3 Tips to Keep Your Strategic Systems Implementation From Becoming a Black Swan

3 Tips to Keep Your Strategic Systems Implementation From Becoming a Black Swan




17% of systems projects become ‘Black Swans’, several studies show, where budgets overruns can reach 200+% and delivery times are 160+% of original estimates. Google ‘Policy Administration and Claims system implementations success rates’ and the results more than tell the real story. After you scroll down the self-serving ‘studies’ and gushing customer write-ups supplied by consulting companies and vendors, real-world insights into this failure rate, and more importantly, how to avoid it, runs thinner than cheap wine. Why?

Let’s first size the issues. In P&C, Celent (an analyst firm) estimates 120 new Policy Administration implementations in 2013 and another 128 kicking off in 2014. With an average price tag of $3M, per Tier 2-5 carrier per project, that’s $360M+ in total use per year, plus the $100M+ a Tier 1 can use. Claims implementations are not much different and are often part of a larger transformation initiative since speed and ease of issuing the policy, and grief-free claims processing, both affect customer satisfaction, especially in Social Media where Millennials trust User Generated Experiences (UGE’s) more than brand promises, and nothing screams UGE like a claim.

In the P&C vertical, an often cited system implementation success rate is +/- 30% (we call it the ‘golden 30%’), and of that, about half fulfill their complete, initial set of goals used to justify the initiative in the first place. Putting some money behind the stats, over $250M is either wasted, or at best, marginally well spent. Include Claims systems projects achieving less than planned results and the waste could already shock Washington.

Can this be avoided? instead of create another list of what can go wrong (the correct answer is “everything”), what follows is some food for thought based on our experiences with major systems projects, including Mobile/Digital Payments, BI, ERP, Claims and Policy Administration, in addition as operational improvements initiatives.

during researching this posting to make sure I’m giving you sound advice instead of already stated truisms, I’ve read some ‘real insights’:

  • Pick the right vendor (sounds reasonable to me)
  • Make sure the consultants/implementors are experienced and competent (also sounds reasonable since the last time we hired incompetents it didn’t end up so well)
  • Make sure to use a strong PMO (since over 50% of PMOs are closed due to failure in their first years, that’s not encouraging. Should we add ‘PMO success’ as a possible risk for them to self-track?)
  • Stress interdepartmental cooperation and communication (when was the last time something was imposed on you and you blindly followed without saluting?)

And on and on…

To help bring some day-to-day insights into the conversation, here’s my contribution:

1 – Senior Management needs a realistic understanding of the current state of their IT organization

Most IT organizations have been gutted by either offshoring, which robs IT of its motivation or best talent (who leave for more committed companies), or by staff reductions. In the former case, most in-thoroughness architecture and code knowledge is in the hands of non-employees, 12 time zones away. Remaining staff spends 90% of their time managing this offshore resource, not supplying technical competency. Cost controls and position reports/emails replace technical thinking. Project Management becomes a series of late night and early morning position calls, followed by Issues Logs and position reports. Nothing much gets done except for an abundance of reporting. IT’s SOP becomes CYA, and I truly heard a CIO tell a Global conference call based project review “I’m done being pressured into BS dates I know we can’t unprotected to, here’s the real situation”. We were all relieved by the candor and reset our expectations consequently.

For those companies choosing packaged software (almost all Tier 2-5’s and, now, some Tier 1 carriers in addition), IT nevertheless plays a vital role in a PAS or Claims package implementation by supplying thorough institutional knowledge of interfaces, externally facing portals, data models, data warehouses, related BI tools, etc. A&H carriers, for example, have extremely complicate HIPAA pushed rules on Protected Health Information, spanning patient identification, health position, payments and, adding complexity, who can view a claim and under what circumstances. Our experience is for these complicate rules to be hard-coded into existing applications, making rule extraction for set-up in a packaged application’s external rules engine extremely difficult and time-consuming, and requiring important IT resources. In addition, IT will have current operations and configuration/change responsibilities, and so complete knowledge move is necessary.

In our experience, using a hybrid form, run by the Business, staffed by IT with a consulting company or the vendor supplying just a few SMEs performing heavy-lifting during the early project stages, results in both a substantial implementation and current internal sustain capabilities.

2 – Understand what the Business needs and then take the build vs. buy decision. Verify any vendor’s claim ‘we have optimized processes’ – it’s optimized for them, not necessarily for you.

Many industry analysts and whitepaper writers take part in ‘pay for play’ deals with the packaged software vendors, whereby a vendor pays a pretty substantial amount for the analyst firm to come over and review the package, check some references, express a point of view, etc. They then resell this paid-for information as many times as they can, in addition as incenting the listed vendors to buy self-promoting reprints. Many large consulting firms, onshore and offshore, build business units with hundreds of billable resources dedicated to a particular vendor, and may receive a finder’s fee, in addition. If using an outside consulting firm, make sure the Business Analysts are highly experienced and senior, catching nuances and differentiators, and are not high-margin template completers. Particularly in the Tier 2-5 insurer space, it is not uncommon for a consulting company or a vendor’s specialized sets group, to sell with the A-Team, staff with the C-Team and then back-fill some B-players when you complain. These parties want to steer you towards what is best for them, and what is hopefully, OK for you.

