Page 1

Business Architecture – From Business Strategy to the Alignment of IT

Rich Waller

An Insurance Industry Case Study

April 15, 2009

Page 2

Overview of the enterprise

Insurer at a Glance

• 100+ years in business

• $10 billion in revenue, Net Income of $187 million, Statutory surplus of $8.5 B

• > 9,000 employees

• U.S. and international operations

• “A” rated for financial strength by A.M. Best

• Property & Casualty Operations combined ratio of 98.1%

• Leading insurer of construction businesses, accountants, lawyers, architects & engineers, and other professionals

• The company is a U.S. based Commercial Property & Casualty insurer

• The enterprise is one of the 10 largest U.S. commercial insurers

• The company provides insurance protection to more than 1 million businesses and professionals in the U.S. and internationally.

Page 3

Operations & context for an Enterprise Transformation Framework and Business Architecture

• Business strategy ( high-level):

• Continue to grow in a soft market

• Customer Service wins

• Centralized IT for Corporate and all international

• $300-350M in Annual IT Spend

• 1100 Full Time IT Employees

• ~750 Contractors

• 2 Data Centers with 500+ Applications

• CEO was an advocate of business “Transformation”, CIO is the catalyst

• Transformation and Business Architecture recently established as key capabilities needed to deliver results

Align business strategy transformational business opportunities spend on enabling technology

Initial Enterprise Objective

Page 4

Operations & context for an Enterprise Transformation Framework and Business Architecture

Responsibilities

• Establish framework that enables the enterprise to lead the marketplace in achieving financial and growth targets

• A standard approach to evaluate, design, and implement process designs across business units

• A standard performance framework that incorporates operational process scorecards for business units and functions

• Deliver $100M of Net Operating Income

• Metrics and data not readily available / common definition of metrics

• Too many initiatives• Accountability

• “I have to meet my annual numbers”

• Transparency is a threat• “We are different”• Process is not important – financials are

important• “Can’t you just build us a tool?”• Skills

Challenges

Page 5

Approach to establishing a framework

1. Determine customer needs/values and strategic operating goals2. Design operating model to support strategy3. Establish process performance metrics and objectives4. Design and implement process, system and people related changes5. Establish ownership and governance infrastructure

11 22 33 44 55Strategy Understand Our Customer’s needs/values

Enterprise Process Model

Process Performance Model/Scorecard

Operating Model & Process, System/Service, Data, and Organization Redesign

Process Ownership & Ongoing Agenda (PMO)

Order Entry AfterOrder Entry Before Order Entry AfterOrder Entry Before

Page 6

The Business View – The work we doOur Enterprise Process Model

Fee based services

Management Processes

SpecialityLines

CommercialP&C

Enabling Processes

Cu

sto

mer N

eed

s

Cu

sto

mer V

alu

e

Develop and Maintain Strategy

Manage Assets

Communicate/ Inform

Manage Business Processes

Manage Human Resources

Manage IT

Manage Facilities

Procure Goods & Services

Research Market & Gather Intelligence

Manage Legal

Manage Projects

Develop And Maintain Products & Services

Acquire And Grow The Customer

Care For The Customer

Deliver Claims And Recovery Services

Manage Project Portfolio

Manage Risks

Appoint & Assess Distributors

Provide Marketing and Communication Content

Administer Reinsurance

Un

ders

tan

d M

ark

ets

C

usto

mers

&

Dis

trib

uto

rs

Manage Budgets

Page 7

The Business View – What are the gaps and where should we invest

FIX BUILD LEAD

1 2 3 4 5 6 7 8 9 10CORE PROCESSES

Understand Markets, Customer, & Distributors

Develop And Maintain Products & Services

Acquire And Grow The Customer

Care For The Customer

Deliver Claims And Recovery Services

ENABLING PROCESSES

Manage Finance & Accounting

Manage Human Resources

Manage Information Technology

Manage Projects

Manage Legal

Audit

Procure Goods & Services

Manage Facilities

Current State vs. Future State

Page 8

The Performance View – establish enterprise wide measurement system

Electronic (EDI/XML vs.Manual (Commercial Paper) Transactions

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%Electronic Manual

010,00020,00030,00040,00050,00060,00070,00080,00090,000

100,000

Jul-00

Aug-00

Sep-00

Oct-00

Nov-00

Dec-00

Jan-01

Feb-01

Mar-01

Apr-01

May-01

Source:

