Incumbents and InsurTechs must embrace each other’s unique strengths and work together

Executive summary

New challenges, changing business dynamics have set off a tectonic shift in the insurance industry

  • Customer expectations are evolving, offers are becoming more innovative, and new players are making their presence known.
  • Fundamental and significant challenges will require insurers’ immediate and considered attention.
  • As a result of these changing dynamics, incumbents and InsurTechs agree that collaboration with other industry players is necessary to create an integrated portfolio of offerings.

Insurers must support a platform that serves a broad spectrum of customer needs

  • The future marketplace will showcase a bouquet of offerings that caters to customers’ financial and non-financial needs.
  • Insurers need a structured approach to marketplace development that includes proper identification of customer preferences and relevant offerings, evaluation of best-fit partners, and an effective GTM strategy.
  • Today’s operating model will undergo a fundamental transformation as part of the inevitable path forward.

Experience-led digital offerings and seamless collaboration with ecosystem players will drive marketplace success

  • Insurers will need to tear down internal silos, seamlessly connect with ecosystem players, and be more inventive.
  • Our Inventive Insurer profile includes key characteristics:
    • intelligent insurer,
    • open insurer,
    • deep customer,
    • and product agility.

Incumbent-InsurTech collaboration can shore up competencies in preparation for the future

  • InsurTechs’ unique capabilities and agility make them ideal partners for incumbents aiming to carve out a substantive role in the new marketplace.
  • A successful holistic collaboration will focus on long-term benefits.

New ecosystem roles will evolve as the industry transitions toward the marketplace model

  • Industry players must decide how to successfully and profitably contribute to the new ecosystem based on their most compelling competencies, as well as market needs and the external environment.

There’s no looking back for today’s digitally-empowered consumers

Throughout the past decade, as smart technology tools became mainstream, consumer interaction with the world changed dramatically. Changing lifestyles, behavior, and preferences have created a digital-age paradigm. As smartphones and the internet unlock information and decision power, interconnectivity, personalization, and seamless omnichannel access have become must-haves.

So, what does this mean for insurers?

Policyholders seek new offerings: Traditional insurance policies may not fully meet customers’ changing needs and desire for add-on services, personalization, and flexible offerings. In fact, for nearly half of policyholders, the decision to continue with their insurer is influenced by the availability of these features and benefits, according to the World Insurance Report (WIR) 2019.1

The demand for digital transaction channels is up: The popularity of digital channels is gradually growing. More than half of insurance customers (nearly 52%) interviewed as part of the WIR 2018 placed high importance on the mobile and internet or a website channel for conducting insurance transactions.

Simplicity is the rationale behind genuinely digital products

Digital channels work best when insurers streamline and standardize products and processes so customers easily understand features and benefits and can make direct purchases online with ease. In short, insurers must simplify offerings to create genuinely
digital products.

  • Easy to understand: Policy details should be redesigned and reformatted for straightforward interpretation so customers can quickly make a buy/ no-buy decision. For example, Berkshire Hathaway’s Insurance Group (BiBerk) launched a comprehensive insurance product for small businesses that combines multiple coverages. Dubbed THREE, the new product is three-pages long and links coverage for workers compensation, liability (including general liability, errors and omissions, and cyber), property, and auto.
  • Automated processes: Straight-through processing and other ease-of-use tools can simplify underwriting, claims processing, and more across the value chain. Cake Insure, a subsidiary of Colorado-based Pinnacol Assurance, launched in late 2017 with an algorithm that produces a bindable quote in less than a minute and a bound policy in fewer than five minutes for small businesses seeking workers’ compensation insurance. New York-based property and casualty InsurTech Lemonade uses artificial intelligence to automate claims processing. Lemonade showcases a 2016 case in which it crossreferenced a claim against a user’s policy, ran 18 anti-fraud algorithms, approved the claim, and sent wiring instructions to the bank in three seconds to demonstrate ease of use.
  • Straightforward policy wording: Descriptions of policy coverage and expenses (which ones are payable and which do not qualify) must be explained clearly in everyday language. Similarly, insurance industry players should work together to standardize definitions, exclusions, and processes.
  • Interactive customer education: Gamification, interactive videos, and social channels are ways to educate customers about risks, their need for coverage, and policy details. Interaction can also improve customer engagement and experience.

The marketplace of the future can holistically focus on customer needs

HomeFlix is a virtual assistant offering renters and homeowners insurance underwritten by Zurich Connect, the digital arm of Zurich Italy, and powered by on-demand digital broker Yolo, a Milan-based InsurTech. In addition to insurance coverage, the policy, introduced in July 2019, offers laundry service – washed and ironed after a few days and paid directly on delivery. Access to concierge maintenance services such as plumbing and electric also is available. Next, HomeFlix plans home delivery, babysitting, and cleaning services.

New York-based Generali Global Assistance (a division of Italy’s Generali Group, which provides travel insurance-related services) strategically partnered with San Francisco-based rideshare company Lyft in late 2017 to improve customer service and contain costs for clientele of its insurance companies and multinational corporations. Later, Lyft
collaborated with CareLinx, a US professional caregiver marketplace that helps find, hire, manage and pay caregivers online, to create CareRides, a door-to-door transportation service for special-needs individuals in 50 US metro areas. Generali Global Assistance also partnered with CareLinx to provide value-added services for existing policyholders in times of need.

The marketplace of the future can offer emerging-risk coverage

Working with Cisco, Apple, and Aon, Allianz launched a comprehensive cyber insurance product for businesses in early 2018. The product includes a solution comprised of cyber-resilience evaluation services from Aon, secure technologies from Cisco and Apple, and options for enhanced cyber insurance coverage from Allianz. The product aims to help a broader range of organizations manage and protect themselves better from cyber risks associated with ransomware and malware-related threats.

