Consultants' Corner

Poised for Recovery: a Powerful Preparation

Dave Edwards
Insurance Experts' Forum, July 13, 2011

Fifty-six years ago, Edmund Hillary and Tenzing Norgay commanded the attention, imagination, and respect of the world when they were the first to step on the summit of Mt. Everest—a feat since duplicated by about 1,400 others. That initial success was certainly the result of meticulous planning, effective decision-making, and focus on the ultimate destination. Today, a strong case can be made that those same success characteristics now need to be exercised, with significant numbers of economists offering evidence that our economy is in the process of taking recovery steps. A long and likely arduous climb is just ahead, and while there is no mistaking its difficulty, forward-thinking leadership recognizes this challenge as a watershed opportunity for improvements that produce expense savings and position the organization for rapid, cost-effective growth.

Traditional improvement efforts are often defined and limited by the needs of a particular function within the organization. As a result, the approach and techniques brought to bear in a given initiative may be completely inappropriate for other opportunities. At this critical moment in the economic cycle, management needs a cost-effective improvement solution that can be used across the company, that is consistent with the sense of urgency the current environment requires, and that maintains the fiscal discipline demanded by operational budgets offering little flexibility.

There is one improvement approach that meets all of these requirements and more: Value Analysis. 'VA' is a powerful tool that, when applied properly, delivers significant savings and, just as important, can fundamentally reshape a function, unit, or division—producing a lean, fit, customer-centric, and properly-equipped (but not overly-equipped) organization. Here is a quick tour of the elements that make this approach so successful:

* It’s customer-focused. It begins with a clear understanding of the market needs being fulfilled by the enterprise.

* It’s inclusive. The workshop-based team includes functional subject-matter experts, customers (either internal or external), and other upstream and downstream stakeholders. Thoughtful team composition helps ensure that the creative power of a wide, diverse group of participants is brought to bear on the improvement effort.

* It’s flexible. The scope of the team’s efforts can be as broad and deep as needed, addressing a specific organizational unit, a cross-functional process, or inter-relationships with external business partners (be they customers, agencies, hospitals, physicians, or regulatory bodies). Nearly any function can benefit from Value Analysis—marketing, sales, operations, systems, medical management, contracting, compliance, or network management.

* It’s disciplined. Discussions surrounding the 'essential purpose' of the workshop subject (the distinct reason that the subject exists) and the 'primary and supporting functions' that result in the execution of the essential purpose are expressed in a simple noun-verb format (for example, the Essential Purpose of Hillary’s Climb = Reach Summit). This precision, combined with a customer-based statement about the importance and reliability of the functions performed and a functional cost summary, provides a common language for workshop members and a quantified understanding of the current service/product delivery model.

* It’s swift. Typical VA workshops are completed in six to eight weeks, with members meeting two or three times each week.

* It’s rigorous. Although quick-paced, workshops are structured to ensure that all elements of the functional subject are effectively scrutinized. Depending upon the importance, reliability, and cost of a particular element of a process or function, workshop members question whether it can be eliminated, transferred, automated, executed with fewer resources, or retained but improved.

* It’s measurable. Creative alternatives are quantitatively assessed against pre-determined evaluation criteria.

* It offers near-term implementation orientation. Although long-term changes are not precluded by VA, the vast majority of approved improvements are typically implemented in fewer than 180 days and, in some cases, nearly immediately.

* Benefits are sustained. Those directly affected by the workshop’s recommended changes are the authors of the change, with benefits validated by customers and rigorous financial impact analyses.

Just like the planning effort that Hillary and Norgay must certainly have conducted, VA can create a truly distinctive organization—one clearly focused on universally understood objectives and equipped with the tools needed for the journey, but not burdened by accountabilities or distractions that slow progress or jeopardize success. Whether you believe the economic recovery is best described as a 'U,' a 'V,' or even a 'W,' the question is not whether an exciting climb is ahead, it is simply when and how to join in.

Good fortune on your ascent!

Dave Edwards is a senior consultant for the Robert E. Nolan Company, a management consulting firm specializing in the insurance industry.

Readers are encouraged to respond to Dave using the “Add Your Comments” box below. He can also be reached

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