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From Resource,
March 2005
Copyright by LOMA
The Future of IT
Technology expert Don Tapscott, who will be the keynote speaker at the 2005
ACORD LOMA Insurance Systems Forum, discusses today’s business environment.
By Tammy J. McInturff
“Emerging
Information Technology trends will bring profound opportunities for insurance
companies to create new services, new experiences, new relationships and overall
new value for customers,” says Don Tapscott, CEO of New Paradigm Learning
Corporation. Tapscott, a
best-selling author and visionary, will keynote the 2005 ACORD LOMA Insurance
Systems Forum. The second annual
Forum takes place May 22-24 at the Walt Disney World Dolphin in
Orlando
,
FL.
Tapscott will argue that companies
ultimately face a choice. They can
innovate IT—a resource still in its infancy—to enable new business designs
that help them differentiate in the market, or they can give in to the pressures
and cynicism of today’s difficult business environment.
Resource recently had an
opportunity to talk with Tapscott and get a glimpse of what he will be
discussing at the Forum.
Resource:
What is your assessment of the
current business environment?
Tapscott:
There are some fundamental changes that are going on in the new business
environment that are quite striking, and which we haven’t fully understood
yet. Take
globalization. There is much talk
about it, but what are the real implications for companies?
The engine of the global economy is clearly shifting from the
U.S.
to developing economies, particularly Asia and even more so
China
. This is a historic change. We
haven’t seen a change of this scope in decades.
Obviously
the new geopolitical situation is very volatile.
We’ve got new forms of military conflict and restricted mobility as a
result of the so called battle of the civilizations.
We’ve
come out of a recession but there are many aspects to the global economic
environment that are quite unpredictable. The corporation as we’ve known it is
going through the biggest change in its architecture in a century.
We
also have the crisis of trust, probably the biggest one ever.
And transparency is a powerful new force in the economy that is changing
the way that companies build relationships and grow.
There
is also a demographic revolution under way, not just the aging of a population
but the rise of the baby boom echo or the so called net generation—kids today
age six to 26 years old. In the
U.S.
they are the largest generation ever—80 million people.
But it is not their demographic muscle that makes them a huge force for
transformation, it is the fact that they are fundamentally different than their
boomer parents. They process
information differently; they think differently.
They will be different as consumers and as employees.
Fundamental
changes are taking place in technology as the Internet shifts from becoming a
presentation medium to a computational platform.
So
when you put all that together it is a time of very profound change.
It is also time of great opportunity and great danger for companies.
Resource:
What are the top IT trends that are emerging for 2005 and beyond?
Tapscott:
We have identified nine trends that will be emerging in 2005 and
beyond. Two big ones are the
seemingly counterpoised trends of granularity of systems, data and technologies
on the one hand and the trend towards integration and collaboration on the
other. Technology is becoming much
more molecular as we see the rise of pervasive computing—billions of inert
objects that become smart communicating devices connected to networks.
Our customers are being connected with each other and with companies
throughout the day.
Resource:
Do you believe that IT has become a commodity?
Tapscott:
Some IT has become a commodity and some have not.
It is a big mistake to think that everything has been commoditized.
Hardware has been on a relentless trek towards commoditization for some
time, but there still are specialized hardware devices that are not
commodities—the iPod is a great example. Some
software has become commoditized at least from the customer point of view.
Many applications are publicly available and get customized into “best
practices” in a given industry. Having
said that, much software is unique to individual corporations or situations and
the really hard part to commoditize is the changes to a business process or a
business design enabled by technology.
Resource:
Can IT still be leveraged for creating competitive advantage?
Tapscott:
More so than ever. Information
technology never created competitive advantage independent of the business
changes that it enabled and there were no halcyon days of IT competitiveness 20
or 30 years ago as some pundits have alleged.
For every American Express Sabre reservation system, there were dozens
that tried and failed and there were thousands of systems that were pretty
boring. IT was about bread and
butter automation of existing business processes.