The marketplace of the future can deliver simple to understand, easy-access offerings

Berlin-based startup FRIDAY offers innovative, digital automotive insurance with features like kilometeraccurate billing, the option to terminate at month’s end, and paperless administration. The InsurTech’s technologies and partnerships include:

  • Telematics support from the BMW CarData platform and from TankTaler, which tracks vehicle location as well as data such as battery voltage, mileage, and other statistics
  • Automotive services through the mobility hub of ATU, a German chain of vehicle repair franchises
  • Drivy, a peer-to-peer car rental marketplace that enables consumers to lease vehicles from private individuals
  • Friendsurance, a peer-to-peer InsurTech that pays out a percentage to customers who do not use (or use very little) annual insurance also sells FRIDAY policies

Prudential Singapore and StarHub partnered to create FastTrackTrade (FTT), Singapore’s first digital trade platform for small and midsized business (SMBs) that uses blockchain technology. FTT helps SMBs find business partners and distributors, buy and sell goods, track shipments, receive and make payments, access financing, and buy insurance via a single platform. FinTech startup Cités Gestion developed the pioneering platform with funding from Prudential.

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Structure supports success

Insurer success in the future marketplace will rely on a structured approach (see Figure 3).

  • Understanding customer preferences and conceptualizing product portfolios: Insurers can tap new data sources such as social media channels and use behavioral analytics for better understanding and more accurate estimation of their customer’s preferences and risk profile. With a deeper understanding of customers, they can conceptualize personalized product portfolios for each customer segment.
  • Recruiting the right partners: Once the product portfolio is finalized, insurers should look for partners that align with their business objectives and strategic vision. Cultural fit, ease of integration of systems, and seamless channels of communication are key success factors.
  • Structuring the offerings portfolio: Insurers should closely collaborate with partners while assembling their portfolio. A winning product/service mix offers a hyper-personalized one-stop solution for all the needs of the customer.
  • A compelling go-to-market strategy: Insurers should be able to communicate the value of the marketplace by touting human-centric offerings that customers find simple to understand and easy to access.
  • Capturing feedback: Through advanced analysis of sales data, direct customer input, social media, etc., insurers can capture feedback about their offerings. The process should be continuous rather than on an ad-hoc basis. More importantly, the input should be immediately acted upon to enhance current products or to conceptualize a new product.

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To realize the full potential of the structured approach, four fundamental shifts in the current operating model are critical

For an insurer to realize the full potential of the structured approach and ensuring the successful creation of the marketplace of the future, four fundamental shifts in the current operating model are critical (see Figure 4). The importance of these areas is borne out by the research. For example:

  1. Experience: More than 70% of insurers and InsurTechs said a focus on holistic risk solutions for customers was critical to establishing a future-state insurance marketplace.
  2. Data: More than 70% said advanced data management capabilities are critical.
  3. Partnerships: 90% of InsurTechs said partnerships were critical while 70% of incumbents said the same. Both insurers and InsurTechs have a hearty appetite for collaboration with other sectors, such as healthcare providers and players from the travel, transportation, and hospitality space (see Figure 5).
  4. Shared access: However, an emerging area in which views are evolving is the transition to a shared economy. Here, less than 40% of established insurers and InsurTechs say they consider shared ownership of assets to be critical.

Industry players should understand that the four shifts – focus on experience, data, partnership, and shared access – are interrelated and critical for partnering with other entities to develop bundled offerings. Concentrating on one at the expense of others may stymie the overall efficiency of the marketplace.

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Digital maturity does not match aspiration

While insurers realize the importance of these fundamental shifts, there is a significant gap between their expectations and their current digital maturity. Lack of digital maturity is the biggest concern for incumbents. While 68% of insurers said they believe partnerships are critical, only 32% are currently collaborating with ecosystem partners (see Figure 6).

Less than 40% of insurers have a holistic digital transformation strategy and are collaborating with ecosystem players to provide value-added services. Only 11% of insurers say they leverage open architecture, which is critical for working with other industry players.

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Experience-led digital offerings and seamless collaboration with ecosystem players will drive marketplace success

We call firms prepared to excel in the future marketplace Inventive Insurers because they have strategically updated their product portfolios, operating models, and distribution methods. They have outlined their distinctive capabilities as well as their competency gaps and are ready to deliver end-to-end solutions in the manner customers prefer.

Pragmatic assessment (and subsequent enhancement) of a firm’s digital maturity is critical to connecting with ecosystem players seamlessly. Figure 7 shows the steps companies need to take to establish the marketplace of the future.

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1. Prioritize digital agility

The critical first step in the future marketplace journey is boosting digital agility. The more quickly initiatives are implemented, the more quickly firms will enhance their digital maturity and actively participate within a connected ecosystem. Insurers must holistically adopt these critical capabilities to optimize their digital agility and seamlessly connect with partners to develop digitallyintegrated ecosystems (see Figure 8).

  • Real-time data gathering
  • Advanced analytics
  • Re-engineering complex processes and automating them

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2. Build an integrated ecosystem

Seamless collaboration between insurers and their strategic partners is the backbone of a digitally integrated ecosystem. As new players enter the insurance value chain (aggregators, original equipment manufacturers (OEMs), one-stop policy management apps, and third parties such as repair stores), incumbents must strengthen their position through strategic partnerships.

Our proposed digitally-integrated ecosystem seamlessly interconnects insurers with customers and partners to enable the efficient flow of information and services (see Figure 9).

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In the digitally-integrated ecosystem, customers can access insurers over various channels through extended multi-device, multi-platform, and mobility offerings. Digital integration with partners will play a crucial role as insurers seek to increase their reach and provide customers with convenient and seamless services.

Integration with aggregators and intermediaries offers insurers a choice of distribution channels. As insurers connect with individual customers through devices, real-time data can be captured and used to provide personalized offerings and value-added services.

Insurers will move beyond traditional touchpoints to become their customers’ constant risk control advisory and partner. For that to happen, however, insurers will need to join forces with third-party vendors for efficient claims management and payout, and with OEMs for real-time customer data.

