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An 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 their competitors.

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 knowledge Kings.

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!

John Myatt
Finance Knowledge Manager
Cap Gemini Ernst & Young

In this month's edition of Document Management Update:

Lotus unveils Raven Discovery Server. more>>
Deutsche Bank chooses IBM WebSphere Translation Server. more>>
Zurich deploys Autonomy in worldwide risk engineering extranet. more>>
Feature: The need for content management. more>>
eRooms launches eRooms 5.0 - Richard Croasdale finds out how the company plans to differentiate collaboration tool from Microsoft rival. more>>
Documentum launches 4i Portal content edition. more>>

Other knowledge management features:

Content management — helping create order out chaos. Knowledge management maybe an oxymoron — albeit a useful one — but there are certainly parts of our intellectual capital that we can manage much more effectively. more>>

UNLOCKING THE VALUE OF KNOWLEDGE. Knowledge management as a concept has received much attention of late, but that does not alter the fact that many businesses are not realising the benefits of exploiting the knowledge available to them. However, in the current turbulent business climate, few companies can afford to let this valuable resources remain untapped. more>>

Information overreach - With 2.8 million public websites and approximately 800 million web pages (and counting), the challenge of finding the right business information quickly and easily is difficult, at best. more>>
Putting Knowledge to Work. Knowledge management has spawned a lot of theoretical discussion, but how do you put it to work to achieve – and quantify – real benefits for businesses? Peter Turnbull, SER’s UK head of marketing, goes back to Shakespeare to bring to life working solutions for companies today. more>>
Knowledge is power, as the saying goes. Ernst & Young understands this better than most - the firm has one of the largest knowledge infrastructures in the world and is the only professional services firm to have been recognized as one of the world's top five "Most Admired Knowledge Enterprises" in each of the last two years. more>>
In favour of GM insurers. more>>
feature. more>>





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