Group Insurance Speed to Market: The Importance of Early IT Involvement
From widget makers to big box retailers, companies require speed to market to get their products to the market quickly and efficiently, to beat the competition and to get a head start on marketing efforts. One of the primary benefits of speed to market is early promotion to establish first-mover advantage, a term coined by renowned business scholar and author Michael Porter, where strong brand recognition and customer loyalty is established before competitors enter the arena. First-mover advantage also provides a head start on improving new products or services and setting their market price.
Speed to market is the key force behind first-mover advantage, and a compelling business need that companies consider a top priority and worthy of significant resources. This is especially true for group insurance companies, who according to a recent Novarica survey, trail the individual life and annuity business by approximately two months.i In a tight economy, insurers need to develop and rush new products to market sooner than ever; an extra 30 or 60 days of robust revenues before imitations flood the market can be the difference between profitability and stagnation. A rapid pace of fresh and innovative products also quickly attracts customers, and leads to greater market recognition and perceived value, especially in the commoditized markets of today’s group insurance industry.
Although we had touched on speed to market in our earlier Group Insurance Series (see “Group Insurance Obstacles: Speed to Market Disruption (and How to Avoid It)”), we felt that as such an important topic for group insurers, it deserved its own series, where we’ll examine the subject more in depth. This week, we cover how the early involvement of IT in the product development process can expedite speed to market for increased market share and ultimate competitive advantage in group insurance’s commoditized markets.
IT: Providing The Speed to Market Advantage
Achieving speed to market doesn’t exist in a vacuum. In the above-referenced Novarica study, it was also noted that organizations that included their IT teams earlier in the design process delivered products faster than those that waited until later stages. We’ve observed that including IT earlier helps bring perspective around how to best design a product that fits within the current, or even future ecosystem and processes. Involving IT from design to actual product deployment is especially key in the group insurance industry, which still suffers from antiquated legacy technology. A recent Deloitte Consulting LLP survey among insurers found that over 90% of respondents indicated that their current technology environment would not be sufficient to support their product development capacity in the next three to five years.ii But the good news is that many group insurers have realized the necessity of core system upgrades and have committed significant resources toward bringing their core systems up to date. And with comprehensive system upgrades come the opportunity to build a foundation for speed to market from the ground up, with modular product architecture that enables the timely development of an evolving, innovative family of market-driven products.
The Modular Product Architecture Foundation
With group insurers’ willingness to rebuild core systems, modular product architecture can serve as the new foundation, where particular functions (or individual operations) necessary to achieve the overall product purpose are identified. Standard assemblies are then developed to undertake these individual operations. Subsequently, the assemblies or “modules” are brought together to form the complete product, which can then perform its complete function.iii As a result, product developers can develop new marketing products in a shorter period, via module re-use and rebundling. Similar to automobile manufacturing, with modular product architecture, insurers can leverage a common chassis and sets of building blocks to create tailored products efficiently.iv This means that new market products can be created quickly by reusing or modifying any of the components, resulting in an increased development speed and streamlined product portfolio that can be brought to market quickly.
Enhanced product innovation is also important to group insurers. A recent report by Eastbridge Consulting Group also noted that among insurance executives, 29% considered product competition a large obstacle (the third-highest ranked obstacle among the group of 17),v while 11% of insurance executives believe that innovative products will be the basis for competitive advantage in the next five years (the third most common response among the eight responses).vi
Streamlined Portfolio Benefits
Once insurers establish a modular product architecture foundation, over time they will be able to more easily recognize redundant products, since many will originate from the same base.vii With simplified forms, insurers can experience increased operational efficiency, while members and vendors alike will appreciate the consistency in look and feel.viii Finally, once carriers start to view products through a modular product architecture framework, it will become easier for them to view potential bumps in the product development road, and will be that much more adept when it comes to trouble-shooting and resolution.ix
Speed to market is a priority for all businesses, but especially for group insurers, whose commoditized markets demand that products stand out. Other than competing on price, new and innovative products that get to market early can command first-mover advantage, and subsequently generate customer loyalty as well as strong brand recognition. Speed to market can be achieved that much easier with early IT collaboration and automation, which can result in an agile approach to product development and deployment, to ultimately achieve desired speed-to-market goals.
To see how Vitech’s V3locity solution can transform insurance administration operations, enable accelerated speed to market and product model objectives, while offering unparalleled security, click here.
i Speed to Market for Life/Annuity/Benefits Insurers, Novarica Research Council Study, pg. 7.
ii Speed to Market: (Part of the Insurance Series, “Benefits of a New Policy System: Why Going Live is Not Enough,” Deloitte Consulting LLP, April 2015.
iiiEmbodiment Design: Modular Design and Product Architecture; Essential Product Development for Engineers.
iv Op. Cit, Speed to Market, Deloitte Consulting LLP, April 2015.
v Voluntary Worksite Marketing: An Executive Perspective for 2021, Eastbridge Consulting Group, pg. 4
vi Ibid, pg. 13
vii Op. Cit, Speed to Market, Deloitte Consulting LLP, April 2015.