APIs, cloud-based storage, and blockchain can foster insurance ecosystem integration by enabling the seamless and secure transfer of data between diverse systems. A digitally-integrated ecosystem – both within and outside the organization – will support the real-time, personalized services that customers already demand. Digital mastery can benefit top- and bottom lines and propel insurers forward.

Grasping the art of teamwork with close ecosystem players – and relevant offerings based on core capabilities – will lay the groundwork for insurers to partner profitably.

3. Create tomorrow’s marketplace

Firms must develop Inventive Insurer competencies to contribute to the successful development of tomorrow’s marketplace. These competencies include intelligent processes, open platforms, customer centricity, and an innovative mindset among team members ( see Figure 10).

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Intelligent insurer. Automation, analytics, and artificial intelligence can prioritize customer experience within all operations.

  • Process efficiencies can support top-notch service with quick turnaround times.
  • Analytical competencies help insurers understand customer needs and act swiftly.
  • Robust digital governance provides monitoring and ensures compliance within today’s dynamic regulatory environment.

Open insurers leverage open platforms to build an ecosystem of partners through seamless collaboration with third parties and enable firms to participate in the value chain of third parties. Insurers with open platforms can access and integrate new data streams to cater to customers’ evolving needs, reaching them in the way they prefer via new distribution channels. Modern platform with open architecture for providing bouquet of offerings also allow firms to take a fail-fast approach to product development and innovate at a faster pace.

Deep customer competencies allow insurers to leverage data and channels for enhancing the customer experience across all touchpoints. Deep customer insights generated using advanced analytics and AI enable insurers to keep the customer at the center of all decisions.

Product agility is crucial for insurers to create new products at a faster pace and gain a competitive edge from an increased speed-to-market. Creative culture and ability to innovate at scale are critical components for achieving product agility. A creative culture
encourages novel thinking from employees and spurs openness to change.

Innovation labs and design thinking can encourage a fresh approach, especially within cultures that are hard-wired with conventional processes and culture.

Leadership support and vision are also critical. While Inventive Insurer status may be an aspirational future state, each firm’s journey is unique. An open platform used as a sandbox is an excellent place to begin developing new competencies and learning how to innovate at scale. Inventive Insurers create digital, experience-led offerings by collaborating seamlessly with other ecosystem players.

Incumbents and InsurTechs will benefit from strategic collaboration

For the most part, the industry sees InsurTech collaboration only as a means to drive growth and transform the customer experience. For example, 84% of insurers and 80% of InsurTechs say they are focusing on “developing new offerings.”

However, when it comes to the critical building blocks for the new insurance marketplace – such as developing holistic technology infrastructure and advanced data management capabilities – there are significant gaps in the expectations of insurers and InsurTechs. For example, fewer than 40% of incumbent insurers want to build holistic technology infrastructure by collaborating with InsurTech firms, while more than 60% of InsurTechs wish to work with insurers to create such a foundation.

What’s more, while data security remains a crucial concern when establishing partnerships with other industries, only around 10% of incumbents and 25% of InsurTechs say they want to focus collaborative efforts on data security.

Industry players should focus on a holistic approach while venturing into an insurer-InsurTech collaboration to prepare for the future and consider tactical plans for quick wins that may offer short-term benefits.

External partners can facilitate incumbent-InsurTech collaboration

After clearly outlining collaboration objectives, insurers must select a partner. The World InsurTech Report 2018 took a deep dive into the InsurTech landscape and offered ways in which incumbents can assess the success potential of short-to-medium term partnerships with InsurTech firms as well as longterm relationship feasibility. Finding a partner that can address technology capability gaps may require specialized third-party support.

Incumbents and InsurTechs can optimize their structured collaborative efforts by keeping four guiding pillars in mind: People, Finance, Business, and Technology (Figure 13).

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People (The right individuals in the best-fit positions): Employees are a firm’s most essential assets when it comes to driving innovation, growth, expansion, and fruitful collaboration. Both partnering entities must be flexible and strive for a balance between the hierarchical nature of many traditional insurers and the flat organizational structure favored by InsurTechs.

Finance (Allocate optimal capital, realistically forecast returns): Without a defined investment and revenue model, it may be difficult to articulate a compelling value proposition. Participants need adequate capital to invest in the partnership and a proven revenue generating model to maintain positive cash flow in the not-too-distant future.

Business (Early traction, measurable success): Business traction, a proven business model, customer adoption, and value creation are must-meet goals for any potential collaboration. A new business model should solve the needs and challenges that were difficult to tackle independently. A collaborative partnership should produce a value proposition with quantifiable results.

Technology (Collaboration tools and technologies): Technology tools should be secure and enable frictionless collaboration, as well as scalability. Partner systems should securely integrate with the help of technology. Accessed information must be accurate, timely, and be regulatorily compliant. It should be scalable without affecting current systems.

New ecosystem roles will evolve as the industry transitions toward the marketplace model

As the insurance industry advances, new specialist roles are developing. In addition to the traditional integrated business role, new functions include that of Supplier, Aggregator, and Orchestrator. Close collaboration will enable incumbents and InsurTechs to maximize opportunities in each.

These roles are not business-model exclusive but business-case specific. Each ecosystem entity may mix and match positions depending on the business model in play (see Figure 15).

Established insurers and InsurTechs can also play multiple roles within an ecosystem. For example, a firm can act as both supplier and orchestrator. Similarly, one firm may be a supplier in an ecosystem, but be an orchestrator in another ecosystem.

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Click here to access Cap Gemini’s entire report

 

The Future of CFO’s Business Partnering

BP² – the next generation of Business Partner

The role of business partner has become almost ubiquitous in organizations today. According to respondents of this survey, 88% of senior finance professionals already consider themselves to be business partners. This key finding suggests that the silo mentality is breaking down and, at last, departments and functions are joining forces to teach and learn from each other to deliver better performance. But the scope of the role, how it is defined, and how senior finance executives characterize their own business partnering are all open to interpretation. And many of the ideas are still hamstrung by traditional finance behaviors and aspirations, so that the next generation of business partners as agents of change and innovation languish at the bottom of the priority list.

