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Page 1
Business Architecture – From Business Strategy to the Alignment of IT
Rich Waller
An Insurance Industry Case Study
April 15, 2009
Page 2
Overview of the enterprise
Insurer at a Glance
• 100+ years in business
• $10 billion in revenue, Net Income of $187 million, Statutory surplus of $8.5 B
• > 9,000 employees
• U.S. and international operations
• “A” rated for financial strength by A.M. Best
• Property & Casualty Operations combined ratio of 98.1%
• Leading insurer of construction businesses, accountants, lawyers, architects & engineers, and other professionals
• The company is a U.S. based Commercial Property & Casualty insurer
• The enterprise is one of the 10 largest U.S. commercial insurers
• The company provides insurance protection to more than 1 million businesses and professionals in the U.S. and internationally.
Page 3
Operations & context for an Enterprise Transformation Framework and Business Architecture
• Business strategy ( high-level):
• Continue to grow in a soft market
• Customer Service wins
• Centralized IT for Corporate and all international
• $300-350M in Annual IT Spend
• 1100 Full Time IT Employees
• ~750 Contractors
• 2 Data Centers with 500+ Applications
• CEO was an advocate of business “Transformation”, CIO is the catalyst
• Transformation and Business Architecture recently established as key capabilities needed to deliver results
Align business strategy transformational business opportunities spend on enabling technology
Initial Enterprise Objective
Page 4
Operations & context for an Enterprise Transformation Framework and Business Architecture
Responsibilities
• Establish framework that enables the enterprise to lead the marketplace in achieving financial and growth targets
• A standard approach to evaluate, design, and implement process designs across business units
• A standard performance framework that incorporates operational process scorecards for business units and functions
• Deliver $100M of Net Operating Income
• Metrics and data not readily available / common definition of metrics
• Too many initiatives• Accountability
• “I have to meet my annual numbers”
• Transparency is a threat• “We are different”• Process is not important – financials are
important• “Can’t you just build us a tool?”• Skills
Challenges
Page 5
Approach to establishing a framework
1. Determine customer needs/values and strategic operating goals2. Design operating model to support strategy3. Establish process performance metrics and objectives4. Design and implement process, system and people related changes5. Establish ownership and governance infrastructure
11 22 33 44 55Strategy Understand Our Customer’s needs/values
Enterprise Process Model
Process Performance Model/Scorecard
Operating Model & Process, System/Service, Data, and Organization Redesign
Process Ownership & Ongoing Agenda (PMO)
Order Entry AfterOrder Entry Before Order Entry AfterOrder Entry Before
Page 6
The Business View – The work we doOur Enterprise Process Model
Fee based services
Management Processes
SpecialityLines
CommercialP&C
Enabling Processes
Cu
sto
mer N
eed
s
Cu
sto
mer V
alu
e
Develop and Maintain Strategy
Manage Assets
Communicate/ Inform
Manage Business Processes
Manage Human Resources
Manage IT
Manage Facilities
Procure Goods & Services
Research Market & Gather Intelligence
Manage Legal
Manage Projects
Develop And Maintain Products & Services
Acquire And Grow The Customer
Care For The Customer
Deliver Claims And Recovery Services
Manage Project Portfolio
Manage Risks
Appoint & Assess Distributors
Provide Marketing and Communication Content
Administer Reinsurance
Un
ders
tan
d M
ark
ets
C
usto
mers
&
Dis
trib
uto
rs
Manage Budgets
Page 7
The Business View – What are the gaps and where should we invest
