Digitalising the wrong way

The Munich Re and ERGO tech trend radar is an annual update on digital innovation. It is a sort of time telescope that allows you to look at the future of technology over the next five to ten years. It highlights and assesses the latest tech hype from the perspective of an insurer. As Chief Digital Officer, it’s pretty hard to hold yourself back. You just want to dive straight in and apply the technology. But that is mistake number one – seeing digital transformation only in terms of the technology. This article looks at the stumbling blocks with digitalisation. It is not so much a collection of rules from a technical manual, more the acquired wisdom of my ten years’ experience working in the digital sector.

With the launch of 5G technology, the mobile internet has switched to high speed operations. The speed of data transfer allows you to download a film to your smart phone in less than five seconds. And today’s standard will seem fairly sluggish when compared with 6G. The sixth generation standard will support data rates of up to 1 terabyte per second. This will allow you to download entire databases of films in less than five seconds.

The technology will be particularly exciting in the field of autonomous vehicles. The new standard will further lower latency – this is the time delay between the digital impulse and the reaction. If a vehicle needs to brake in an emergency, 6G will allow an autonomous braking response time that a human being could never hope to achieve.
I don’t know how this makes you feel, but this particular prospect from the latest tech trend radar makes me want to get together at once with our automotive partners in Germany or China to draft ideas for innovative products.

Mistake No. 1 – Leaving innovation to digitalisation

But what if 6G promises more than it can ever deliver? The development of new technologies generates something that we call a hype cycle. When an innovation is presented at a tech exhibition, the expectations in this technology surge to a peak. After that they fall back again, and later settle at a more realistic level. In the best-case scenario, it proves possible to translate the promises offered by the technology into genuine innovations.

As a general rule, innovations always begin with improvements in technology. That is why ERGO has its own mobile scouting team, which tries to quickly identify the right ideas, along with the right player. In the hype cycle, the length of the period between exaggerated expectations at the start and a genuine increase in productivity at a later stage, differs from one technology to another. A lot of pioneering work can be done during this period of time and a competitive lead can be established. But potential, ideas and creativity can also be squandered from working with an immature innovation that ultimately fails to pass the practical test.

And a further challenge arises in this phase of uncertainty: those who drive forward an innovation are generally the digital experts themselves. By reason of their activity, they are a step ahead of everyone else in the company and are up to date with the trends they have seen at tech fairs. Almost inevitably, they try to persuade others to use the new technology. People then “cobble together” a solution around a particular technology. However, it should always be done the other way round. You have a problem and you search for solutions using the appropriate technology. What is crucial is to keep the use case clearly in mind. In this phase in particular, you need to control and leave to one side your personal enthusiasm for the technology, and engage in analysis with the actual business partners. After all, you want to solve a problem, not instal the latest technology. Digitalisation for the sake of digitalisation just doesn’t work.

Mistake No. 2 – Digitalising while bypassing the employees or the core mission

A key element of our strategy has been to immediately involve employees from all business units in the digitalisation processes. This allows us to bring in the all-important process expertise. It also leads to a significant increase in the level of acceptance for digital transformation among employees. We saw this in particular with our robotics processes, which were well received by staff.

At the same time, there was a considerable learning curve before we were in a position to properly address the issue. That is how the idea for the digital factory came about. But more on that below. Many people in the health sector are having similar experiences at the moment. Doctors, nurses and healthcare workers are spending an increasing amount of time on computer documentation. A single person performs up to 4,000 keyboard clicks per shift. In doing so, they are helping almost everyone – insurers, health insurance funds, medical services and government health statisticians – everyone except the patients.

As much as one third of all working time must now be spent on documentation tasks according to reports. This is time that is being diverted from the actual core responsibilities. According to colleagues in the health sector, medical staff understand digitalisation as the documentation masks on the PC. So acceptance for everything that is still to come in terms of digitalisation, and which might actually help, is correspondingly low.

Based on my own experience, I can only say that digitalisation does not work if it does not involve work colleagues and win their support! Staff want practical solutions, and they need a partner to develop them.

Mistake No. 3 – Fostering the "not invented here syndrome" – or the silo approach to work

At ERGO we have installed a delivery unit that we call the digital factory. Here everyone works in an agile setting, and scrum masters ensure the team experts can do their work. We have already developed a range of products. Apart from involving the customer, the most important factor here is that employees from different units work alongside and with each other. And not just for a single meeting, but on a permanent basis.

The cross-functional teams don’t need to phone one another to coordinate. All they have to do is walk to the next desk. They don’t have to ask their superior if they can have a bit more time to finish something. Their job is to work together to transform problems into solutions.

This setting reduces hierarchical procedures and promotes an ownership mentality among staff. It also encourages a cross-functional approach to problem solving. The paralysing “we invented it” silo culture is therefore automatically kept to a minimum.

Mistake No. 4 – Planning the really big solution

You have an idea with a coherent concept for realising it, as well as a clear picture of what the solution should look like. This would be the ideal situation, but it is far removed from an agile approach to digitalisation. Despite this, such an analogue procedure is still quite prevalent. The idea is that you go into the workshop with a master plan and reappear at some point with the finished solution. But that doesn’t work because we know less about our customers and their needs than we think we do.

That is the reason we never try to deduce what the customer wants in the agile environment. Instead, we prefer to ask them directly. This means we build prototypes or minimal viable products (MVPs) rather than finished products. Which is why we work in fortnightly sprints, after which the MVP must exhibit an additional benefit. At least to the extent that we can bring in the customer again and present the innovation to them.

There are two advantages to this approach. You realise very quickly if you’ve taken a wrong turn. At the same time, you have not used up too much capacity or budget – potentially in vain – by the time you get this second opinion from the customer. By way of an example, at ERGO we were convinced that we needed to offer an insurance cover for gamers. We are now a little wiser and have realised that this simply doesn’t work under certain parameters. But we developed the policy using the MVP method. This gave us quick responses from gamers at a minimum cost.

Mistake No. 5 – Bringing in expertise from outside instead of transforming internally

New, digital technologies call for new expertise. In most cases, you are not able to find the people with the right skills in your own company. What ERGO and Munich Re do, therefore, is engage in strategic partnerships, or acquire national and international startups. This is the only way to ensure a transfer of expertise and develop the required applications for our business areas.

But if we wish to use a technology in the long-term, we establish our own centres of competence with ERGO employees. With robotics, voice and artificial intelligence, we now operate three such clusters. But we are under no illusions: developing expertise internally is more costly and takes longer.

On the other hand, the return on investment is many times higher. We can only establish close, lasting interfaces to the business units internally. Not only are we developing in terms of technology, but we are also creating prototypes that can only be produced with this configuration of digital experts and business. The cultural value and the contribution of digital transformation to the company as a whole should not be underestimated.

We have experienced the direct comparison many times, where we started off with external experts, and then switched to internal clusters. And in every case, we were able to substantially improve the level of satisfaction among internal customers while at the same time enhancing our problem-solving skills.

Text: Mark Klein, CDO ERGO Group AG