The scope of business partnering

According to the survey, most CFOs see business partnering as a blend of traditional finance and commercial support, while innovation and change are more likely to be seen as outside the scope of business partnering. 57% of senior finance executives strongly agree that a business partner should challenge budgets, plans and forecasts. Being involved in strategy and development followed closely behind with 56% strongly agreeing that it forms part of the scope of business partnering, while influencing commercial decisions was a close third.

The pattern that emerges from the survey is that traditional and commercial elements are given more weight within the scope of business partnering than being a catalyst for change and innovation. This more radical change agenda is only shared by around 36% of respondents, indicating that finance professionals still largely see their role in traditional or commercial terms. They have yet to recognize the finance function’s role in the next generation of business partnering, which can be

  • the catalyst for innovation in business models,
  • for process improvements
  • and for organizational change.

Traditional and commercial business partners aren’t necessarily less important than change agents, but the latter has the potential to add the most value in the longer term, and should at least be in the purview of progressive CFOs who want to drive change and encourage growth.

Unfortunately, this is not an easy thing to change. Finding time for any business partnering can be a struggle, but CFOs spend disproportionately less time on activities that bring about change than on traditional business partnering roles. Without investing time and effort into it, CFOs will struggle to fulfill their role as the next generation of business partner.

Overall 45% of CFOs struggle to make time for any business partnering, so it won’t come as a surprise that, ultimately, only 57% of CFOs believe their finance team efforts as business partners are well regarded by the operational functions.

The four personas of business partnering

Ask a room full of CFOs what business partnering means and you’ll get a room full of answers, each one influenced by their personal journey through the changing business landscape. By its very variability, this important business process is being enacted in many ways. FSN, the survey authors, did not seek to define business partnering. Instead, the survey asked respondents to define business partnering in their own words, and the 366 detailed answers were all different. But underlying the diversity were patterns of emphasis that defined four ‘personas’ or styles of business partnering, each exerting its own influence on the growth of the business over time.

A detailed analysis of the definitions and the frequency of occurrence of key phrases and expressions allowed us to plot these personas, their relative weight, together with their likely impact on growth over time.

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The size of the bubbles denotes the frequency (number) of times an attribute of business partnering was referenced in the definitions and these were plotted in terms of their likely contribution to growth in the short to long term.

The greatest number of comments by far coalesced around the bottom left-hand quadrant denoting a finance-centric focus on short to medium term outcomes, i.e., the traditional finance business partner. But there was an encouraging drift upwards and rightwards towards the quadrant denoting what we call the next generation of business partner, “BP²” (BP Squared), a super-charged business partner using his or her wide experience, purview and remit to help bring about change in the organization, for example, new business models, new processes and innovative methods of organizational deployment.

Relatively few of the 383 business partners offering definitions of a business partner, concerned themselves with top line growth i.e. with involvement in commercial sales negotiations or the sales pipeline – a critical part of influencing growth.

Finally, surprisingly few finance business partners immersed themselves in strategy development or saw their role as helping to ensure strategic alignment. It suggests that the ongoing transition of the CFO’s role from financial steward to strategic advisor is not as advanced as some would suggest.

Financial Performance Drivers

Most CFOs and senior finance executives define the role of the business partner in traditional financial terms. They are there to explain and illuminate the financial operations, be a trusted, safe pair of hands that manages business risk, and provide s ome operational support. The focus for these CFOs is on communicating a clear understanding of the financial imperative in order to steer the performance of the business prudently.

This ideal reflects the status quo and perpetuates the traditional view of finance, and the role of the CFO. It’s one where the finance function remains a static force, opening up only so far as to allow the rest of the business to see how it functions and make them more accountable to it. While it is obviously necessary for other functions to understand and support a financial strategy, the drawback of this approach is the shortcomings for the business as a whole. Finance-centric business partnering provides some short-term outcomes but does little to promote more than pedestrian growth. It’s better than nothing, but it’s far from the best.

Top-Line Drivers

In the upper quadrant, top line drivers focus on driving growth and sales with a collaborative approach to commercial decision-making. This style of business partnering can have a positive effect on earnings, as improvements in commercial operations and the management of the sales pipeline are translated into revenue.

But while top line drivers are linked to higher growth than financial-focused business partners, the outcome tends to be only short term. The key issue for CFOs is that very few of them even allude to commercial partnerships when defining the scope of business partnering. They ignore the potential for the finance function to help improve the commercial outcomes, like sales or the collection of debt or even a change in business models.

Strategic Aligners

Those CFOs who focus on strategic alignment in their business partnering approach tend to see longer term results. They use analysis and strategy to drive decisionmaking, bringing business goals into focus through partnerships and collaborative working. This business benefit helps to strengthen the foundation of the business in the long term, but it isn’t the most effective in driving substantial growth. And again, there is a paucity of CFOs and senior finance executives who cited strategy development and analysis in their definition of business partnering.

Catalysts for change

The CFOs who were the most progressive and visionary in their definition of business partnering use the role as a catalyst for change. They challenge their colleagues, influence the strategic direction of the business, and generate momentum through change and innovation from the very heart of the finance function. These finance executives get involved in decision-making, and understand the need to influence, advise and challenge in order to promote change. This definition is the one that translates into sustained high growth.

The four personas are not mutually exclusive. Some CFOs view business partnering as a combination of some or all of these attributes. But the preponderance of opinion is clustered around the traditional view of finance, while very little is to do with being a catalyst for change.

How do CFOs characterize their finance function?

However CFOs choose to define the role of business partnering, each function has its own character and style. According to the survey, 17% have a finance-centric approach to business partnering, limiting the relationship to financial stewardship and performance. A further 18% have to settle for a light-touch approach where they are occasionally invited to become involved in commercial decision-making. This means 35% of senior finance executives are barely involved in any commercial decision-making at all.

More positively, the survey showed that 46% are considered to be trusted advisors, and are sought out by operational business teams for opinions before they make big commercial or financial decisions.