FIX BUILD LEAD
1 2 3 4 5 6 7 8 9 10CORE PROCESSES
Understand Markets, Customer, & Distributors
Develop And Maintain Products & Services
Acquire And Grow The Customer
Care For The Customer
Deliver Claims And Recovery Services
ENABLING PROCESSES
Manage Finance & Accounting
Manage Human Resources
Manage Information Technology
Manage Projects
Manage Legal
Audit
Procure Goods & Services
Manage Facilities
Current State vs. Future State
Page 8
The Performance View – establish enterprise wide measurement system
Electronic (EDI/XML vs.Manual (Commercial Paper) Transactions
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%Electronic Manual
010,00020,00030,00040,00050,00060,00070,00080,00090,000
100,000
Jul-00
Aug-00
Sep-00
Oct-00
Nov-00
Dec-00
Jan-01
Feb-01
Mar-01
Apr-01
May-01
Source:
Total Past Due ReceivablesMonth by Month (in thousands)
Book to Cash (Setup Account/Reserves)•Bill Premiums
• Issue Invoices• Post Premium Payments
•Manage Accounts Receivable
• Reconcile Premiums
• Research & Resolve Non-Payments
•Pay Sales Commissions•Publish Policies & Issue Certificates•Deliver Loss Control Services•Prepare Account Financial Reports
• Standard• Ad Hoc• Utilization• Reinsurance
Book to Cash (Setup Account/Reserves)•Bill Premiums
• Issue Invoices• Post Premium Payments
•Manage Accounts Receivable
• Reconcile Premiums
• Research & Resolve Non-Payments
•Pay Sales Commissions•Publish Policies & Issue Certificates•Deliver Loss Control Services•Prepare Account Financial Reports
• Standard• Ad Hoc• Utilization• Reinsurance
Care For The Customer
Care For The Customer
Policy Issuance Inventory (Commercial)
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Sep-00
Oct-00
Nov-00
Dec-00
Jan-01
Feb-01
Mar-01
Apr-01
May-01
Jun-01
Jul-01
Aug-01
Source: "
Form
s
0
1
2
3
4
5
6
7
8
9
Days o
n H
an
d
Forms Days on Hand
Commercial Incoming Calls and Abandon Rate
7,9
92
4,4
96
4,3
04
4,5
57
7,8
95
4,3
54
4,4
40
4,3
40
4,9
02
5,6
06
8,1
97
6,7
09
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
Sep-00
Oct-00
Nov-00
Dec-00
Jan-01
Feb-01
Mar-01
Apr-01
May-01
Jun-01
Jul-01
Aug-01
Source: "
Calls
0%
2%
4%
6%
8%
10%
12%
14%A
ban
don
Rate
Calls Abandon Rate
94
%
92
%
91
% 93
%
94
%
93
%
94
%
93
%
93
%
94
%
89
%
93
%
97%
84.0%
86.0%
88.0%
90.0%
92.0%
94.0%
96.0%
98.0%
Jun-00
Jul-00
Aug-00
Sep-00
Oct-00
Nov-00
Dec-00
Jan-01
Feb-01
Mar-01
Apr-01
May-01
All Forms Standard
Source: "
Combined Commercial Accuracy Rates
95%
100%
Service Retention Rate
63%
83%
50%55%60%65%70%75%80%85%90%95%
100%
Jan Feb Mar Apr May Jun Jul Aug
Page 9
Key Tools and Enablers
Financial Return Customer Satisfaction Employee Satisfaction Compliance Contribution to Community
Enabling Budget
Customers• Insured
• Distributors
• Internal
PMO Capability
Process models (current/future) and
framework maintained in enterprise repository
Operational metrics will be captured and available in our
enterprise metrics portal
Enterprise data and Organization maintained in Enterprise Repository
Functional capabilities, applications, services, and other architecture
building blocks maintained in enterprise tool/repository
Page 10
Lessons Learned & Conclusions
• Must approach build-out from top-down and bottom-up• Early success stories will produce more success• Focus on a one or a few key processes first• Those processes that touch customers have the highest impact on enterprise
performance
• Process Ownership is key• Process Ownership is not just one person but a team• Establish a dedicated team that owns the analysis and design of business
architecture changes for any one major process• Key roles include Business Architects, Business SME’s and change agents, production process
coordinators/performers
•There are no IT projects; there are only Business Projects with enabling IT components