Architecture Strategies

Technology

www.bestreview.com

BESTS REVIEW
Four ways to make an IT transformation project a success.

December 2011

Building a
by K. Ram Sundaram

hen It transformation projects implode, the costs in time, money and morale can be devastating. think it couldnt happen to you? think again. in a survey of 800 it managers, research firm dynamic markets found that 62% of it projects ran behind schedule, 49% ran over budget, 47% incurred higher-than-anticipated maintenance costs, 41% failed to deliver expected rOi and 25% were canceled before completion. though the survey covered all industries, theres no reason to believe the results are any better for insurance companies. In other words, one in every four insurance It transformations will fail completely, and many others will fall short of expectations or waste company time and resources. turnaround specialists frequently are called in to rectify these types of troubled projects. more often than not, what they find arent just failures, but spectacular failures. so how can you help ensure this wont happen to you? Its a combination of four central elements: team experience, solution and project architecture, an agile approach and executive oversight. Contributor K. Ram Sundaram is a senior principal of X by 2, Farmington Hills, Mich. He can be reached at ksundaram@xby2.com.
1

Key Points
transformations with these components have significantly better odds of success. now lets take a closer look at why failures happen and how they can be prevented. 1. Inexperienced Leaders Well-intentioned insurance executives can stymie a transformation initiative before its even begun, by choosing inexperienced project leaderswho in turn select the wrong rank and fileand sometimes by missing critical roles. At first blush, the prototypical project leader looks like a sure bet: an exceptionally smart, personable, conscientious corporate administratorsomeone to manage the calendar, the budget and the 2,000-line project plan. But large-scale It projects demand leaders with personal experience on both the business and technology sides of the house, and who are willing to sink their teeth into the real problems while leaving the minutiae of time and task reporting to the administrators. typically missing from multimillion-dollar transformation projects are business visionaries who are high enough up the food chain those who understand the business, appreciate the need for change, invite challenges to the status quo and possess the authority to make decisions. Often, there are no strong, experienced architecture visionaries dedicated to these projects, either. Instead, fractional architects who dont practice the
The Big Picture: Many IT projects fail or waste companies time and resources. What Needs to Happen: One essential piece of any IT projects success is a clear, comprehensive up-front architecture. The Payoff: The right architecture, agile process and executive involvement can lead to a successful IT project.

Sundaram

contact sport of creating and implementing transformative solutions are assigned to ensure compliance with the so-called corporate architecture rule book. In some cases, companies will attempt to coach-up inexperienced project teams by sending them off to a one- or two-week technology crash course. But someone trained on a mainframe in the 1980s cant possibly learn modern technologies and paradigms in a matter of days. And if you havent been there and done that at least a few times, even rigorous boot camps wont help. You wouldnt let a surgeon operate on your heart after two weeks of surgery school, yet insurance companies seem surpr isingly unfazed by placing inexperienced leaders and teams at the heart of complex, multimillion-dollar transformation initiatives. Inexperience breeds inexperience. If project leaders and socalled architects are merely administrators or compliance cops who have never been in the trenches and arent personally familiar with

Bests Review december 2011 reprint

the applicable technologies, how how individual efforts impact the can they hope to articulate the greater strategy. the strategy that guides team projects needs to their teams, or to distinguish between legitimate can- selection is the true fruit of strong didates and resume-rich imposters? project leadership. And its here this is why inexperienced lead- that experience matters most ers turn to superficial, mechanical hiring and resource selection proLacking strong C-level cesses. Often, that means adopting project oversight, ultra-specific job descriptions, or matching candidates based on titles insurance initiatives and skill-set acronyms. the problem tend to take on a is that mechanical hiring generaljust-keep-workingFire team of finely leads to a massive Fire Fire and-it-will-get-done grained specialists: technologists Fire Writers Fire Top U.S. who know the intricaciesWriters or($ Billions) mentalityin which Direct Premiums of one Top U.S. Writers2010 Top U.S. Written Direct Premiums Written 2010 ($ Billions) Direct U.S. are unable two specific systems,Premiums Written 2010 ($ Billions) hard work and effort Top U.S. Writers Top but Writers Direct Premiums Written 2010 ($ ($ Billions) Direct Premiums Written 2010 Billions) to grasp the bigger American International Group [18540]supersede tangible picture. American International Group [18540] American But todays technologyInternational Group [18540] systems AmericanProperty & Casualty Groupprogress and results. American International Group [18540] Assurant International Group [18540] [18523] are far too complex and interconAssurant Property & & Casualty Group [18523] Assurant Property Casualty Group [18523] nected for an insular team of speAssurant Property & & Casualty Group [18523] Assurant Property Casualty Group [18523] simply because seasoned project cialists. In fact, a Balboa Insurance Group [04062] massive team of [04062] Balboa Insurance Group [04062] Balboa Insurance Group narrowly focused Balboa Insurance Group [04062] experts would [04062] Balboa Insurance Group leaders and visionaries know how FM Global Group [18502] be nearly impossible toGroup [18502] and why to invest in a winning FM Global Group [18502] FM Global manage, let alone redirect FM Global Group [18502] architecture. or redeploy to FM GlobalGroup [18674] Travelers Group [18502] alternate areas of the project.[18674] Travelers Group Worst Travelers Group [18674] of all, an army of Travelers GroupInsurance Cos.2. No Project Architecture fine-grained[18674] [00060] Travelers Group speLiberty Mutual [18674] Liberty Mutual silos, If theres one essential piece cialists will tend Liberty MutualinInsurance Cos. [00060] to work Insurance Cos. [00060] Liberty Mutual Insurance Cos. any LibertyFinancial Services NA to[00060] It Mutual Insurance [00060] lacking a solid understanding of Cos.Group [18549] transformation projects Zurich Fire

