As the fog slowly lifts from our beleaguered world of operations, we can start to put the pieces together regarding where we truly are, when it comes to building the backbone for successful businesses of the present and the future:
No – not all our firms have been wiped out overnight by disruptive digital competitors (sorry all you hypesters who’ve been beating that drum, but most our ‘legacy’ firms are doing just fine).
No – not all of us have been replaced by robotic software that can mimic our rote behavior and render us useless (if only more customers will actually admit they are finding RPA a lot more challenging than they thought).
No – outsourcing isn’t dead, it’s just under pressure from commoditizing services, too many competitive service providers, greater global location choice and the emergence of specialist niche firms, which can do complex work at a much smaller scale than our juggernaut firms can afford to deliver.
In short, our enterprises are caught between innovation and renovation, where they need to make the most out of what they have, while making the shrewd investments in the innovation the need to stay relevant in their markets. So with whom better to chew the fat than a very old friend and great supporter of HfS over the years, Ian Maher, who’s been the dynamic busybody behind Hanover Insurance’s sourcing and operations activies over the last decade. You won’t meet many customer executives who deal with technology firms, automation vendors, outsourcing providers, procurement executives, HR, IT – you name it – and still always has a smile on his face. Maybe it’s his stubborn devotion to his under-achieving soccer team, Everton, which keeps the chap so positive and focused….
Phil Fersht, CEO and Chief Analyst, HfS Research: Good morning Ian. It’s great to catch up with you again. Could you tell HfS readers a little more about you and your background in the industry, where you’ve come from, and what you’re doing today?
Ian Maher, VP, Head of Sourcing, The Hanover Insurance Group: Phil, good morning, it’s great to catch up again. As you know, my background is on both sides of this interesting equation, from both a sales and a buy-side perspective. When I was originally in the UK, I spent the first decade of my career working for what is now Fujitsu. As the development of consulting services, on the back of technology solutions, I was fascinated by how firms created new revenue streams on the back of product sales. In the late ‘90s, I moved over to the States and joined Gartner. With roles, in account management support and financial services in the North East of the US, I then started to work more closely with the research leaders in Sourcing and especially BPO, spending a lot of time working with CIOs and similar leaders, helping them understand what was going on from the BPO point of view as it started to seep away from a technology space, into the realm of mainstream business decision makers.
One of my previous clients is the company I’m with today. I’ve been at Hanover for nearly 10 years. We are a growing P&C business, largely in the US but with a UK operation via our Lloyds of London syndicate. In this role, I look after a variety of functions, including, traditional procurement, contract risk and governance. But more interestingly, perhaps to me at least, is the role of trying to fix together how the ideas from the outside world can be brought to benefit, what is pretty much, a traditional insurance business. I’ve led a couple of major initiatives working with leadership about benefit realization from BPOs and in the last two years, really started to help familiarise and educate the organization as to the potential and perils of what we call Services Automation. In short, our venture into RPA, Cognitive and the step change function that Automation may offer operational excellence.
Today, I’m keeping the organization moving at a steady pace.
That’s the potted history and I’m speaking to you today from a very sunny Boston. So I’m happy about that.
Phil: Good for you. I think we’ve worked together as colleagues and friends for probably close to a decade, since you started at Hanover. You’ve been through a long process of educating your colleagues and stakeholders on the merits of BPO and I’ve observed you’ve become quite a mature adopter at Hanover over the years. Where is it all going now? Is it still the same type of value proposition that we were talking about three, four years ago? Or do you feel it’s really changing now, beyond recognition?
Ian: It’s interesting Phil. I sometimes think we jump to the next fad or area of excitement, and forget that at its very basic level a successful BPO program is, and should continue, to deliver massive benefits as long as it’s managed in the right way. It isn’t something that gets stale. We continue to reap major benefits economically, from a quality of service, which is really the primary driver and continues to be a point of differential with our agents and with our insureds. Caution should be taken not to throw away something, that while it’s sell-by-date might be fast approaching, it’s something that can still, year-on-year, give a consistency of service at a scalability of cost, and should be maintained.
We’re approaching 12 years in our relationship with our primary BPO provider, to support maybe 80 to 85 different functional areas across Hanover, and continue to deliver extremely well in a very, mature set of processes. Where is that relationship going? We’ve discussed how the BPO providers are moving towards the next evolution of service delivery and incorporating the digital aspect. I’m sure a part of me is a little bit frustrated, I would like to see the traditional pure-play BPO’s a little bit further along the path. But at the same time, I need to be confident that if they change their delivery model, I can still hold them accountable for both the people and the digital aspects of the solutions. I’m comfortable in biding my time a little bit as long as I get a 95% confidence level of the evolution of the BPO into this hybrid BPO, and its success. That’s probably where I am and what I’m saying to my senior leaders, don’t rush into something at a 40-50% confidence level.
