4 April 2020
Using examples from the insurance industry, this article discusses
- which types of companies will emerge from the COVID-19 crisis in a strong position,
- the steps you can take to place your company amongst them, and
- whether it is socially responsible to do so.
In summary, the percentage of information arriving in your organisation as actionable digital data will determine whether your company emerges from the crisis in the strongest possible position and, in our view, transformation projects aimed at increasing the amount of actionable digital data in your company are OK provided the objective of the transformation is not at odds with the objective of any government subsidy your company is receiving during the crisis.
Actionable digital data is data that you can use without further interpretation to make decisions or take actions. For example, an insurance company receives actionable digital data when it receives a claim through its online portal. They do not receive actionable digital data when a claim report arrives by email and needs to be keyed into their claims management system.
Now is the time to turn as much incoming information as possible into actionable digital data but to do so in a way that doesn’t fly in the face of our obligations to our community and our workforce during the COVID-19 crisis. This article sets out how.
Part two of this series will highlight many of the software tools and services that you can use to turn incoming data into actionable digital data. If you would like your software or services mentioned in part two, leave a comment, or DM me on Twitter @hudgeon. There is no cost for this. We’re simply putting together a resource that we hope will help companies emerge from the COVID-19 crisis in strong shape.
Paths through the COVID-19 crisis
The diagram below is our take on the transition we'll see in the competitive landscape as we move through the COVID-19 crisis. The blue box on the left is all companies before the crisis. The grey rectangle in the middle shows the economic tiers that companies will stratify into during the crisis. And the green, orange and red boxes on the right show the tiers after the COVID-19 crisis is over.
The journey for most companies will be from the blue box on the left, through the Survivors category during the crisis, to the orange box after the crisis is over. But if your company is in the Survivors category there are steps you can take right now, during the crisis, to push your company up to the green box on the top right.
Three tiers during the crisis
During the crisis (grey rectangle in the middle) companies will stratify into three tiers of economic activity.
A. Thrivers: Companies that are booming during the crisis: Grocery stores, pharmacies, video conferencing software, healthcare suppliers.
B. Survivors: Companies that will experience a dampened level of economic activity during the crisis. These companies will rebound once the crisis is over and most insurance companies will fall into this category. These are the companies that should be taking the opportunity right now to digitise their businesses.
C. In-Personalisers: Companies whose business relies on in-person foot traffic such as retail stores, airlines, cruise lines, hairdressers, hotels, bars, restaurants, conference facilities etc. Many of these businesses will continue to struggle long after the crisis subsides and will require a longer period of government assistance in order to survive.
After the crisis, companies will still be stratified into three tiers but some companies will move up one tier or down one tier.
Three tiers after the crisis
Companies emerging from the COVID-19 crisis will be in one of three economic activity tiers.
1. Mostly digital: This tier will include businesses that are able to operate in a digital world and the software companies that enable them to do so. These businesses are either booming now (such as video-conferencing companies and 3D printing) or will boom once the world's economy starts to crank up. These companies are essentially de-linked from the performance of the global economy as a whole.
2. Mostly analogue: Most companies will be on this tier. It includes mining, manufacturing, energy, business services etc. These are the companies that have not digitised their businesses and operate largely as they did before the COVID-19 crisis. Their growth will be linked to the growth of the economy as a whole. If it takes the global economy two years to return to normal, the mostly analogue companies will take two years to return to normal revenue levels.
3. Mostly dead: These companies will suffer for far longer than it takes the global economy to rebound. Companies in this tier include cruise lines, in-person event companies and many airlines. Even once air travel is possible a lot of companies will choose to continue to use videoconferencing for certain types of meetings rather than fly executives around the world. And it's hard to see the cruise industry rebounding quickly even with the inevitable steep price reductions we'll see on cruise ticket prices.
The companies that move down a tier will be Thrivers who are thriving during the crisis because of increased demand during the crisis. Take grocery stores for example. They are booming during the crisis as people stockpile food and other necessities but they will return to normal levels of economic activity once the crisis is over.
Companies that move up a tier after the crisis is over will be those companies who have digitized their processes during the crisis.
The key difference between companies who will be in the top tier after the crisis and those in the middle tier will be the percentage of actionable digital data to non-digital data in their systems and processes.
What does it mean to digitise your processes?
We’ve all heard a lot about digital transformation but understanding what that is for your business can be quite complex. During the crisis, we recommend you focus on one aspect of it: the data that is coming into your organization.
We recommend this focus because:
- It advances any digital transformation program. You can’t transform your business without turning as much incoming information as possible into actionable digital data.