InduSTry SnApShoT
Farmers Insurance Group [00032] Farmers Insurance Group [00032] Farmers America Group [00032] Farmers Insurance Group Allianz ofInsurance[18429][00032]

Zurich Financial Services NA Group [18549] Zurich Financial Services NA Group [18549] Zurich Financial Services NA Group [18549] Zurich Insurance Group [00032] Farmers Financial Services NA Group [18549]

Fire

success, its a clear, comprehensive up-front architecturea logical, elegant framework for decomposing and organizing complex requirements that describes, at the right level, the elements of the solution and how they interrelate. Imagine hiring a group of construction workers to build a new skyscraper in lower manhattan, but neglecting to give them clear guidance, strategic direction or the necessary blueprints. the result would be total anarchy. And sure enough, the strength or weakness of an It transformations architecture will almost always predict the projects success or failure. Yet, instead of a well-articulated business and technical visiondistilled in a handful of key blueprints, schematics and picturesmost projects will produce either too much documentation (for instance, a rambling 200-page manual) or none at all. Its nearly impossible for team members to assimilate the underlying strategy and architecture. Absent a well-articulated architecture, project

Top U.S. Writers Top U.S. Writers

A quick glimpseofof the [18429] insurance industry. Allianz of America Allianz America [18429]
Allianz America [18429] Allianz ofof America [18429] Munich-American Holding Corp. [18753] Munich-American Holding Corp. [18753] Munich-American Holding Corp. [18753] Munich-American Holding Corp. [18753] Munich-American Holding Corp. [18753] 0.0 0.5 1.0 1.5 2.0 Fire insurance protects property against losses caused by fire or 0.0 0.0 0.5 0.5 1.0 1.0 1.5 1.5 2.0 2.0 lightning and may be included in homeowners or commercial Direct Premiums 1.0 Combined Ratio 2.0 0.0 0.0 0.5 0.5 1.0 1.5 1.5 2.0 multiple peril policies. U.S. IndustryPremiums U.S. Industry Direct Premiums Direct Combined Ratio Combined Ratio ($ Direct Premiums Billions) U.S. Industry U.S. Industry U.S. Industry U.S. Industry Direct Premiums Combined Ratio Combined Ratio ($ ($ Billions) Billions) U.S. Industry U.S. Industry U.S. Industry U.S. Industry

Direct Premiums Written 2010 ($ Billions) Direct Premiums Written 2010 ($ Billions) American International Group [18540]

American International Group [18540] Assurant Property & Casualty Group [18523] Balboa Insurance Group [04062] FM Global Group [18502]

Fire

Assurant Property & Casualty Group [18523] Balboa Insurance Group [04062] FM Global Group [18502] Travelers Group [18674] Liberty Mutual Insurance Cos. [00060] Zurich Financial Services NA Group [18549]

Insurance

An introduction to the insurance industry

($14 Billions) ($ Billions) 180 160 180 180 14 14 12 140 160 160 12 12 180 180 14 14 10 120 140 140 160 160 10 10 12 12 8 100 120 120 140 140 80 8 10 8 10 6 100 100 120 120 60 80 80 66 88 4 100 100 40 60 60 80 80 4 66 24 20 40 40 60 60 22 44 0 0 20 20 40 01 03 05 07 09 40 01 03 05 07 09 00 00 22 20 01 03 05 07 09 20 01 03 05 07 09 01 03 05 07 09 01 03 05 07 09 00 00 01 03 05 07 09 01 03 05 07 09 01 03 05 07 09 01 03 05 07 09 Source: , Best's Aggregates & Averages Source: Source: , Best's Aggregates & Averages , Best's Aggregates & Averages Source: Source: , Best's Aggregates & Averages , Best's Aggregates & Averages

Travelers Group [18674]

Liberty Mutual Insurance Cos. [00060]

Zurich Financial Services NA Group Farmers Insurance Group [00032] [18549] Farmers Insurance Group Allianz of America [18429] [00032]
Munich-American Holding Corp. [18753] Allianz of America [18429] 0.0 Munich-American Holding Corp. [18753]1.5 0.5 1.0 2.0