Let’s make sure we get it right jointly. Let’s make sure that the vendor succeeds. Because if we fail, we fail jointly and there may not be a second chance in terms of going in the direction that we’re looking to go given the magnitude of impact of introducing automation into the delivery model.
Phil: It’s good to hear you talk about incremental change, at a pace that you’re comfortable with. We hear a lot of clients today and customers talk about, “Oh, my CFO just came back from another conference and apparently we have to find 40% cost saving through RPA, and we got to do it next week and we need a digital strategy.” Does your firm suffer from a lot of the startling new stats and new technology trends? Or do you feel you’re a bit more sceptical, at Hanover, as to the pace and the velocity with which things are moving?
Ian: No. You hit on the most common conversation I have, from a global business services or a shared services leadership point of view, there is no more important task than being a voice of reason, and often responding to CFOs latest airport lounge magazine article, in terms of what’s the marketing hype from the sell-side.
It is always possible to hit some unrealistic number in the short-term. But you’ll probably pay the cost through disruption or through a failure to really plan systematically for the next three to five years. Across the industry, and not just at Hanover, experiences of going through different delivery model changes can bring that realism to keep you ahead of the discussion. One of the things that I’m starting to take a lot of interest in, and I’m looking forward to discussing further at the HfS Summit in Chicago, is, are leaders ahead of the discussion or is the discussion ahead of them and they’re simply reacting to other senior leaders?
I think this is a great chance for the BPO leaders, the CPO’s, the SSO leaders to again reinforce value within their organization and to be ahead of these major changes. I’m interested in the views of the folks that are going to be in Chicago – where do they see themselves on the proactive vs reactive scale.
Phil: Yes, there was a lot of tension at a recent event we held in New York City, the stress levels between providers and their customers, have reached an all-time high. I think there is a lot of expectation on both sides and a lot of pressure on operations to really shift things along in many organizations. It’s interesting to hear what’s happening with Hanover. When we talk about a burning platform, you know insurance is an interesting industry. We’re looking very closely because there are a lot of disruptive competitors coming along, a lot of digitally driven insurance products and firms leaping into the space. Do you feel being in a more traditional firm like Hanover, there is more threat from digital disruption? Is this something you’re closely monitoring in terms of how you need to make a pivot? How are you viewing disruption in your space? Is it something that is changing your behavior when it comes to sourcing and operational relationships?
Ian: It really is and obviously my major area is the P&C side. I am vaguely aware of the Life and Health side as well. We are traditional, in so much as we still largely operate through a distribution channel of Insurance agents, because at the end of the day we’ve got a firm belief and understanding of the needs of the insured and this is best handled through a skilled individual – that’s our Agency channel. Clearly, we’ve got challenges within the industry. As companies can move into the insurance space with a fraction of the start-up or operational cost that we have, there is clearly a need to pay attention to those who are bringing in digital end-to-end solutions. We’re looking to build on the foundation of our value proposition, which includes intimacy of conversation and an understanding of “location”, and bringing in the smartest and most effective delivery model.
We typically see a progression through a legacy system being matured, and in some cases being replaced by package solutions. However, at the front end, what we’re starting to see is the widespread adoption of the digital based input processes, the submittal, the early inquiries and so on that come to us. They now typically come in with an expectation that a quote or description of the coverage areas, can be provided through any device, can be provided at any time of the day, can be provided without necessarily having to talk to somebody. So my focus is sourcing the enhancement of our sales activities as well as the delivery of operational services.
The other area that we’re seeing Phil, is clearly the development of certain products to actually take account of some of the emerging threats in the world of business. Most insurance companies, are looking at the development of cyber-related insurance products.
As we start to build those new products, we’re largely building them from a framework of digital first components. In the past, we have gone through a traditional underwriting compliance product development area. Most of us are more likely to look at a solution that’s a one-stop shop for underwriting in some of these interesting and extremely opportunistic areas for us to develop new products. I go back to my earlier question – is the sourcing leader involved in working with these types of solutions and integrating them into the portfolio of traditional BPO services? I think that typically sourcing leaders can bring in a rational and an understanding of how new vendors, new third-parties can be integrated into the bigger service offerings of the organizations that we represent. So definitely a change in mentality from back office through to front office differentiation, something akin to the HfS OneOffice vision.
Phil: It’s good to hear the evolution of your approach in this type of market as you look at your enabling support strategy, to be more flexible, nimble, scalable, cost effective with your delivery. One of the other analyst firms recently declared that 96% of clients trying RPA aren’t very happy. What’s been your experience? Are you one of the 4% or one of the 96%?
Ian: So we will refer to that “other firm” as, just as one of the others… I don’t think we’ve had enough time for anyone to judge happiness or success. I think we’re in the twilight of the first day of understanding just what the benefits or otherwise from the early ventures might be. Insurance is slightly a laggard as we don’t work in a real-time environment Phil, the wealth management and retail banking firms together with the micropayment functions are ahead of us in terms of benefits realization but we are starting to see how to deploy successfully, and how not to.
