25th Anniversary blog series: 1993 – Rethinking the company
The UK Independence Party is making the headlines. Newspapers are under scrutiny for invasions of privacy and the security threat is at its highest level for years….
Sounds familiar doesn’t it? They are not, however, observations of the present but a snapshot of life in 1993. A look back at that year shows a world that will be both familiar and alien to many people.
Some aspects will feel like a lifetime ago. The Maastricht Treaty had just come into force, creating the European Union, NHS waiting lists had fewer than 2M people on them and the Bank of England had lowered interest rates to the lowest levels since 1978…. 6%
The “familiar” and the “alien” were a common theme for SAMI that year as we helped organisations to look to the future with clarity and confidence. A reflection on our work with a major insurance company at that time shows SAMI working with a successful player in the UK Life Insurance industry who were grappling with how to manage a familiar present whilst looking ahead to an alien future.
The 1980s had been a time of unparalleled success for the company, but whilst there had been a boom in new business, there had also been a growth in industry complexity and regulation.
By the time the 90’s arrived consumers were plagued by mistrust due to the aggressive selling techniques that were common in the industry. By 1993 industry costs were rising, sales linked to the housing market were flat and competition was growing.
The consensus view was that insurance had become a “grudge purchase” and needed to be sold instead of marketed. This approach came with associated high costs of sale. The new Chairman and CEO asked SAMI to help the company take a more strategic view in order that they could ensure future success.
- The strategy process started with a scenario-planning project, with SAMI as facilitators.
- Interviews with clients, staff, competitors and regulators identify two key environmental factors – demographics, and information and communications technology. The industry was perceived to have been asleep for years and the internal culture was “anti” and not “pro” consumer.
- There was universal agreement that continuation of the status quo was not a credible scenario and two scenarios were created – “Evolution” and “Revolution”
The drivers for both solutions were the same; the main difference was in the pace of change. By the end of the process, “Revolution” was looking more credible.
With this in mind, the company asked three questions to determine their strategic direction:
- Could the company grow their long-term business profitably?
- Were there other profitable opportunities that could be exploited?
- Were there profitable opportunities for L&G outside the UK?
Opportunities were identified in:
- Pensions – the growth area
- Retail investment products (eg unit trusts)
- The protection market (eg household insurance)
The company also decided to build direct as well as the traditional indirect distribution channels and introduce advice based selling and cross selling. A Director of Marketing was recruited and business activities based upon core competencies.
The scenarios were rolled out through the company in workshops run by facilitators trained by SAMI.
The results from getting ahead of the curve were growth in:
- Market share
- Profitable new business
- Share price
It is critical that the strategic planning process is clear, manageable and objective if the business is to benefit from it in the long term. Here are some of our suggestions for ensuring successful strategic planning:
- Remember that stretch goals drive more creative, strategic thinking. Best practice organisations set targets that require a considerable shift away from “Business as usual”.
- Ensure that your planning processes are evolving and flexible. A continuous improvement philosophy should guide the planning process design.
- Make communication of the strategic plan a formal and significant element of the process (It should be viewed as a key measure of quality planning).
- Be mindful that a planner’s distinction between strategic planning and business planning is normally blurred. As the cycle time between strategic plans shortens, business planning is done within the context of a strong corporate vision or culture, even if a corporate strategy is not articulated.
- Know that the role of strategic planning as a key element in the management system should be explicitly recognised through strong links to other elements of the management system (e.g., strong human resources and organisational structures).
- Document all aspects of your strategic thinking.
- Recognise that a single core competence or capability is not the driver of strategic planning (Instead, the basis for competitive advantage and new business development is based on diverse competencies).
Written by James Blackmore-Wright.