But at the apex of the business partnering journey are the change agents, who make up a paltry 19% of the senior finance executives surveyed. These forward thinkers are frequently catalysts for change, suggesting new business processes and areas where the company can benefit from innovation. This is the next stage in the evolution of both the role of the modern CFO and the role of the finance function at the heart of business innovation. We call CFOs in this category BP² (BP Squared) to denote the huge distance between these forward-thinking individuals and the rest of the pack.

Measuring up

Business partnering can be a subtle yet effective process, but it’s not easy to measure. 57% of organizations have no agreed way of measuring the success of business partnering, and 34% don’t think it’s possible to separate and quantify the value added through this collaboration.

Yet CFOs believe there is a strong correlation between business partnering and profitability – with 91% of respondents saying their business partnering efforts significantly add to profitability. While it’s true that some of the outcomes of business partnering are intangible, it is still important to be able to make a direct connection between it and improved performance, otherwise those efforts may be ineffective but are allowed to continue.

One solution is to use 360 degree appraisals, drawing in a wider gamut of feedback including business partners and internal customers to ascertain the effectiveness of the process. Finance business partnering can also be quantified if there are business model changes, like the move from product sales to services, which require a generous underpinning of financial input to be carried out effectively.

Business partnering offers companies a way to inexpensively

  • pool all their best resources to generate ideas,
  • spark innovation
  • and positively add value to the business.

First CFOs need to recognize the importance of business partnering, widen their idea of how it can add value, and then actually set aside the enough time to become agents of change and growth.

Data unlocks business partnering

Data is the most valuable organizational currency in today’s competitive business environment. Most companies are still in the process of working out the best method to collect, collate and use the tsunami of data available to them in order to generate insight. Some organizations are just at the start of their data journey, others are more advanced, and our research confirms that their data profile will make a significant difference to how well their business partnering works.

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The survey asked how well respondents’ data supported the role of business partnering, and the responses showed that 18% were data overloaded. This meant business partners have too many conflicting data sources and poor data governance, leaving them with little actual usable data to support the partnering process.

26% were data constrained, meaning they cannot get hold of the data they need to drive insight and decision making.

And a further 34% were technology constrained, muddling through without the tech savvy resources or tools to fully exploit the data they already have. These senior finance executives may know the data is there, sitting in an ERP or CRM system, but can’t exploit it because they lack the right technology tools.

The final 22% have achieved data mastery, where they actively manage their data as a corporate asset, and have the tools and resources to exploit it in order to give their company a competitive edge.

This means 78% overall are hampered by data constraints and are failing to use data effectively to get the best out of their business partnering. While the good intentions are there, it is a weak partnership because there is little of substance to work with.

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The diagram above is the Business Partnering Maturity Model as it relates to data. It illustrates that there is a huge gap in performance between how effective data masters and data laggards are at business partnering.

The percentage of business partners falling into each category of data management (‘data overloaded’, ‘data constrained,’ etc) has been plotted together with how well these finance functions feel that business partnering is regarded by the operational units as well as their perceived influence on change.

The analysis reveals that “Data masters” are in a league of their own. They are significantly more likely to be well regarded by the operations and are more likely to act as change agents in their business partnering role.

We know from FSN’s 2018 Innovation in Financial Reporting survey that data masters, who similarly made up around one fifth of senior finance executives surveyed, are also more innovative. That research showed they were more likely to have worked on innovative projects in the last three years, and were less likely to be troubled by obstacles to reporting and innovation.

Data masters also have a more sophisticated approach to business partnering. They’re more likely to be change agents, are more often seen as a trusted advisor and they’re more involved in decision making. Interestingly, two-thirds of data masters have a formal or agreed way to measure the success of business partnering, compared to less than 41% of data constrained CFOs, and 36% of technology constrained and data overloaded finance executives. They’re also more inclined to perform 360 degree appraisals with their internal customers to assess the success of their business partnering. This means they can monitor and measure their success, which allows them to adapt and improve their processes.

The remainder, i.e. those that have not mastered their data, are clustered around a similar position on the Business Partnering Maturity Model, i.e., there is little to separate them around how well they are regarded by operational business units or whether they are in a position to influence change.

The key message from this survey is that data masters are the stars of the modern finance function, and it is a sentiment echoed through many of FSN’s surveys over the last few years.

The Innovation in Financial Reporting survey also found that data masters outperformed their less able competitors in three key performance measures that are indicative of financial health and efficiency: 

  • they close their books faster,
  • reforecast quicker and generate more accurate forecasts,
  • and crucially they have the time to add value to the organization.

People, processes and technology

So, if data is the key to driving business partnerships, where do the people, processes and technology come in? Business partnering doesn’t necessarily come naturally to everyone. Where there is no experience of it in previous positions, or if the culture is normally quite insular, sometimes CFOs and senior finance executives need focused guidance. But according to the survey, 77% of organizations expect employees to pick up business partnering on the job. And only just over half offer specialized training courses to support them.

Each company and department or function will be different, but businesses need to support their partnerships, either with formal structures or at the very least with guidance from experienced executives to maximize the outcome. Meanwhile processes can be a hindrance to business partnering in organizations where there is a lack of standardization and automation. The survey found that 71% of respondents agreed or strongly agreed that a lack of automation hinders the process of business partnering.

This was followed closely by a lack of standardization, and a lack of unification, or integration in corporate systems. Surprisingly the constraints of too many or too complex spreadsheets only hindered 61% of CFOs, the lowest of all obstacles but still a substantial stumbling block to effective partnerships. The hindrances reflect the need for better technology to manage the data that will unlock real inter-departmental insight, and 83% of CFOs said that better software to support data analytics is their most pressing need when supporting effective business partnerships.

Meanwhile 81% are looking to future technology to assist in data visualization to make improvements to their business partnering.