- Whilst every business has different internal information flows, the variety of inbound digital information is small and the approach you should take to tackle it is often obvious. For example, most businesses receive information via email that needs to be entered into their core systems such as your finance system (invoices, payments etc) or other systems specific to your industry (such as claims, policy and underwriting systems in the insurance industry). If you have an online portal, the obvious approach is to push as much incoming traffic through your portal as possible. If you don’t have a portal or can’t move incoming information to that portal, you can adopt a system that extracts information from emails and attachments into an actionable format.
- Information that can't be immediately acted upon creates an unnecessary cognitive burden on your employees. The palpable relief of an underwriter who no longer has to manually key in quotes is great to see.
- These projects can be fast to get off the ground, quick to complete and easy to measure i.e. What percentage of incoming data did you turn into actionable data as a result of the project?
What does the Mostly Digital tier look like?
Many of the Thrivers (A) will stay in the top tier after the crisis is over. These include 3D printing companies and some medical supply companies such as testing providers. Many video conferencing companies such as Zoom and Slack will retain some of their current gains but we don't know how much. For these Thrivers, staying in the top tier is easy. Other Thrivers such as grocery stores and pharmacies will return to the Old economy levels of economic activity.
If you're an In-personaliser (C), you've got a hard road to get to the top tier. The best most can hope for is to return to some semblance of their previous level of economic activity (Although, like Westley from the Princess Bride, some will quickly rebound from being "mostly dead").
But if you are a Survivor (B) you can get to the top tier. The trajectory shown by the thick green line from the Survivors rectangle to the Mostly Digital box is the most interesting trajectory. The vast majority of companies fall into the Survivors category and how those companies can get to the top tier occupies a lot of our day-to-day thinking and work.
To see how these companies can reach the top tier, let’s look at the insurance industry.
Incoming actionable digital data in the insurance industry
Lemonade is a good example of a company that is likely to be in the top tier at the end of the COVID-19 crisis. Even after the crisis there will still be homeowners and renters and Lemonade’s product (home and renter insurance) will still be required. Customers already interact with them completely online so the company doesn't need to change any of their processes to interact efficiently with their customers and make the best use of the digital data they provide. Their actionable digital data percentage is close to 100%.
One example of actionable digital data is their claims reporting process. Instead of filling out a form, Lemonade policy holders make their claim by videoing themselves as they describe the events leading up to the loss. This is not only fast for the claimant, it also provides a vast amount of rich data to determine whether the claim is valid or not. It is a lot easier to lie on a form than it is to lie whilst looking at yourself in a video feed.
Contrast this with an insurer that has been in operation for decades. Lots of the information that comes into their organisation will do so via unstructured channels such as email. This information is currently turned into actionable data by someone in the insurer manually entering the information into their policy or claims systems. These insurers may only have 30% actionable digital data.
To be in the top tier, insurers must automatically ingest as much information as possible into actionable data. Doing so will put them in a position to come out of the starting gates quickly once the COVID-19 crisis is over and the global economy begins to pick up.
Is it socially responsible to digitally transform your company during the COVID-19 crisis?
The lens we’re viewing this question from is an insurance company that, during the crisis, is receiving government subsidies to help them weather the downturn,
There are two competing principles at play in answering whether it is socially responsible to digitally transform your company during the crisis.
On the one hand, we don’t think it’s right for companies receiving government subsidies during the crisis to actively take steps to make it so they don’t have to rehire in-country employees once the crisis is over. But, on the other hand, we also think that automation is inevitable and that it is not beneficial to hobble our country’s competitiveness by denying companies the ability to improve their operations.
We are of the view that projects directed at turning all incoming information into actionable digital data are socially responsible during the crisis because these types of projects are more about increasing the capability of your company rather than reducing your headcount. In many cases, these projects allow your employees to focus on more value-added work such as building relationships with customers and partners rather than mundane data interpretation tasks.
We are also of the view that you have different social obligations to your onshore staff than you do to your outsourced offshore staff. The obligation to not actively pursue headcount-reduction projects whilst your company is receiving government subsidies only applies to your in-country staff. Automating, or repatriating work from outsourced offshore centres to an in-country team, is fair game during the crisis.
In the insurance sector the types of projects that are OK to pursue are those that ensure claims, quotes and payments (remittances) end up in your systems ready to act on.
For claims, that means the claims are in your claims assessment system regardless of whether the claim was made through your portal, reported by email or has come through your call centre.
- For requests for premium quotes, it means when a broker uses your portal or sends you an email requesting a quote that the data ends up in your premium rating tool automatically.
- For payments, it means that money received in your bank account is automatically matched against remittances and line items on the remittance are automatically put against the unpaid items in your policy systems.
- Doing this will allow your organisation to be much more nimble and competitive once the crisis is over and you will be more capable of taking advantage of new opportunities that arise. It does not necessarily mean that you will have fewer in-country employees on your books.
Thanks for reading this far. Stay safe and keep others safe. We’ll return in a few days with a list of different types of software and services you can use to turn incoming information into actionable data.