Our success, as opposed to happiness, has been in actually seeing from start to finish, the life cycle of Service Automation, including almost 10 to12 months of actual production environment. We’ve measurable results of a very, very key insurance process which has a minimum life cycle of a year because it’s involved with the market acquisition. I think the first sign of success is present but we won’t know for some time. I’m not in the camp of happiness, I’m in the camp of ‘enthusiastic observer’.
More than anything our success is about getting our organization ready for the next major initiative, as it is with the result of the first one. If your organization is primed and operating in an environment where the support services understand, articulate and are making the right commitments to plan for 2018/2019, I think that is success. But I don’t put that down to RPA. I put that down to good planning and leadership that we’re trying to bring to the organization.
Phil: We talk a lot about unlearning. You’ve been in a quite unique role as a sourcing lead, a governator type, for quite some time. Do you feel that you are learning new skills, new capabilities on the job and broadening your horizons? Or do you feel there is more of a defined curriculum here with everything that’s going on?
Ian: Well it’s a good question. I think in some ways the scope of what we try to do really hasn’t changed, but the pieces that we’re talking about clearly have.
From a sales background and now leading the buy-side, in many ways I’m part evangelist on behalf of the industry and some of the sales organizations, part pragmatist. I think that really hasn’t changed. The role that we play organizationally is about risk management, finance management and governance. But individually, I think you play a different role in terms of bringing the knowledge to the C-level that they require in order, to make decent decisions.
So from my own development, my ability to understand the ways of a changing C-suite is something that you’re never going to feel that you can take for granted. You go through the activity to establish and maintain relationships. You understand how the outside world forces changes in business direction for the senior leaders and you have to connect Sourcing to these changing needs. We’ve had the retirement of our CEO and the arrival of a new CEO with a very different outlook on the world. You need to be ahead of that individual thinking and bringing ideas as opposed to problems. Otherwise, you and your function that you look after might be relegated to a secondary position. In summary, while nothing has dramatically changed, you have to be consciously looking out and understanding and translating the marketing and the realities of the sale side. That is something we’re never going to be comfortable in saying that we’ve achieved, simply because the sell-side bring ideas at an ever faster rate.
Phil: We talk about the velocity of change and where things are shifting, when you look at your partnerships, with the other service partners in particular, would you say those are changing dramatically? Do you feel your current partners can innovate with you at the pace that you want to go with? Do you feel you constantly need to look out for new expertise and skills? How do you feel the service community is helping you get to where you need to get to?
Ian: I think I’m going to give a more general answer as opposed to a specific comment on my primary partner Phil. Knowing many of the folks in North America and a number in Europe as well, Many service providers have struggled somewhat with this reality of, “How do I protect my revenue but also generate future margin.” For some time I have been somewhat frustrated but also somewhat sympathetic to the business challenge that they’ve got. I’m not sure that I need to hold my primary BPO vendor to something that would cause them to act unnaturally or even put their capabilities in threat. I want to get a better deal clearly. I may want to get better quality but you have to figure out the solution together. I say that because I’m still going to hold my BPO partner accountable for both the digital and the non-digital delivery component. I’m not looking to change or reduce service levels. They’re only going to go up.
There is a degree of complexity, that you really have to think through on behalf of your vendor rather than just take a “two by four” and challenge them to take 60% of cost out. Because you’ll end up with an unbalanced and a somewhat immature solution. My wish though, and again I’m looking forward to speaking to some of the BPO vendors as well as the Automation vendors, is how well are they really teaming together not just to shift license, not just to get me to commit upfront, but to think through the reality of a deployment model including the HR aspects of workforce changes.
Providers need to think through a reality of a well built, highly efficient use of technology rather than just have a deploy bots that may just about meet a basic level of performance but fail to when integrated to the much bigger ecosystem of operations. The BPO providers need to take look at derivative rights solutions that combine technology and process knowledge into a reusable industry focused set of solutions. I’m surprised that this isn’t more widely talked about because your asset at the end of the day is your execution of your process. Whoever carves that out first and can create some competitive edge, maybe even protect that particular new product, I think has got a great opportunity to be competitive and more aggressive and go after other organizations traditional business areas. So a long answer but I think on the whole I’m a little bit more sympathetic in figuring the future out than I was.
Phil: That’s nice to hear. So you’ll go easy on everybody when you’re in Chicago in September I’m assuming, right?
Ian: I’m looking forward to the one-on-ones Phil, let me put it that way!!
Phil: And finally… what do you think about Wayne Rooney coming home to Everton?
Ian: Happy! A different player at 31 but will help galvanize the team. some very good signings so far, I’ll be doing nearly as many air miles as you this year, Phil
Phil: Excellent. I’m really looking forward to seeing you again. You’ve been a very good friend and supporter of HfS over the years and hopefully, you’ll get to meet many new folks in Chicago in a few weeks. Thank you very much for your time today Ian.