Today however given the big changes in business architecture and strategy
required for the global business environment, information technology is coming
into the heart of competitiveness in some industries more than others but
overall across the board.
Resource:
What is the role of IT in competitive advantage today?
Tapscott:
I’m conducting a five million dollar research project which is answering this
question. It is funded in part by
some leading insurance companies. We
are looking at fundamental changes in the way that companies compete as we move
from a traditional model of the corporation to what we refer to as an open
network enterprise and there are ten dimensions of change all enabled by
technology. Most of this work is
proprietary to the members who funded the program but there are some top level
findings that will be communicated to a broader audience including in my
presentation at the ACORD LOMA Insurance Systems Forum.
Resource:
What is the key to competitive advantage in today’s business world?
Tapscott:
Companies compete in two ways; they have differentiated product and service
offerings or they have lower cost structures enabling lower prices. But
there are changes underway regarding how we orchestrate resources to achieve
competitive advantage. The deep
structures of corporations are changing, as vertically integrated corporations
unbundle and focus within business webs. The
tonic of the market is being brought to bear on every business function or
object or component within the corporation on a global basis and this is a very
profound change which, if handled correctly, enables companies to have better
performance and to compete. The way that companies create experiences for
customers and the way they innovate and collaborate are also changing.
Resource:
What is the biggest mistake companies are making right now, in terms of
technology?
Tapscott:
Well the biggest mistake that I see is throwing out the technology baby with the
dot-com bath water. There is a lot
of confusion amongst the CEOs that I deal with regarding how to make the turn to
growth and the role of technology in doing so.
Many executives are cynical, understandably, about the claims of
technology vendors and IT managers especially given the crash of the dot-com,
the technology depression, the global recession, the bear market and overall,
the difficult period that we have just come through.
Business executives tend to be hunkering down, often thinking that cost
control is not only necessary but sufficient as a strategy for success.
This is a big mistake.
Resource:
What advice do you have for the IT
professional in the life insurance industry?
Tapscott:
IT is going through some big changes, as is the industry.
Continue to become more of a business leader, not just a technologist.
Deliver value. Keep a low profile, while at the same time finding ways to
provide leadership for the transformation of your company.
Resource:
Is there a future for the IT professional? As
technology evolves how will the profession change?
Tapscott:
Well someone said that IT and the IT professional are becoming less important
and that overall IT as a function will just disappear—like managing the
electrical power grid in a building disappeared as a separate function.
There are also pressures of outsourcing, where a lot of IT work can be
done more cost effectively in low cost geographies.
However, it is wrong to conclude from this that IT is becoming less
important or that there are not opportunities for IT professionals and I will be
explaining why in my keynote presentation in
Orlando
,
FL.
Resource:
Why is transparency becoming so important for organizations?
Tapscott:
Transparency is much more than the obligation to openly disclose financial
information. Rather all of the
stakeholders that interact with companies—customers, employees, business
partners, shareholders, communities are gaining unprecedented visibility and
access to information about the behavior, performance, operations and even
values of companies. So the
corporation is becoming naked and smart companies realize that rather than
fighting transparency, you can embrace it as a force for building trust,
profitability and a sustainable business model.
Resource:
What issues or problems arise with greater transparency?
Tapscott:
There are unintended consequences of not having a clear transparency strategy
but the dangers of being opaque are much greater.
Resource:
Are insurance companies doing enough right now to become more transparent?
Tapscott:
No, definitely not. The
insurance industry needs to get with the program and open up. There are all
kinds of classes of information that should be shared with customers and with
other stakeholders. By being opaque
companies not only risk opportunities to build trust and relationships, they set
themselves up for potential failure.
Resource:
How should companies view technology—as a strategic business solution, a
source of competitive advantage, or a cost of doing business?
Tapscott:
Technology is a resource like human capital or money, which can be
harnessed to enable new business designs and strategies that help companies
compete. It can also be a money pit
and a sinkhole if not managed properly. The
irony of the new period that we are entering is that there are far reaching
opportunities to reduce the cost of technology while at the same time increase
its importance within the firms and their business strategies.
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