Culture & Digital Transformation: How a 145-Year-Old Insurance Company Became A Digital Darling
The insurance industry in Canada is unlikely to be the first place you go to find examples of innovation, transformation and disruption. However it is within a mid-sized 145-year-old insurer from Waterloo, that some of the most intriguing category innovation is occurring.
Since Economical Insurance launched their direct-to-consumer offering Sonnet in May 2016, the organization has been receiving praise and plaudits from the industry and from Canadians who genuinely feel this is an entirely different type of Insurance organization.
I sat down with Economical Insurance CMO Michael Shostak to talk about driving business and cultural transformation and what a “sleepy Waterloo insurance company” figured out to leap-frog the category.
HB: The Sonnet story has been playing out in the media as a real digital disruptor, can you give me some background on that evolution within Economical?
MS: Absolutely. It’s important to put Sonnet in context of our overall business direction. Before I joined, Economical’s board made a decision to demutualize the company — essentially so we’d have different options available to us to drive growth. The direct-to-consumer model showed real promise but it was always going to be in addition to our traditional broker model. The challenge was to find a meaningful way to build that consumer business.
HB: “Going Digital” seems like a natural solution to that challenge. The Sonnet proposition seems much deeper and broader than that.
MS: Digital was a natural conclusion from the market assessment exercise we went through. Operating in such a large global category, with many de facto standards, means that many of the platforms and processes that power a digital solution already exist. So we purposefully chose to not build anything proprietary or in-house. We wanted to spend our time sweating the details of how we delivered this new service versus creating new versions of technology that already existed. That started with a Brand Purpose exercise to crystalize our thinking and to align the organization on exactly what it was we were creating.
The first step was foundational but very profound. All aspects of the business had to align on what we meant by “customer” — after all for 145 years “customer” meant different things to different people across the company, from broker to end consumer. Following that, what would be our guiding principles in attracting and dealing with that customer.
For me common language is the first demarcation of any cultural change.
Fortunately that exercise was less turbulent than I anticipated. There was a genuine belief that to bring customers over in a category where switching is low and involvement is typically even lower, would require more than just opening a digital channel. We needed a different proposition. We took inspiration from Saturn’s “Different Type of Car Company. Different Type of Car”. We needed to be — and act like — a different kind of Insurance Company. That drove some very powerful ideas which we crystalized into two thoughts. One — we care enough to change everything. Two, and you see this emblazoned on our walls, “Inspiring Customer Confidence” Those mantras gave us permission to start building out our new offering in a meaningful way.
HB: Classically, words on a wall seldom transfer into new behaviours and actions. Particularly in a 145-year-old organization. How did Sonnet avoid that trap?
MS: True but we had a great combination of executive alignment and commitment to experiment in building this out. In addition our board and C-suite include a fair number of executives with varied backgrounds from outside the industry. That immediately gave us a different perspective and different level of executive sponsorship.
Changing everything can feel like an enormous cultural task. We needed to be judicious. One of the first actions we took — and this took a real leap of faith — was to build out a hybrid team of Economical insiders paired with fresh-eyed “outsiders and newbies” to start creating the Sonnet experience. Essentially we took experts with diverse experiences and expertise and told them “Go build something that’s going to Inspire Customer Confidence” I remember early meetings where those hybrid teams would discuss how much latitude they really had to change things. Naturally people would say “Can we really drop this clause if it’s bringing in revenue?” The answer would be “If its not inspiring customer confidence, it has to go and we’ll find a way to address the shortfall” I was pleasantly surprised how quickly this new attitude took root. It actually gave us proof that this could work.
One meeting, in particular, stands out when our colleague from Legal pushed back on a certain decision because he felt it didn’t inspire confidence.
When Legal began championing this new behaviour, it was a genuine “mic drop” moment for me.
As you can imagine that story has subsequently become part of the company mythology and I’ve heard numerous colleagues reference it when they talk to their teams about the new behaviours we expect at Economical.
HB: Brand Purpose. Brand Mantra. These are typically the domain of Marketing. How have your fellow executives helped spread this across the organization?
MS: I’ve been very fortunate to have ongoing encouragement and support from across the ELT. Both our CEO and CHRO saw the value in having a clearly defined Brand Purpose not only for external purposes, but also as an internal rallying cry for employees. One of our priorities is to develop a “One Economical” culture that helps connect the company across diffent business lines and regions, while acknowledging that each will have its own unique personality. Brand Purpose, along with our company Values, gives us the foundation to achieve that. The partnership between Marketing and HR has been pivotal in this respect.
HB: Launching Sonnet to the public is only the first step in your transformation journey? Can you talk to me about keeping that spirit alive with Economical?
MS: We’re engaged in a multi-phased transformation of our business that began with the decision to demutualize. While we may have deliberately prioritized a direct-to-consumer business as our first step, it was always the intent that we’d be embarking on a similar transformation of the existing broker business. Of course it wont be as radical, but the sentiment of inspiring customer confidence is an amazing filter for looking at enhancements across the business. That 2nd Chapter has just begun.
Several things have helped keep the flame alive. One we’ve been engaging in a multitude of small initiatives across the organization to deliberately highlight this wasn’t just about launching Sonnet. For example we contemporized the Economical website from the outdated version that had preceded it. A clear signal of change. The manner in which we communicate across the organization has changed from old-fashioned news bulletins to slick video segments featuring our executives discussing topical events. Employees are actually engaging with those more than ever before. We’ve also seen great success infusing the informal networks that exist in any organization with our war stories from Sonnet — the Legal story I mentioned earlier is a great example. And what’s helped immensely is that several of the Sonnet folks have returned back to Head Office to help craft Chapter Two. They’ve become carriers of the new culture and visible examples of acting and behaving differently here.
It hasn’t just been one thing but a combination of activities that have legitimized and confirmed Economical is transforming it business and its culture. It’s the nudge model of change and its worked for us so far.
HB: That’s remarkable. The organization seems to have genuinely embraced this transformation. What advice for your peers concerned about how they transform their businesses, particularly the large institutional types?
MS: Start small. Create multiple small initiatives that signal change rather than some grand whole-scale reinvention. We’ve all experienced the dreaded desk drop of a T-shirt, coffee mug and screensaver with a new mantra that, twelve months later, has effected no new behaviour. The other benefit of small is its less intimidating. For employees at all levels. Enacting big change can often slow an organization down and create unnecessary, and unhelpful, anxiety. Small and distributed changes would be my advice.
HB: We began by talking about Sonnet as an example of Digital Transformation in Insurance but your story seems more about Culture as the Transformation.
MS: It’s actually both. Sonnet is a digital transformation for sure but there’s nothing particularly unique about how we’ve tackled that from a technology perspective. When folks ask me “How were YOU able to do this ahead of some of the larger, more expected players in the category?” I go back to a simple Venn diagram I always use. If you can 1) intersect an unmet customer need — and the unmet part is critical — with 2) a changing business model and 3) an enabling technology, you’re golden. Do it with 2 out of those 3, you’re likely to be successful for a while at least.
In our case the changing business model wasn’t going direct-to-consumer, that’s not novel. Our changing business model was about how we’d go direct.
The “how” was entirely driven by our people and that needed us to refine our culture in order to succeed.
This post is part of an ongoing series exploring the intersection of Culture and Digital Transformation — and the challenges organizations face when those two forces meet. This challenge will, I believe, shape the business agenda for the next decade so we all have a lot to learn.
I intend to highlight organizations that are uniquely traversing this challenge and share their stories.
If you’d like to share your story, please DM me on Twitter @ZimHilton or reach out via LinkedIn.