What life insurance can learn from manufacturing - lean methodology in product development
Lean methodology originated in Japanese car manufacturing. Its goal was to eliminate waste from every aspect of production – streamlining processes and focusing on what added value to the customer.
Since this beginning, it’s been adopted by the rest of the manufacturing world, and eventually the service industries showed interest. Some took to it like ducks to water, fully embracing the new method of working, embedding it into their company culture. Others have tentatively dipped their toes in, applying the methodology to some business units and not others.
Insurance seems to be of the latter variety. Hesitant to commit, either unwilling or unable to undergo to any sort of real change. It’s understandable, lean is so different to how insurance companies usually operate, and the ‘tried and true’ method has worked for so long. Why risk losing that certainty? Why gamble away a solid success rate?
But we all know that the old methods aren’t working as well anymore. Products aren’t as profitable, cost of operation is too high, and almost every insurance provider is missing a huge chunk of a potential market. So how could lean methodology solve all that?
One of the biggest benefits of lean methodology is in the name, lean. The goal is to reduce unnecessary waste so that you’re travelling lighter, and consequently, cheaper.
Faster products to market
Another goal of lean is speeding up cycles. Finding ways to work more efficiently, reduce wait times, and make sure every minute counts. In product development, this means faster products to market.
Products that clients actually want
Lean at its core is customer centric. Every improvement is geared towards the customer’s point of view. Part of this is learning to properly understand the customer’s wants and needs, how your product adds value to them, and how the customer engages with your product and company.
The product development process following lean principles would look more like a feedback loop, as product developers constantly learn directly from customers and regularly test their assumptions.
Adapting lean to life insurance product development
The basic principles of Lean are:
- Focus on effectively delivering value to your Customer
- Respect and engage the people
- Improve the Value Stream by eliminating all types of waste
- Maintain Flow
- Pull Through the System
- Strive for Perfection
These core principles instruct a process of constant improvement called Kaizen, with each iteration more efficient than the last. The process should look like a cycle, where the wheel turns around customer needs, and all decisions are informed by accurate information.
In product development the implications are clear. The wasted time from product inception to introducing a product to market needs to be drastically reduced, and products need to become even more customer focussed. What are the customers needs? How can each new product improve on the last in a way that actually adds value?
Until now, the focus in insurance has been product centric. Products were designed first and then pushed out to the market to be adopted by consumers. In a lean enterprise, products are ‘pulled’ through the system, proactively developed for what the demands of the market actually are, ensuring the highest possible success.
This is what product developers should be working towards - products that can’t fail, because they perfectly meet the needs of the customer.