As Ronald Reagan said to Gorbachev, “trust but verify”.

Most evaluation templates are an exhaustive list of features, with some weighing, but these lists tend to be too high level, not capturing the time of action nuances describing your uniqueness. We highly recommend mapping your 3-5 year Business-Side Strategic Plan to a set of end to end business processes, timing and data flows, and then origin your requirements. Executing on the new course of action designs, either during set up or before (and not after) will produce the best operating ROI.

Building in-house can take several forms, but all should use the above mentioned business Business-side strategic plan based requirements. We have seen an approach, particularly in Tier 2 and 3 companies, to leverage an incumbent vendor’s strong but dated package’s data form as the basis for future development, but the meaningful is not just the data form, it’s empowering agility. Wrapping legacy applications or adding new features to existing applications platforms, will most likely not produce results sufficient to justify the effort, and more importantly, it will most likely not justify the elapsed time. If your goal is extreme flexibility to 1 – take business off the street quickly, and/or 2 – respond quickly to market opening and opportunities, and/or 3 – adapt and respond to a new regulatory ecosystem, then a new architecture is most likely required and the Business-side has to estimate the cost of time as much as the hypothesizedv budget as it is not uncommon for strategic IT projects to come in 2-3X over budget and 1.5-2X late, based on our experiences (that nasty Black Swan position again). As with a ‘buy’ decision, any internal enhancement or re-write initiative has to mirror the Business-side strategic plan, otherwise, Management will have to plan based on how their processes and systems can deliver, which is backwards.

If a customer renews their policy 2X, they’re considered long-term (the most profitable category, clearly), but for most insureds, commercial or consumer, remaining a long-term customer is directly a consequence of how their claim is handled, and not their experience during the sales cycle with your friendly portal, app, agent or call center. In this day of social media and broadcast media on speed, terrible experiences are transmitted globally in seconds. For example, in NYC, after Sandy, there was a series of stories and Tweets, with business owners on camera, complaining about specific carriers of Business Interruption coverage disallowing claims since Con Ed, not the insured, suffered water damage. Others complained about too long FNOL to settlement times. consequently, for Claims implementations and transformations, we highly recommend focusing equally on achieving the lowest possible processing costs with the end to end customer experience. No portal or Mobile app can compensate for a connected consumer feeling they were mistreated due to (unbeknownst to them) systems inflexibility not allowing appropriate responses to uncommon events. Your technology direction will directly affect your ability to optimize the User Experience.

Optimizing the business processes is particularly advantageous in building a communications bridge and rapport between IT and the complete group of Business stakeholders, chiefly to ensure there’s a shared set of definitions and terms. At project’s end, having been able to optimize processes to the Business’ strategic plans, break silos and align end-to-end flows to maximize the long-term relationship experience is the acid test of having chosen the correct vendor or approach.

3 – Turn your PMO into a Line function, plan for flexibility and delivery, not reporting

Many PMOs see the world as their being a sort of middleman, bridging the gaps between the Business and IT, focusing on reporting, scheduling meetings and issuing meeting minutes. This form of PMO is not sufficiently empowered to run a program this complicate.

Given the length of a meaningful IT program, a fixed 1000+ task plan in MS-Project is too inflexible to deal with the myriad of decisions and new unknowns occurring on a daily basis. While you need the end-goal and meaningful dates since many meaningful IT areas are firmly pre-booked for work (ex: testing, release schedules), planning should be focused into rolling 30 and 60 day detailed plans, with dovetailing into meaningful gate dates in the future.

If possible, we would upgrade the PMO to the same position as a General Contractor, responsible for the overall budget (and not just position reporting) and paying for results as described in the 30 and 90 day plans. This also gives Senior Management ‘1 throat to choke’.

OK, here’s the shameless plug, but at the minimum I’m blatant about it. We strongly suggest you have a senior Business-Side program manager additional to the program daily leadership team, in addition to the vendor and IT project managers. In addition to having real-time Business input into the hundreds of small decisions cumulatively affecting the end-product, this approach also ensures Senior Management has a true picture of program position, avoiding frustrations and comments, such as our having heard a very senior manager telling a room complete of vendor, IT and business stakeholders “I no longer trust a single thing that woman tells me” (she was the IT-PMO leader who marginalized a ineffective Business-side similar PMO). This joint project management approach helps everyone since, in the 70% of situations where these projects are either shut down or heavily restructured, Senior Management’s loss of faith is the reoccurring triggering cause.

In recent studies, more than half of all business success today is based on nimble product/market fit, recommendations, and posted customer experiences, and not advertising or features, deals or sales reps. Modern systems are crucial in staying and growing a business in this connected, faster paced ecosystem. Your new strategic projects and initiatives, including course of action improvements, have to sustain this new form. If it doesn’t, don’t be surprised if the Business-side forces the initiative into the failing 70% and Black Swans are not pretty to anybody.




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