Northwestern Mutual’s Enterprise Venture Fund Drives New Tech Adoption

The Milwaukee, Wisc.-based life insurer has taken the risk out of leading-edge technology exploration by creating a dedicated fund and project team.

Adopting new technologies can enable significant gains in efficiency and competitive differentiation, but insurers often find the risk doesn’t justify the potential reward. Northwestern Mutual has created a way to speed new technology adoption with a minimum of risk: the Milwaukee, Wisc.-based life insurer’s Enterprise Venture Fund (EVF), which lays aside a portion of its IT budget to explore new technology under controlled conditions, has led to successful adoption of new technologies within large projects.

“We desired to keep evolving our assets and solutions, but we found that incorporating new technologies into large-scale projects introduced a great deal of risk,” relates Tim Schaefer, Northwestern Mutual’s CIO. “The opportunity we sought was to be able to go out a little further into the future and explore technologies we were interested in that weren’t immediately ready for use in large initiatives.”

[Read more about Northwestern Mutual CIO Tim Schaefer: 4 Elite CIOs Share Lessons.]

The solution originated in 2007 with Karl Gouverneur, the insurer’s CTO and head of its technology architecture group, according to Schaefer. “Karl brought this to us and helped shape the discussion around it,” he says. The concept was that committing a meaningful portion of IT budget to targeted R&D could enable Northwestern Mutual to stay closer to the leading edge of technology and therefore reduce project risk once the carrier was ready to deploy the technology on a grander scale. The insurer currently reserves roughly 1% of its overall IT budget for the EVF, according to Schaefer.

Northwestern Mutual’s IT leadership pitched the idea to a number of the carrier’s senior leadership but the key approval came from senior VP and CFO Michael Carter. “I think the attractive part was taking risk out of subsequent large projects by evaluating newer technologies on a smaller scale,” Schaefer reports.

A governance board comprising IT and business leaders evaluates proposed initiatives and decides which ones to fund, according to Schaefer. Northwestern Mutual has assigned Stig Haagensen as the director responsible for delivery of EVF-funded-projects. Since the EVF was fully implemented in 2008 Northwestern Mutual has enjoyed a range of benefits, according to Schaefer, including the major objective of project risk reduction. “There’s a number of instances we can point to where evaluating technologies under the EVF has enabled us to discover an alternative approach or at least get through the learning curve so that by the time we were using the technology in a larger project we were no longer running into unknowns,” Schaefer says.

[See our coverage about Tim Schaefer's appointment as CIO in 2008: Northwestern Mutual CIO Schaefer Drives Greater Maturity.]

Northwestern has also succeeded in creating a space for serious exploration of emerging technologies unimpeded by immediate practical demands, Schaefer suggests. “Now we feel there’s an avenue to get investment in a leading-edge technology, so it has enabled us to innovate,” he says.

Paradoxically, one of the most important factors in the EVF’s success is its tolerance for failure. “There’s room to be more aggressive with an emerging technology when you know that even if an endeavor fails, it’s still a success because we’ve learned something,” Schaefer explains. “Creating cultural room for ‘fast failure’ has been a key benefit of the EVF.”

Experimentation within the EVF supported Northwestern Mutual’s adoption of advanced business process management, using IBM’s Process Server, which went live in the first half of 2012. “The EVF allowed us to explore different avenues and eventually lay in place a platform that’s been used for multiple applications,” Schaefer recounts.

Work in the EVF also enabled Northwestern Mutual to study challenges associated with the adoption of advanced analytics capabilities, according to Schaefer. “During 2010 and 2011 we researched what was happening with analytics and turned it into a large project that put in place what we call an Agile Analytics platform, which went live in 2012,” he says. “It is used for strategic analysis of our distribution system, financial security planning process, and sales.”

Among what might be called the EVF’s “successful failures” was an investigation into e-signature technology. “We found a mismatch between the technology we were looking at and some higher-end requirements associated with capabilities needed for critical documents,” says Schaefer. “Because it wasn’t within a large project, our team felt comfortable pulling back.”

Northwestern Mutual has also profited from lessons on how to operate the EVF itself for optimal effect, according to Schaefer. “We learned over time that we couldn’t use our regular project delivery teams for work within the EVF,” he says. “We needed a ‘lite,’ more exploratory version to explore and evaluate these technologies to see if they have promise.”

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio