Improving Product Development:
How to Become the Speed-to-Market Leader in the Life and Annuity Marketplace
By: Chris Conklin, FSA, MAAA, MBA Principal & Actuary, Insurance Insight Group
This white paper is provided to you courtesy of Insurance Insight Group, a leader in product development processes. For more information call 801.290.3320 or visit our web site at www.improvingproductdevelopment.com
Putting this white paper to work for your company. For most carriers, product development is a slow, inefficient, and stressful process. Even major carriers seem to struggle to bring to market more than a few products every year, and they routinely push back their internal deadlines time and time again. This insightful white paper aims to change all of that by giving you some key steps to quickly improve your product development process. In the following pages, Chris Conklin outlines why product development doesn’t need to be difficult for your company. Put these changes into practice and you can realize some big advantages, including: • • •
Dramatically driving down the cost of bringing a new product to market. Transforming your product development process into something that is faster and more efficient. Bringing a sustainable, competitive advantage to your company.
It’s not easy to do product development well, but it’s worth the effort. To receive samples of the tools mentioned in this document, please email
[email protected] or call 801.290.3320. Read on for more details...
Chris provides details on these proven strategies for enhancing your product development process: 1. Determine your desired outcomes and put them in writing, along with who is responsible for specific outcomes. This will help shorten your timeline and drive down your costs. 2. Devote qualified staff to a permanent product development team—designating this as their primary priority cuts down on conflicts that bog down the process. 3. Let the product team determine the target dates, rather than senior management. 4. Put in place concrete incentives for achieving the goals.
©2008 Insurance Insight Group
Improving Product Development: Becoming the Speed-to-Market Leader
For most carriers, product development is a slow, inefficient, and stressful process. Even major carriers seem to struggle to bring to market more than a few products every year, and they routinely push back their internal deadlines time and time again.
We went from consistently missing deadlines to consistently hitting deadlines. And, as a result, we dramatically drove down the cost of bringing a new product to market.
A few years ago, I worked for one of these major carriers, and in a short period of time, we transformed the product development process to be quick, efficient, and even fun. Without increasing staff, we were able to go from turning out only a few products every year to bringing to market an average of 35 new products and product changes annually. We went from consistently missing deadlines to consistently hitting deadlines. And, as a result, we dramatically drove down the cost of bringing a new product to market. We did it by making a series of structural and process changes that would be considered radical in some corporate cultures. Let me describe a few, and you will see that they make sense. Determine Desired Outcomes One item that makes product development slow, inefficient, and stressful is that the product development team at most companies often is asked to begin work before management has clearly articulated what it wants in writing. This lack of clarity and certainty causes the product development team to spin its wheels and make little progress. Then, since the time to market is so slow and market conditions are constantly changing, often the desired product outcome changes during implementation, causing further delays. So, one key change was that we created a document we called an “Approval to Implement.” We enforced a discipline that absolutely no work began until this document was completed. To complete this document required consensus of senior management, which usually could be reached quickly since everyone understood that no implementation would begin until consensus was reached. Once the document was completed, work began in earnest, and the product would be made available shortly, which means typically 4 months for a brand new product and 1½ months for a product tweak. The document included: • • • • •
that the product is approved for implementation, the date when it was approved, exactly what work senior management expects, which project manager is responsible for the project, what priority the product is, in case there is a conflict.
This process allows implementation work to begin much more quickly than it had in the past. It eliminated effort that was being wasted on product
©2008 Insurance Insight Group l 1
Improving Product Development: Becoming the Speed-to-Market Leader
work that was not formally approved. It gave those people involved in product implementation a clear set of marching orders. If it turned out that we did need to make a change to the product specifications during the implementation process, we had a formal document for that too. Organization
Another key change is that we put all the people involved in product development into a permanent Product Development department.