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This echoes the findings of FSN’s The Future of Planning, Budgeting and Forecasting survey which identified users of cutting edge visualization tools as the most effective forecasters. Being able to visually demonstrate financial data and ideas in an engaging and accessible way is particularly important in business partnering, when the counterparty doesn’t work in finance and may have only rudimentary knowledge of complex financial concepts.

Data is a clear differentiator. Business partners who can access, analyze and explain organizational data are more likely to

  • generate real insight,
  • engage their business partners
  • and become a positive agent of change and growth.

Click here to access Workiva’s and FSN’s Survey²

The State of Connected Planning

We identify four major planning trends revealed in the data.

  • Trend #1: Aggressively growing companies plan more, plan better, and prioritize planning throughout the organization.

  • Trend #2: Successful companies use enterprise-scale planning solutions.

  • Trend #3: The right decisions combine people, processes, and technology.

  • Trend #4: Advanced analytics yield the insights for competitive advantage.

TREND 01 : Aggressively growing companies prioritize planning throughout the organization

Why do aggressively growing companies value planning so highly? To sustain an aggressive rate of growth, companies need to do two things:

  • Stay aggressively attuned to changes in the market, so they can accurately anticipate future trend
  • Keep employees across the company aligned on business objectives

This is why aggressively growing companies see planning as critical to realizing business goals.

Putting plans into action

Aggressively growing companies don’t see planning as an abstract idea. They also plan more often and more efficiently than other companies. Compared to their counterparts, aggressively growing companies plan with far greater frequency and are much quicker to incorporate market data into their plans

This emphasis on

  • efficiency,
  • speed,
  • and agility

produces real results. Compared to other companies, aggressively growing companies put more of their plans into action. Nearly half of aggressively growing companies turn more than three-quarters of their plans into reality.

For companies that experience a significant gap between planning and execution, here are three ways to begin to close it:

  1. Increase the frequency of your planning. By planning more often, you give yourself more flexibility, can incorporate market data more quickly, and have more time to change plans. A less frequent planning cadence, in contrast, leaves your organization working to incorporate plans that may lag months behind the market.
  2. Plan across the enterprise. Execution can go awry when plans made in one area of the business don’t take into account activities in another area. This disconnect can produce unreachable goals throughout the business, which can dramatically reduce the percentage of a plan that gets executed. To avoid this, create a culture of planning across the enterprise, ensuring that plans include relevant data from all business units.
  3. Leverage the best technology. As the statistic above shows, the companies who best execute on their plans are those who leverage cloud-based enterprise technology. This ensures that companies can plan with all relevant data and incorporate all necessary stakeholders. By doing this, companies can set their plans up for execution as they are made.

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TREND 02 : Successful companies use enterprise-scale planning solutions

Although the idea that planning assists all aspects of a business may seem like common sense, the survey data suggests that taking this assumption seriously can truly help companies come out ahead.

Executives across industries and geographies all agreed that planning benefits every single business outcome, including

  • enhancing revenues,
  • managing costs,
  • optimizing resources,
  • aligning priorities across the organization,
  • making strategies actionable,
  • anticipating market opportunities,
  • and responding to market changes.

In fact, 92 percent of businesses believe that better planning technology would provide better business outcomes for their company. Yet planning by itself is not always a panacea.

Planning does not always equal GOOD planning. What prepares a company for the future isn’t the simple act of planning. It’s the less-simple act of planning well. In business planning, band-aids aren’t solutions

What counts as good planning? As businesses know, planning is a complicated exercise,
involving multiple processes, many different people, and data from across the organization. Doing planning right, therefore, requires adopting a wide-angle view. It requires planners to be able to see past their individual functions and understand how changes in one part of the organization affect the organization as a whole.

The survey results suggest that the best way to give planners this enterprise-level perspective is to use the right technology. Companies whose technology can incorporate data from the entire enterprise are more successful. Companies whose planning technology cannot link multiple areas of the organization, or remove multiple obstacles to planning, in contrast, plan less successfully.

Here are three areas of consideration that can help you begin your Connected Planning journey.

  1. Get the right tools. Uncertainty and volatility continue to grow, and spreadsheets and point solutions lack the agility to pivot or accommodate the volumes of data needed to spot risks and opportunities. Consider tools such as cloud-based, collaborative Connected Planning platforms that use in-memory technology and execute real-time modeling with large volumes of data. Not only can teams work together but plans become more easily embraced and achievable.
  2. Operate from a single platform with reliable data. Traditionally, companies have used individual applications to plan for each business function. These solutions are usually disconnected from one another, which makes data unreliable and cross-functional collaboration nearly impossible. A shared platform that brings together plans with access to shared data reduces or altogether eliminates process inefficiencies and common errors that can lead to bad decision-making.
  3. Transform planning into a continuous, connected process. Sales, supply chain, marketing, and finance fulfill different purposes within the business, but they are inextricably linked and rely on each other for success. The ability to connect different business units through shared technology, data, and processes is at the core of a continuous and connected business planning process.

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TREND 03 The right decisions combine people, processes, and technology

As businesses examine different ways to drive faster, more effective decision-making, planning plays a critical role in meeting this goal. Ninety-nine percent of businesses say that planning is important to managing costs. According to 97 percent of all survey respondents,

  • enhancing revenues,
  • optimizing resource allocation,
  • and converting strategies into actions

are all business objectives for which planning is extremely crucial. Eighty-two percent of executives consider planning to be “critically important” for enhancing revenues.

For planning to be successful across an organization, it need to extend beyond one or two siloed business units. The survey makes this clear: 96 percent of businesses state that
planning is important for aligning priorities across the organization. Yet even though companies recognize planning as a critical business activity, major inefficiencies exist: 97 percent of respondents say that their planning can be improved.

The more planners, the merrier the planning

When describing what they could improve in their planning, four components were all named essential by a majority of respondents.

  • Having the right processes
  • Involving the right people
  • Having the right data
  • Having the right technology

To support strong and effective change management initiatives, successful businesses can build a Center of Excellence (COE). A COE is an internal knowledge-sharing community that brings domain expertise in creating, maturing, and sustaining high-performing business disciplines. It is comprised of an in-house team of subject matter experts who train and share best practices throughout the organization.