Facts and stats

2011 edition

Direct line of information products highlighted in Combined Ratio Explore todays insurance business environment through A.M. Bests extensive Premiums U.S. Industry U.S. 0.0 1.0 Industry 1.5 Insurance Facts and Stats 2011 Edition. This handy reference focuses on the many0.5 of business within the lines ($ Billions) property/casualty, life, health and reinsurance industries, with rankings of top writers. To order copies and see the entire Direct Premiums Combined Ratio A.M. Bests Guide series, visit www.insurancebookstore.com or www.amazon.com. 180 14
U.S. Industry
12 ($ Billions) 10 8 14 6

2.0

Bests Review

U.S. 160 Industry 140 120 december 2011 100 180 80

160

reprint

Architecture Strategies

Technology
teams will plod on with the best of intentions, but in directions that ultimately court disaster.Worst of all, projects often suffer from a false sense of architecture sufficiency. merely listing the hardware and software elements involved is not an adequate architecture. Likewise, simply knowing to use glass, concrete and steel will notin itselfproduce a new skyscraper. successful architectures must also provide clear definitions of a projects desired end-state. If the vision of a successful outcome cant be articulated in advance, its highly unlikely to be achieved. 3. Inflexible Development Processes speaking of agility, when it comes to It development, most insurance companies err on the side of overgovernance. the common belief is that well-defined processes and tight controls will ensure that commodity resources produce great software. so-called best practices encourage the creation of massive books of requirements, and then a series of nonnegotiable sign-offs that must precede even the smallest action items. But apply this rigid process to a massive team of fine-grained specialists working in silos, and youll find a transformation initiative thats carried by its mass and momentum in a direction thats difficult if not impossible to course-correct. efforts to protect the process through over-governance make it nearly impossible to separate a projects essence from its rituals and mechanics. paradoxically, even companies taking the agile approach sometimes fall victim to an overadherence to the mechanics of agile methodologiesuse cases and stories, index cards and Kanban walls, daily stand-ups that mustnt exceed 13 minutes, burnup and burn-down chartswhile meaningful progress and business value get lost in the noise. When
3

the rigid processes dont deliver, it only begets more control, more processes and a downward spiral. successful processes, on the other hand, remain open and flexible emphasizing short bursts of activities resulting in testable and usable working software. By identifying and making continuous improvements and refinements to all aspects of the project, including vision, scope, team composition and development processes, the probability of ultimate success increases. some insurers might consider the silicon valley model, in which funding is contingent on a viable proof-of-concept, then a commercially viable stage and then expansion capital for the later stages of a product launch. perhaps such an approach is a bit radical, but surely proving the success of individual stages makes sense in a high-stakes It transformation environment. even if insurers dont fund largescale transformation initiatives the way silicon valley funds new ventures, surely insurance executives must become the discerning and dispassionate venture capitalists of these initiatives. 4. Lack of Involvement successful transformations rely on senior-level change agents and champions from both business and It to enforce lines of accountability, challenge assumptions and make corrections on the fly. Yet senior executives dont always sufficiently engage, deeming transformation efforts to be merely It initiatives. this perception is only reinforced by checkpoints and updates weighed down by overdoses of technical-speak. to executives, these projects can seem impenetrable. Worse, many executives will see only a technology problem, where in reality there exists a substantial business threat. H e n c e , t h e y l l o n ly ge t involved when confronted with major capital decisions, or when

the transformation train is clearly off the trackswhen the damage is typically beyond repair. Indeed, a proper definition of the end-statenamely, what will change, how it will change and how well know itis a strong basis for motivating and maintaining involvement from c-level leadership. And this is particularly important when lower-level stakeholders get mired in the details of an implementation (design, integration, functionality etc.) while leaving the larger issues of profitability and long-term market impact in their proverbial blind spots. executive involvement is also necessary for creating a culture of accountability and healthy dissent throughout the chain of command. Lacking strong c-level project oversight, insurance initiatives tend to take on a just-keep-working-and-itwill-get-done mentalityin which hard work and effort supersede tangible progress and results. What Finish Line? When transformation projects are sick, pulling the plug and swallowing millions of dollars in sunken costs is typically a necessary action. Yet most project leaders will succumb to the sunk cost fallacy and inject more people, more capital and more time into a strategically barren operation with virtually no chance of success. such projects can drag on for years, draining millions of dollars and spanning generations. But the cruelest irony is this: When a troubled It transformation reaches fruition, its usually obsolete on arrival, having languished in development while the industry pressed forward. this fate can be avoided with the right team, the right architecture, the right agile process and the right executive involvement. With these elements, theres a better chance that the promises made BR will be kept.

Bests Review december 2011 reprint

Copyright 2011 by A.M. Best Company, Inc. All Rights Reserved. Reprinted with Permission. www.ambest.com