture and structure of an organisation, such that by deploying
knowledge across the business faster than competitors they can deliver
significant bottom line revenue.
Unfortunately organisations frequently view knowledge management as merely
a technology challenge, but having an electronic library of knowledge
supported by an intranet is not enough. In order to deliver significant
benefits an organisation needs to develop a strategy for knowledge in
order to identify where the deployment of knowledge will deliver the maximum
business value. Equally, the knowledge strategy needs to identify where
medium and low business value investment in knowledge is occurring, and
adjust investment accordingly. By focusing thought on the strategy, an
organisation can identify where to deploy high value internal knowledge,
such as the tacit thoughts of a group of actuaries . It may identify,
for instance, that investment in external knowledge about customer segmentation
is the key input to the rules for product development. It may also find
that agents in the call centre are collecting knowledge about the customer
which does not support any business rule, and no longer adds value to
the organisation. By eliminating this time consuming activity a cost saving
can be made, both in a monetary and a customer satisfaction sense.
A good knowledge strategy should also identify the required infrastructure
to support the deployment of knowledge, the processes that need to be
put in place, the people who run the processes, either as knowledge champions
or knowledge researchers, the method for tracking identified benefits,
as well as the technology. Just as technology can be ineffectual when
implemented outside a business-led knowledge strategy, when harnessed
as a part of it, technology can deliver significant benefit in facilitating
the fast and cost effective deployment of knowledge.
Focusing investment on the highest-value knowledge is critical to success.
Smart and new insights are generally only available to a few individuals
in an organisation. In an insurance company senior actuaries and underwriters
are probably the key, but not the only, experts. In an organisation which
has optimised its deployment of knowledge those individuals become a breeding
ground for new and hot ideas. High value knowledge owners should be deployed
carefully to ensure that their intellectual capital can yield the maximum
business benefit. In the case of senior actuaries, this could mean focusing
their thoughts on the rules around the strategic direction of the organisation.
We have found that in order to maximise high value knowledge the insurer
needs to go through a baselining exercise to understand who and what it
has got. The highest value knowledge is generally knowledge that has not
yet been documented, this is the knowledge that delivers significant competitive
advantage. Thus capturing the skills, competencies and experiences of
individuals both against the business rules and, more generally, will
help the insurer to focus the deployment of their experts strategically.
Any effort expended in baselining medium and low value knowledge will
necessarily receive less investment.
To maximise the application of the knowledge of an expert group, we have
to approach each rule and ask what benefit the expert group is able to
add. Equally the level of interaction that is required between the members
of the expert groups needs to be fully understood. A good example could
be a knowledge-optimised global commercial insurer that has identified
a new opportunity with a large international corporation. The commercial
insurer has identified that they will need to augment their sales team
with actuarial and underwriting skills, alongside knowledge of a rare
market segment in order to win the contract. As the organisation has the
facility to operate a global project office on-line, and has a full knowledge
of their staff competencies, they are quickly able to deploy the relevant
experts to add a fresh edge to the team. By enabling the effective use
of experts in a quick and efficient manner an insurer can move fast, maximise
the business value of their scarce skill and increase their chances of
winning the business.
A fresh look at the example above identifies several other demonstrable
benefits that can be gained from the effective deployment of knowledge.
By having a clear set of rules to govern how an insurer identifies a new
market opportunity they are able to deploy knowledge fast. Potentially
the insurer has analysed external market intelligence in order to size
an unusual or niche market. They will have quickly identified the skills
that they need to break into that market place, and they will have shared
the knowledge of experts and content to access the market faster than
In order to maximise the benefits of other communities within the organisation
the knowledge infrastructure needs to enable individuals to respond to
it in an interactive way and to facilitate feedback and continuous improvement,
but in a cost-effective manner. For instance more junior actuaries and
underwriters can develop best practice by providing re-useable answers
to the frequently asked questions . In this way content of a medium or
low importance can be accessed easily by those who need it, but also enabling
the content to be updated with new knowledge in a cost effective manner.
I have outlined several benefits of using experts, essentially around
delivering competitive advantage, but these benefits are only achieved
by substantial investment and clear planning. Initially in the production
of the knowledge strategy, but also on an ongoing basis to maintain it.
A good analogy to use would be that of a meeting. Before each meeting
a significant amount of planning takes place to ensure that the meeting
is effective and meets its objectives. The same is true to a far greater
extent when a community is asked to foster leading practice. It is not
unreasonable to suggest that each senior actuary or underwriter would
spend two hours a week involved in the identification of innovation. Across
a pool of ten actuaries this immediately represents a serious investment
of premium resources. It is key that each insurer focuses their attention
on those business rules that can deliver maximum value, and from this
position to measure the effectiveness of those rules and re-prioritise.
Of course this approach to community can be achieved in many different
ways to match the business rules. In some ways insurers have shared well.
The use of extranet technology to link product providers to intermediaries
has brought a variety of skills to bear and enabled insurers to develop
products to meet specific customer propositions. Embracing a cross functional
sharing model in conjunction with low cost internet enabled technology
is particularly pertinent to general insurers and intermediaries who find
themselves losing market share to cheaper and faster direct providers.
It is key that they harness the knowledge at their disposal as a key differentiator
between themselves and their new competitors, and use this knowledge to
their competitive advantage.
The insurer can further increase the value of expert communities by building
virtual teams across functional areas. Innovation is by definition a new
solution to an old problem and we usually get to this by bringing two
or more people together. Thus setting up cross-functional teams to identify
new business opportunities or product development could enable the insurer
to develop more innovative products.
For the insurance industry the deployment of knowledge in this way represents
a major paradigm shift, both in terms of culture and organisation. In
mining, for example, BP Amoco quickly embraced the concept of knowledge
sharing and as such have realised cash savings of over $50 million. Actuaries
would admit that as a group they are poor sharers and the same is true
of many functional areas within the insurance industry. Nonetheless there
are short term benefits to be had on the road to knowledge optimisation,
not least of which is the dismantlement of the empires of the internal
Rather like a geneticist measures the output of an experiment, so must
knowledge be measured. It is key that the benefits are visible and tangible,
and that the knowledge strategy is continually changed, just as the input
of knowledge changes the genetic make-up of an organisation. It is important
that successes are celebrated, but it is more important that lessons are
learned from failures, and that we understand how successes could have
been greater successes.
Over the next five years significant benefits can be achieved through
the application of knowledge An understanding of relevancy will result
in tightening in operating margins. While deploying hot intellectual capital
will result in better consumer choice and tangible competitive advantage.
Optimised knowledge is THE key weapon to the successful organisation of
the early 2000s. Natural selection dictates that only the strong or the
lucky will survive!
Finance Knowledge Manager
Cap Gemini Ernst & Young