The frightening thing about the accelerated speed of change is that if a strategic IT project fails now, your company may fall too far behind its competitors to ever recover. CEO of Noria Software, Ronny Reppe, shares his insights into how to prevent failure in a major IT project.
Too many digital projects fail. IT project failure can take the form of major budget overruns, late completion, scope creep, failure to meet expectations in terms of value delivered or, as we have seen many times, total failure with nothing being delivered. It is more common than you may think.
McKinsey reported in 2019 that a whopping 70% of digital transformations fail, while IBM places the failure rate even higher at 85%. These figures should be ringing alarm bells for any marine insurer currently undertaking or intending to embark on an IT project of any size. Most concerning, 17% of IT projects go so badly that they threaten the very existence of the company. In an economy ravaged by Covid-19, this figure is likely to be much higher.
Now is not the time to fail. Ten to fifteen years ago, a company could fail in a major IT project, learn its lesson and recover lost ground. But today’s blistering pace of change in the world of InsurTech (exacerbated by Covid-19) means there are no second chances. Fail, and you might fall too far behind. To prevent this happening, insurers need to focus on growing more efficient in their digital project delivery and getting more bang for their buck through their IT investment.
Here are three ways to increase the chance of IT project success:
Reduce risk by adopting the MVP approach to IT projects. I have seen countless banking and insurance companies adopt a “big bang” approach to major IT initiatives. They pour tens of millions of dollars into a big bang project, which means that if it fails, it’s catastrophic. Instead, we promote an iterative, step-by-step approach to lower risks. Organisations should start with the MVP (minimum viable product), which means building a product with just enough features to allow the team to validate an idea. From there, build on the MVP in iterations, establish a rigorous feedback loop and avoid the temptation to leap to a big-bang approach at any point in the project.
Make sure you have enough business knowledge in IT projects. Many IT projects have failed despite having a generous budget and plenty of technical knowledge. What they were missing was business knowledge and an understanding of how digital solutions should support the crucial details in the business. Ideally, the project team should include highly experienced people who have been in the business for 15-plus years and truly understand the organisation’s needs.
Ensure they have a voice throughout the project to minimise the likelihood of developing an inadequate product. Mindset is equally important as experience: look for project team members who recognise that IT has the potential to transform the business and approach senior sponsors, who understand that every company that intends to survive the next decade will have to rely heavily on technology. One of the issues faced by the marine insurance talent pool is that there is not a lot of IT knowledge mixed with marine insurance knowledge. As a result of this, marine insurers frequently engage technology companies with little business understanding, or vendors with a knowledge of general insurance only. As we all know, there is a major difference between general insurance and marine insurance. This lack of business understanding on the technology vendor side increases the chance of a project being delivered that does not meet the business’ needs.
Get the project design phase right. Do not rush. A robust project methodology, good governance and an agile way of working has the potential to set your IT project up for success. Use a design sprint to ensure the concept, design and pre-project phase is tested with stakeholders. If your organisation is unfamiliar with agile ways of working, consider hiring an experienced agile coach to get the project started. Aim to build a team that has a combination of agile know-how, technical expertise and knowledge of what the business needs. Finally, ensure your project is designed to be adaptable in a continuously and rapidly evolving digital environment. This approach allows teams to absorb added complexity (such as the unexpected consequences of the Covid-19 crisis), make rapid changes to the work plan and be flexible enough to respond to continuous feedback.
GETTING MORE BANG FOR YOUR BUCK
Enterprise IT spending for the insurance market is more than US$220 billion worldwide as insurers seek to improve speed-to-market, data and analytics capabilities and ease of doing business through digital solutions. Covid-19 has added more pressure to launch and complete digital transformations at an accelerated rate. If we can believe that at least 70% of IT projects fail, This suggests that global insurers have received nothing for an eye-watering $154 billion. The irony is that large insurance companies spend most of their budget on digital transformations, but they are generally terrible at IT. This translates into catastrophic project failure and no bang for their buck. There’s simply too much risk and too little competence. The solution is to build or acquire the processes and competence that will bring more efficiency to IT projects. This is where a company of experts can help. We know technology, we know the marine insurance industry and we know how to run an efficient and successful IT project using agile methodology.
Use the experts to:
Increase the likelihood of IT project success by using an MVP approach.
Get the most out of your project team.
Create a fail-proof project design. In the IT economy, a successfully executed project with the right team size and competence can cost a fraction of a similar project that uses the wrong approach. Make sure you learn from IT failures in the industry through the last 30 years before you start the next phase of your digital transition journey.
“17% of IT projects go so badly that they threaten the very existence of the company. In an economy ravaged by Covid-19, this figure is likely to be much higher."