By designing a Center of Excellence framework, businesses can get more control over their planning processes with quality, speed, and value, especially as they continue to expand Connected Planning technology into more complex use cases across the company.

Here are six primary benefits that a COE can provide:

  1. Maintaining quality and control of the planning platform as use case expands.
  2. Establishing consistency to ensure reliability within best practices and business data.
  3. Fostering a knowledge-sharing environment to cultivate and develop internal expertise.
  4. Enabling up- and downstream visibility within a single, shared tool.
  5. Driving efficiency in developing, releasing, and maintaining planning models.
  6. Upholding centralized governance and communicating progress, updates, and value to executive sponsors.

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TREND 04 Advanced analytics yield the insights for competitive advantage

Disruption is no longer disruptive for businesses—it’s an expectation. Wide-spread globalization, fluid economies, emerging technologies, and fluctuating consumer demands make unexpected events and evolving business models the normal course of business today.

This emphasizes the critical need for a more proactive, agile, and responsive state of planning. As the data shows, companies that have implemented a more nimble approach to planning are more successful.

Planners don’t have to look far to find better insights. Companies who plan monthly or more are more likely to quickly incorporate new market data into their plans—updating forecasts and plans, assessing the impacts of changes, and keeping an altogether closer eye on ongoing business performance and targets.

However, not all companies are able to plan so continuously: Almost half of respondents indicate that it takes them weeks or longer to update plans with market changes. For businesses that operate in rapidly changing and competitive markets, this lag in planning can be a significant disadvantage.

Advancements in technology can alleviate this challenge. Ninety-two percent of businesses state that improved planning technology would provide better business outcomes for their company. The C-Suite, in particular, is even more optimistic about the adoption of improved technology: More than half of executives say that adopting better planning technology would result in “dramatically better” business performance.

Planning goes digital

Rather than planners hunting for data that simply validates a gut-feeling approach to planning, the survey results indicate that data now sits behind the wheel—informing, developing, improving, and measuring plans.

Organizations, as well as a majority of executives, describe digital transformation as a top priority. Over half of all organizations and 61 percent of executives say that digital transformation amplifies the importance of planning. As businesses move into the future, the increasing use of advanced analytics, which includes predictive analytics and spans to machine learning and artificial intelligence, will determine which businesses come out ahead.

Roadblocks to data-driven planning

Increasing uncertainty and market volatility make it imperative that businesses operate with agile planning that can be adjusted quickly and effectively. However, as planning response times inch closer to real time, nearly a third of organizations continue to cite two main roadblocks to implementing a more data-driven approach:

  • inaccurate planning data and
  • insufficient technology

Inaccurate data plagues businesses in all industries. Sixty-three percent of organizations that use departmental or point solutions, for example, and 59 percent of businesses that use on-premises solutions identify “having the right data” as a key area for improvement in planning. The use of point solutions, in particular, can keep data siloed. When data is stored in disparate technology across the organization, planners end up spending more time consolidating systems and information, which can compromise data integrity.

It’s perhaps these reasons that lead 46 percent of the organizations using point and on-premises solutions to say that better technologies are necessary to accommodate current market conditions. In addition, 43 percent of executives say that a move to cloud-based technology would benefit existing planning.

In both cases, data-driven planning remains difficult, as businesses not employing cloud-based, enterprise technology struggle with poor data accuracy. By moving to cloud-based technology, businesses can automate and streamline tedious processes, which

  • reduces human error,
  • improves productivity,
  • and provides stakeholders with increased visibility into performance.

State-of-planning research reveals that organizations identify multiple business planning
obstacles as equally problematic, indicating a need for increased analytics in solutions that can eliminate multiple challenges at once. Nearly half of all respondents shared a high desire for a collaborative platform that can be used by all functions and departments.

Highly analytical capabilities in planning solutions further support the evolving needs of
today’s businesses. In sales forecasting, machine learning methodologies can quickly analyze past pipeline data to make accurate forecast recommendations. When working in financial planning, machine learning can help businesses analyze weather, social media, and historical sales data to quickly discern their impact on sales.

Here are some additional benefits that machine learning methodologies in a collaborative planning platform can offer businesses:

  1. Manage change to existing plans and respond to periods of uncertainty with accurate demand forecasting and demand sensing
  2. Develop enlightened operations, real-time forecasting, and smart sourcing and resourcing plans
  3. Operations that maintain higher productivity and more control with lower maintenance costs
  4. Targeted customer experience programs that increase loyalty and improve customer engagement
  5. Products and services that are offered at the right price with effective trade promotions, resulting in higher conversions

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Click here to access Anaplan’s detailed White Paper

Technology Driven Value Generation in Insurance

The evolution of financial technology (FinTech) is reshaping the broader financial services industry. Technology is now disrupting the traditionally more conservative insurance industry, as the rise of InsurTech revolutionises how we think about insurance distribution.

Moreover, insurance companies are improving their operating models, upgrading their propositions, and developing innovative new products to reshape the insurance industry as a whole.

Five key technologies are driving the change today:

  1. Cloud computing
  2. The Internet of Things (including telematics)
  3. Big data
  4. Artificial intelligence
  5. Blockchain

This report examines these technologies’ potential to create value in the insurance industry. It also examines how technology providers could create new income streams and take advantage of economies of scale by offering their technological backbones to participants in the insurance industry and beyond.

Cloud computing refers to storing, managing, and processing data via a network of remote servers, instead of locally on a server or personal computer. Key enablers of cloud computing include the availability of high-capacity networks and service-oriented architecture. The three core characteristics of a cloud service are:

  • Virtualisation: The service is based on hardware that has been virtualised
  • Scalability: The service can scale on demand, with additional capacity brought online within minutes
  • Demand-driven: The client pays for the services as and when they are needed

cloud

Telematics is the most common form of the broader Internet of Things (IoT). The IoT refers to the combination of physical devices, vehicles, buildings and other items embedded with electronics, software, sensors, actuators, and network connectivity that enable these physical objects to collect and exchange data.