Total Past Due ReceivablesMonth by Month (in thousands)

Book to Cash (Setup Account/Reserves)•Bill Premiums

• Issue Invoices• Post Premium Payments

•Manage Accounts Receivable

• Reconcile Premiums

• Research & Resolve Non-Payments

•Pay Sales Commissions•Publish Policies & Issue Certificates•Deliver Loss Control Services•Prepare Account Financial Reports

• Standard• Ad Hoc• Utilization• Reinsurance

Book to Cash (Setup Account/Reserves)•Bill Premiums

• Issue Invoices• Post Premium Payments

•Manage Accounts Receivable

• Reconcile Premiums

• Research & Resolve Non-Payments

•Pay Sales Commissions•Publish Policies & Issue Certificates•Deliver Loss Control Services•Prepare Account Financial Reports

• Standard• Ad Hoc• Utilization• Reinsurance

Care For The Customer

Care For The Customer

Policy Issuance Inventory (Commercial)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Sep-00

Oct-00

Nov-00

Dec-00

Jan-01

Feb-01

Mar-01

Apr-01

May-01

Jun-01

Jul-01

Aug-01

Source: "

Form

s

0

1

2

3

4

5

6

7

8

9

Days o

n H

an

d

Forms Days on Hand

Commercial Incoming Calls and Abandon Rate

7,9

92

4,4

96

4,3

04

4,5

57

7,8

95

4,3

54

4,4

40

4,3

40

4,9

02

5,6

06

8,1

97

6,7

09

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Sep-00

Oct-00

Nov-00

Dec-00

Jan-01

Feb-01

Mar-01

Apr-01

May-01

Jun-01

Jul-01

Aug-01

Source: "

Calls

0%

2%

4%

6%

8%

10%

12%

14%A

ban

don

Rate

Calls Abandon Rate

94

%

92

%

91

% 93

%

94

%

93

%

94

%

93

%

93

%

94

%

89

%

93

%

97%

84.0%

86.0%

88.0%

90.0%

92.0%

94.0%

96.0%

98.0%

Jun-00

Jul-00

Aug-00

Sep-00

Oct-00

Nov-00

Dec-00

Jan-01

Feb-01

Mar-01

Apr-01

May-01

All Forms Standard

Source: "

Combined Commercial Accuracy Rates

95%

100%

Service Retention Rate

63%

83%

50%55%60%65%70%75%80%85%90%95%

100%

Jan Feb Mar Apr May Jun Jul Aug

Page 9

Key Tools and Enablers

Financial Return Customer Satisfaction Employee Satisfaction Compliance Contribution to Community

Enabling Budget

Customers• Insured

• Distributors

• Internal

PMO Capability

Process models (current/future) and

framework maintained in enterprise repository

Operational metrics will be captured and available in our

enterprise metrics portal

Enterprise data and Organization maintained in Enterprise Repository

Functional capabilities, applications, services, and other architecture

building blocks maintained in enterprise tool/repository

Page 10

Lessons Learned & Conclusions

• Must approach build-out from top-down and bottom-up• Early success stories will produce more success• Focus on a one or a few key processes first• Those processes that touch customers have the highest impact on enterprise

performance

• Process Ownership is key• Process Ownership is not just one person but a team• Establish a dedicated team that owns the analysis and design of business

architecture changes for any one major process• Key roles include Business Architects, Business SME’s and change agents, production process

coordinators/performers

•There are no IT projects; there are only Business Projects with enabling IT components