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Making Technology Their Business

With new competitive pressures driving insurance companies to be more aggressive than ever in technology deployment, tech-savviness has become an essential attribute of today's winning CEO.

It's no longer about who's playing the game, but how they are playing it. Gone are the days when a company's success was determined solely by whether its CEO was keeping up with competitors. Those CEOs are warming the bench in today's league. And although the ultimate champions of the game—where a combined business/technology acumen is a prerequisite—are still being determined, there is no question that the winners will have an offensive strategy.

So how does an insurance chief executive build an offensive technical strategy? For starters, a CEO must start out with a firm technology knowledge base—credentials shared by the five chief executives profiled in the following pages. Although a tech background is an asset for today's CEO players, with the proper support of internal and external resources, it is not an absolute necessity. According to John Barrett, executive director of New York-based executive recruiter Russell Reynolds Associates, although tech-savviness is among the top three criteria sought in insurance CEOs today, "companies aren't necessarily looking for a CEO who speaks in technical jargon. They are looking for a CEO to understand what the inevitable changes in the industry are and how technology can be leveraged from a competitive standpoint to really leapfrog the competition."

CEOs who are proficient in "tech-speak," do have an advantage, however. Those not as proficient must choose their chief information officers—not to mention consultant partners and other internal and external resources—wisely. "When a CEO is picking an advisor and, later on, managing the individual, it is much more difficult to probe, understand and evaluate the advice that you are getting if you do not have a technical background," says Vic Guyan, partner, Accenture (New York). "You don't need to have all the minute details at hand, but you at least need to probe and get into the details."

Furthermore, although getting the opinions of a business-minded CIO or CTO is important, according to McLean, VA-based Ben Tomb, director, financial services, KPMG Consulting (New York), "CEOs should seek outside ensure they are getting objective input, not just a bias from inside a particular department of their organization."

Project Management Is Key

Although CEOs with technology backgrounds are becoming more in-demand, a business background is still as important as ever. And tech ability is by no means a trade-off for business competency. "In the last five years, because of the complexity of the business, technology has become more important; and when you are looking at the competency profile of a CEO, technology is clearly becoming a piece that has to be part of that profile," says Gordon Gaudet, chief delivery officer, C-Change, a San Raphael, CA-based consulting firm. "But, having a business background and an understanding of insurance is still as important as it ever was."

The reality is that, in order for a systems project to be successful, the development, understanding and communication of a clearly defined business strategy is key. This is important, "so that the technology issues can then be reframed and adjusted on a year-by-year basis," says Kevin Sharps, financial services practice leadership, C-Change. "The biggest gap that we see is the CEO and his executive team not creating enough clarity around those ends-of-business outcomes," says Sharps. The result generally leaves "the business sides of the house really groping for a direction and a decision-making framework for the multitudes of decisions they have around new technology and legacy technology."

After the initial step of defining a business strategy, CEOs must follow the progression of a project to make sure it stays on track with its objectives. "I don't think it's a case where CEOs can participate by exception," says KPMG's Tomb. "I think that they have to show presence constantly and reinforce the business value that the technology brings to the table through all of their modeling and behavior."

Still, an increasing number of insurance executives with technology backgrounds are being appointed CEO or president. But the increasing importance of being tech-savvy isn't the only factor that plays into this trend. "CIOs a couple of years ago were really focused on the internal workings of the company," points out Russell Reynolds' Barrett. "They really weren't looking at how technology can be leveraged to create sustainable competitive advantage in the industry. CIOs are now far more strategic. They are more likely to have a grasp of marketing, sales, distribution and finance. They are able to look at the holistic impact of any change resulting from technology they will implement."

Strength in Numbers

So, how can a forward-looking CEO gain the mix of technology knowledge and business acumen needed to lead an insurance organization in the 21st century? A traditional approach has been to bring in management consultants. But whether that consulting expertise should be business- or technology-focused is not clear. Over the past couple of years, notes C-Change's Sharps, CEOs who have been contracting with pure-play tech consultancies are beginning to work now with more business-focused firms. "We are seeing the pendulum sway back in the direction around business issues," says Sharps.

Another educational channel comes from executive networking. Traditionally, CEOs have sought the advice of their counterparts. However, "the CEOs we encounter are not coming together in study groups to discuss technology like they do traditionally on other topics," says Sharps. "They are networking and sharing consultants when they find insightful and resourceful ones. For the most part, though, CEOs are still on their own learning path."


Most CEOs View Tech as Mixed Blessing

While CEO technology all-stars, such as the executives profiled in this issue, do not question the importance of technology in enabling their firms to succeed, their view is not necessarily that of the majority. Illustrating just how complicated insurance industry CEOs' relationships with technology are, a 2000 Tillinghast-Towers Perrin (New York) financial services CEO study revealed that, while technology limitations were ranked the number-one obstacle to achieving business goals by life and property/casualty CEOs, technology also is viewed as the leading tool for solving many strategic issues, including distribution, competition and costs.

Life insurance CEOs, in particular, identified technology as a double-edged sword: It can offer benefits such as improved operational efficiency, reduced costs, access to new distribution alternatives and improved information; however, the costs of technology are significant.

The report suggested technology may have emerged as a leading concern because insurance CEOs are having to become more innovative with tech solutions in order to compete with an expanding array of both traditional and new organizations. It also appears from the Tillinghast-Towers Perrin research that CEOs recognize that another obstacle in getting the performance expected from technology stems from the high costs of legacy systems, which limit the resources available to invest in new technology.

The survey also suggests that insurance CEOs may feel technology is changing so rapidly that staying current with it is like trying to hit a moving target.

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