The IoT has evolved from the convergence of

  • wireless technologies,
  • micro-electromechanical systems,
  • and the Internet.

This convergence has helped remove the walls between operational technology and information technology, allowing unstructured, machine-generated data to be analysed for insights that will drive improvements.

IoT

Big data refers to data sets that are so large or complex that traditional data processing application software is insufficient to deal with them. A definition refers to the “five V” key challenges for big data in insurance:

  • Volume: As sensors cost less, the amount of information gathered will soon be measured
    in exabytes
  • Velocity: The speed at which data is collected, analysed, and presented to users
  • Variety: Data can take many forms, such as structured, unstructured, text or multimedia. It can come from internal and external systems and sources, including a variety
    of devices
  • Value: Information provided by data about aspects of the insurance business, such as customers and risks
  • Veracity: Insurance companies ensure the accuracy of their plethora of data

Modern analytical methods are required to process these sets of information. The term “big data has evolved to describe the quantity of information analysed to create better outcomes, business improvements, and opportunities that leverage all available data. As a result, big data is not limited to the challenges thrown up by the five Vs. Today there are two key aspects to big data:

  1. Data: This is more-widely available than ever because of the use of apps, social media, and the Internet of Things
  2. Analytics: Advanced analytic tools mean there are fewer restrictions to working with big data

BigData

The understanding of Artificial Intelligence AI has evolved over time. In the beginning, AI was perceived as machines mimicking the cognitive functions that humans associate with other human minds, such as learning and problem solving. Today, we rather refer to the ability of machines to mimic human activity in a broad range of circumstances. In a nutshell, artificial intelligence is the broader concept of machines being able to carry out tasks in a way that we would consider smart or human.

Therefore, AI combines the reasoning already provided by big data capabilities such as machine learning with two additional capabilities:

  1. Imitation of human cognitive functions beyond simple reasoning, such as natural language processing and emotion sensing
  2. Orchestration of these cognitive components with data and reasoning

A third layer is pre-packaging generic orchestration capabilities for specific applications. The most prominent such application today are bots. At a minimum, bots orchestrate natural language processing, linguistic technology, and machine learning to create systems which mimic interactions with human beings in certain domains. This is done in such a way that the customer does not realise that the counterpart is not human.

Blockchain is a distributed ledger technology used to store static records and dynamic transaction data distributed across a network of synchronised, replicated databases. It establishes trust between parties without the use of a central intermediary, removing frictional costs and inefficiency.

From a technical perspective, blockchain is a distributed database that maintains a continuously growing list of ordered records called blocks. Each block contains a timestamp and a link to a previous block. Blockchains have been designed to make it inherently difficult to modify their data: Once recorded, the data in a block cannot be altered retroactively. In addition to recording transactions, blockchains can also contain a coded set of instructions that will self-execute under a pre-specified set of conditions. These automated workflows, known as smart contracts, create trust between a set of parties, as they rely on pre-agreed data sources and and require not third-party to execute them.

Blockchain technology in its purest form has four key characteristics:

  1. Decentralisation: No single individual participant can control the ledger. The ledger
    lives on all computers in the network
  2. Transparency: Information can be viewed by all participants on the network, not just
    those involved in the transaction
  3. Immutability: Modifying a past record would require simultaneously modifying every
    other block in the chain, making the ledger virtually incorruptible
  4. Singularity: The blockchain provides a single version of a state of affairs, which is
    updated simultaneously across the network

Blockchain

Oliver Wyman, ZhongAn Insurance and ZhongAn Technology – a wholly owned subsidiary of ZhongAn insurance and China’s first online-only insurer – are jointly publishing this report to analyse the insurance technology market and answer the following questions:

  • Which technologies are shaping the future of the insurance industry? (Chapter 2)
  • What are the applications of these technologies in the insurance industry? (Chapter 3)
  • What is the potential value these applications could generate? (Chapter 3)
  • How can an insurer with strong technology capabilities monetise its technologies?
    (Chapter 4)
  • Who is benefiting from the value generated by these applications? (Chapter 5)

 

Click here to access Oliver Wyman’s detailed report

The Digital Business Imperative

Don’t Build A Digital Strategy; Digitize Your Business Strategy

Digital fundamentally changes your relationship with your customers. You can’t address this change with a bolt-on digital strategy that adds an app here or a site there. To remain competitive, you must re-engineer how your business creates value for your customers in the digital age.

Digital Has Changed Your Markets
Your customers aren’t who they used to be — they haven’t been for quite some time now. Digital touchpoints permeate every aspect of your customers’ lives — how they watch TV on Netflix, how they research new products on their smartphone, how they check their balance on PayPal, or how they review their stay on Airbnb. Business buyers expect automated service, tap communities for insights, and want services with apps attached; they’re even more digital than consumers are. Digital has transformed the market context for every business, and the pace of change is accelerating.

Digital Has Changed The Way That You Operate
Digital has transformed more than your channels and customers. It also disrupts you from within, changing the way that you do business. Digital not only accelerates the pace of change but also brings new opportunities for firms that can embrace the technology fast enough. It speeds time-to-market, reduces costs, and unlocks new revenue streams. There’s a reason why manufacturers ABB, Schneider Electric, and Siemens spent a combined €8 billion on acquiring software assets to help clients design, manage, and optimize complex industrial operations like power grids more effectively.

Use Digital To Help Customers Get To The Outcomes That They Desire

Re-envision your business not as a set of products and services but as part of the personal value ecosystems that your customers assemble according to their needs and desires. Learn to increase value by expanding your company’s role in your customers’ personal value ecosystems.

Digital Operational Excellence Increases Business Agility

Digital business isn’t just about customer experience — it’s also a way to drive operational agility. Digital operations can increase speed-to-market, make employees more productive, promote leaner processes, and maximize asset utilization.

Digital Dimensions

 

Click here to access Forresters’ detailed study