Elements of a Successful Core System Business Case
Better metrics and a strategic outlook can make your business cases more likely to be approved.
Insurance Networking News, 08/01/2010
During my time as a consultant and in recent years working with a number of insurers, I've had the opportunity to build and review more business cases than most for new core insurance systems and then observe their benefits in action. Unfortunately, I've often found a disconnect between the information used to justify the project and the actual benefits achieved. Why does this happen so frequently?
The best business cases start with a strategic vision, such as: Our vision is a solution built on SOA that supports our client-centric service philosophy and our strategic business direction. It may go on to include such key success factors as: securing new market opportunities, combating competitive threats, streamlining operations to better serve customers, sustaining underwriting profitability, and supporting continuous innovation and process improvement.
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So far, so good-the goal and the success factors are in perfect alignment. How will these inspiring goals be achieved? With anticipation, we turn the page... only to find that the entire business case is built on small incremental improvements with mere minutes saved for manual workarounds, new quotes, and renewals. Will these saved minutes really add up to the millions of dollars required to justify the project?
Most business cases fail to live up to their promise. Often the target audience is unclear, the benefits are incomplete, or there's a lack of data.
The case needs to address the differing interests of a broad audience-CEO, CFO and various business leads. Both tangible benefits, such as time and money saved, and strategic benefits, such as process flexibility or improved customer service should be included-or the case risks being incomplete, or irrelevant. It also needs to contend with the fact that the more deficient the legacy system, the less likely the existence of data needed to justify its replacement. The lack of quality data must be integral to the business case-but that's easier said than done.
Goals
Knowing how to overcome these challenges requires reexamining why we create business cases at all. If the objective is solely to get the check signed, then maybe it's just a mathematical exercise. But the broad audience and strategic nature of a core system project suggest our sights should be set higher.
We should attempt to inspire project stakeholders-the project team, business owners, investors, partners, employees-by enumerating measurable and achievable goals. We want to build consensus and get buy-in from a key decision makers. By using key performance indicators and projected benefits, the aim is to convince business leads to take ownership of the project. And we should set out criteria for project verification.
With these goals in mind, here are some suggestions for making business cases more inspirational, more likely to be approved, and more easily validated:
Attach benefits to strategy. Do you expect to reduce first contact time? Instead of classifying that benefit into an abstract category like efficiency, tie it to the project benefit of reducing overall cycle times. Cycle time reductions could support departmental objectives of reducing loss severity and increasing claim-related customer retention-impacting corporate strategic imperatives of financial performance, superior customer service, and market share growth.
With this approach, benefits have strategic importance and rouse inspiration. You show senior leadership that the project is conscious of the company's strategic direction, making approval more likely and reducing the chance that benefits will be discounted during decision-making.
Include financial and non-financial benefits. Core system replacement projects provide long-lasting benefits-some financial, some not. The traditional approach of categorizing benefits requires significant mathematical contortion to monetize their impact. For example, reduced claim cycle times could translate to reduced head count, which may be logical, but less compelling and more likely to be disregarded by a skeptical executive. In addition to financial savings, include important non-financial benefits: frequency/accuracy of closed file audits, claim reopen rates, etc. Finance can still choose to only count tangible savings, but your CEO will appreciate the broader reaching goal.
Include current and future metrics. Modern core systems provide dramatic improvement in data quality, granularity, and visibility. Limiting the business case to current metrics will likely leave out the highest impact benefits. What is the relationship between time to first contact and loss amount? What percentage of litigation is avoidable? Besides subjective surveys, is there another way to measure customer experience? These are questions modern core systems can help answer. Be sure to include future metrics in your business case to inspire readers and guide your solution design. INN
