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A Scientific Method

John Anthony, Director, Innovation Lab, The Hartford Financial Services Group Before The Hartford Financial Services Group ($27.1 billion in revenue) launched its Innovation Lab in 2005, the Hartford-based company spent some time discussing what innovation should mean for its P&C division.

John Anthony, Director, Innovation Lab, The Hartford Financial Services Group Before The Hartford Financial Services Group ($27.1 billion in revenue) launched its Innovation Lab in 2005, the Hartford-based company spent some time discussing what innovation should mean for its P&C division. The Hartford determined that innovation wouldn't be found through simply evaluating emerging technologies, but by applying a rigorous scientific approach to finding technologies to solve business problems. That focus drives the Lab's technology projects and is one of the priorities for its director, John Anthony.

I&T: Describe the Innovation Lab.

Anthony: The best way to describe the Innovation Lab is as an ecosystem. The Lab has five permanent staff members, including myself. Other business areas and partners interact with the Lab at different times to test hypotheses, perhaps provide an environment to evaluate and test a technology, or participate in the decision of whether or not to recommend an emerging technology. We're more virtual than what you might imagine a traditional lab as being.

I&T: How does The Hartford define innovation?

Anthony: Innovation at The Hartford means delivering value back into the business so it can deliver the best products and services to our customers. That's the real definition of innovation within an insurance company.

I&T: Isn't innovation just another term for research and development, or R&D?

Anthony: It's not. Lots of companies invest millions or billions of dollars in traditional R&D. This often entails identifying and evaluating emerging technologies, working with the provider to mature the technology, taking some guesses at how the business can use the technology and then trying to sell that emerging technology back into the business.

That model of an isolated, domain-specific R&D lab most likely would not be sustainable within The Hartford. We knew we had to offer real value to the business. Instead of a more traditional R&D process, we start each project engagement by looking at the gap between our three- to five-year strategic objectives and where we are today. That gap becomes the innovation platform from which we launch our engagements. We also apply a rigorous, research-oriented evaluation methodology that is predictable, understandable, measurable and repeatable. This process provides us with a high level of confidence and conviction behind every technology investment recommendation we make.

I&T: How does the lab identify ideas on which to work?

Anthony: We form tight partnerships with senior business leaders and IT executives within The Hartford - those key business stakeholders in charge of defining and executing against the long-term strategy. We work with them to understand their priorities and identify the gap between the strategic objectives and our current state. We then determine which hypothesis we should evaluate. Forming these partnerships with key stakeholders also raises their level of awareness of what we can provide for them and gets their skin in the game, since we execute the evaluation with them.

There is not a lot of magic here. An "innovation lab" conjures up images of large groups of people sitting in brainstorming sessions with the intent of producing brand-new, novel, out-of-the-box ideas. That is part of what we do, but a fair amount of our work is recognizing our business strategies and then identifying the technologies that enable the execution of the strategy.

I&T: What are some areas the Lab is focused on now?

Anthony: Of course, the most interesting things are ones that I can't talk about for competitive reasons. But again, not all of our investments have to involve fundamentally new business models or products and services. They can be simple - that's part of the elegance of innovation.

For example, we are working with our sales organization to execute a pilot that allows us to use podcasting to deliver new content and reinforce best practices to our sales staff in order to help them work with our independent agents in the field. We are also working with our claims business leaders to test the hypothesis that automated document classifications using machine learning to identify and route documents can improve the efficiency of our claims operations.

I&T: With what types of organizations does the Innovation Lab partner?

Anthony: Our external partners include what we call our hardware and software "power" vendors - those vendors we have strong relationships with and that provide us with products and services on a daily basis as well as academia and venture capitalist companies.

I&T: Are these relationships symbiotic?

Anthony: Yes, in all cases. Our external partners are starving for content to develop and apply their products. For competitive reasons, we may not fully disclose to our partners all of the ways in which we will use a particular technology. But even providing these organizations with limited exposure to how we plan to apply their technologies is valuable to them. In turn, we get access to emerging technologies, research support and, often, the hardware and software to run our evaluations.

I&T: In what ways do you work with academia?

Anthony: Universities are a hotbed for emerging technologies and offer an interesting relationship for us. There are definite intersections of interest between the academic world and our world. For example, the Massachusetts Institute of Technology [MIT; Cambridge, Mass.] is working on language emergence by recording parent/child interactions to determine how children learn language. One of their challenges is managing all the video and audio data they collect.

Although we don't have video and audio of small children developing language, The Hartford does have lots of data in audio files, and we are very interested in mining those recordings for information such as competitive intelligence and quality assurance. Even though analyzing language development and analyzing claims data are two different applications, we don't necessarily have to modify the research done by MIT to get value for our own applications.

I&T: Once you make a recommendation on a technology, are you done with that engagement?

Anthony: Within a typical software development framework, we sit firmly in the idea development phase. But once we make a technology recommendation we then provide the business with the initial business case, a rough cost estimate, an architectural/conceptual diagram for IT, and an abbreviated scorecard that shows the benefit and value of our recommendation.

It's up to the business to follow The Hartford's processes and governance in making the investment decision. We are not in the business of selling innovation to the business. We partner with the business to identify a set of hypotheses that then drives our discovery and evaluation of emerging technologies. This results in a focus on innovations that are, by definition, aligned with business goals and priorities.

I&T: Does the Lab provide a more- or less-exclusive focus for innovation in the company?

Anthony: We don't own innovation - there is a lot of innovation happening at The Hartford outside of the Lab. However, our focus is different in that we look at new product innovation using emerging technologies that are viable in the one- to three-year time frame.

I&T: How does The Hartford realize a return on its investment in the Innovation Lab?

Anthony: When insurers consider innovation, they have to be willing to experiment with new technologies, some of which they will wind up killing. This is a good thing since cost avoidance is as important as the investment in technology.

Insurers have to be willing to fail; therefore, you can't measure ROI using traditional methods. We don't measure the benefit of the Innovation Lab in terms of dollars delivered to the business or costs. Instead, we look at the value of the Innovation Lab through case studies.

John Anthony

Age: 31

Title: Director, Innovation Lab, The Hartford Financial Services Group

Education: B.A. in biology, University of Hartford; M.S. in computer science, Rensselaer Polytechnic Institute (RPI)

First Job: Designing software simulation programs for genetics experimentation.

Career at The Hartford: Anthony joined The Hartford in 2000 as an IT architect and became director of the newly formed Innovation Lab in 2005.

Hobbies: Running, cycling, rock climbing

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