Another item that makes product development slow, inefficient, and stressful is that the people involved in product development are often in different departments and therefore subject to differing managers, priorities, and incentives. They are trying to play for two teams, their permanent functional team and their temporary product development team, and the priorities of their permanent functional team usually win. Another key change is that we put all of the people involved in product development into a permanent Product Development department. The department consisted of project managers, actuaries, legal and compliance people, marketing communications people, and IT people. That made sure they were subject to one manager and a consistent set of priorities. Of course, this requires that the manager be competent in all these functional areas, but we also gave the other functional areas authority to review and approve our work. For example, the company’s chief actuary reviewed the final work product of our product development actuaries. So, senior management was assured that quality was maintained. Team Input into Target Dates Another item that I see most companies do is to have senior management set the target product rollout date. The assumption seems to be that the implementation team needs that direction from senior management. We took a different tactic. Our “Approval to Implement” did not include a launch date set by senior management. Instead, we let the project manager meet with the implementation team, and they collectively proposed a target product rollout date. Compared to senior management, they were able to better assess the required work and the available resources because they were in the trenches doing the work. We found that two wonderful results occurred. One, they consistently came back with reasonable dates. We saw no evidence that they were setting dates conservatively far in the future so that they could slack off. And, two, since they had set the dates themselves, they worked diligently to make sure that they delivered. Incentives Spur Productivity Very few companies design incentives specifically around product development timelines and results. That is a missed opportunity because if you give ©2008 Insurance Insight Group l 2
Improving Product Development: Becoming the Speed-to-Market Leader
someone a target that they have the capability to achieve, they will sometimes move mountains to achieve it. Across groups of people, proper incentives will modify behavior. So, we designed appropriate incentives. For example, what we wanted was for the promised implementation dates to be met with the product available in our key states of California, Florida, and Texas. Previously, those three states had often been among the last to be filed because they usually had additional requirements that took time and effort.
...this is an area where you can build a sustainable competitive edge, but you need to change what you are doing.
We modified behavior by having the Product Development department receive bonuses if they had the product available for sale on the launch date senior management expects, with at least 30 states available for sale, and at least two of California, Florida, and Texas available for sale. There was an extra bonus if they had all three of California, Florida, and Texas available for sale. As a result, the filings for California, Florida, and Texas were always the first to go out, and objections from those state insurance departments were answered immediately. We did many more things that had a beneficial effect. Almost everything was a dramatic departure from what most companies do, but our results were excellent. Few companies do product development well. This is an area where you can build a sustainable competitive advantage, but you need to change what you are doing. To find out more about our unique product development solutions, please email
[email protected] or call us at 801.290.3320. www.improvingproductdevelopment.com
©2008 Insurance Insight Group l 3 Not intended for use with the public. The information provided herein is intended for licensed insurance agents, financial advisors, insurance carriers and marketing organizations use only.
About the Author Chris Conklin, Principal & Actuary, Insurance Insight Group Mr. Conklin’s expertise includes all aspects of the product development strategy and implementation functions performed by insurance companies. He has helped numerous carriers with the complete process from product strategy through implementation, including pricing and design, hedging and asset/liability management, policy forms, state filings, marketing materials, compliance issues, sales support, and in-force administration. Chris was a long-time Vice President of Product Development for a major insurance carrier. He developed new products that resulted in the company achieving sales growth over a ten-year period from nearly zero sales to over $100 million annually in life sales and $3 billion annually in annuity sales. He led a department that brought to market over 170 new products and significant product enhancements in a 5-year period. Chris has played a major role in assisting large and mid-size carriers successfully enter new market segments over the last few years. Chris also has developed working relationships with many key distributors in the brokerage life insurance and annuity marketplace, which has benefited many of Insurance Insight Group’s clients. Chris has assisted several carriers grow their network of national marketing organizations.
Enabling you to enter new markets, build distribution, optimize marketing, and strengthen operations in the life and annuity marketplace. www.insuranceinsightgroup.com
[email protected] 877.321.6246 Insurance Insight Group P.O. Box 980511 Park City, UT 84098
©2008 Insurance Insight Group. All Rights Reserved. Not intended for use with the public. The information provided herein is intended for licensed insurance agents, financial advisors, insurance carriers and marketing organizations use only.
