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The insurance industry is in the midst of profound change mainly driven by trends that are converging and creating conducive environment for disruptive innovation and forcing a shift in traditional business models compelling them to align with models relevant in today’s digital age. In this new era of On Demand economy, where Netflix, Amazon, Uber rule the world, consumers now expect to get what they want when they want it on their terms.  The challenges brought about by this Digital disruption in the Insurance industry is forcing companies to not just rethink their software architecture but also rethink the whole approach to delivering value to the customer.Firstly, the digital business model should allow creation & shorter time to market of products and services; companies need to become skilled at product innovation that meets changing customer expectations. They also need to provide a seamless multichannel experience so consumers can move effortlessly from one channel to another. Finally, businesses need to use advanced analytics tools to gain insight into customer behavior which can lead to improved customer experience and increase sales through more effective cross selling.Most importantly, Companies need to cut across organization barrier to deliver great end-to-end Customer experience across multiple touch points which span multiple departments (e.g. new business, claims, policy servicing, etc.) & in some cases involve suppliers that are external to the company. This can only be achieved when we have the underlying workflows connecting various systems designed to be responsive to the fast changing needs of this digital economy You must be wondering, how does Conway’s Law come into the picture?? Conway’s law is an adage named after computer programmer Melvin Conway, who introduced the idea in 1967A contract research organization of eight people was hired to produce a COBOL and an ALGOL compiler. During the project, he observed, “After some initial estimates of difficulty and time, five people were assigned to the COBOL job and three to the ALGOL job. The resulting COBOL compiler ran in five phases, the ALGOL compiler ran in three.” 1These observations led to what is now known as Conway’s Law, which states:”Organizations which design systems…are constrained to produce designs which are copies of the communication structures of these organization.”In other words, how we organize our teams has a powerful effect on the software we produce, as well as our resulting architectural and production outcomes.Designs evolve to reflect the environments in which they were developed. In tightly-coupled organizations, dedicated teams employed by a single firm and located at a single site develop designs which are tightly-coupled. By contrast, in loosely-coupled organizations, when a large, distributed team of volunteers develops the design, the architecture that evolves is more modular as a result of the limitations on communication between developers.Digital disruption: What it means to current IT delivery model?In the insurance industry, Legacy applications pose multiple challenges in realizing the goals of the digitalization. A legacy application would consist of a monolithic architecture where a vast number of functionalities are wrapped under one roof. Though monolithic architecture has its own benefits, it also poses a number of challenges such as inability to deploy different components/ functionalities independently thereby greatly affecting the speed to market, failure in one part/component affecting the entire monolith, inability to scale different components / functionality independently , etc.Unlike enterprises that are born digital, traditional Insurance companies don’t have the luxury of starting with a clean slate; they must build an architecture designed for the digital enterprise on a legacy foundation.   In a 2014, McKinsey introduced the concept of “Two-speed IT architecture” solution which involves managing two separate, coherent modes of IT delivery, one focused on stability and the other on agility.  The high- speed IT can create strategic advantage for the enterprise with Low-speed maintaining systems of record “. They see Two-speed IT as re-inventing IT to support digitization as part of an organizational transformation so as to deliver a strong digital capability in the organization. Their approach is to incrementally re-invent IT with Two-speed IT so as to focus the high-speed IT on high value areas for an initial period. After which agile innovative IT approach is roll out to other areas of IT.   This will involve implementation of enablers that can help realize these organizational goals which are:1. Cloud Services and a Cloud Architecture (IaaS and PaaS ): Enables  the use of public, or hybrid cloud through self-service rapid provisioning of complete environments as well as rapid creation these resources can be quickly deleted2. Instant cross-channel deployment of functionality via Microservices : New Microservices defining only a small amount of functionality, should be deployable in an hour rather than in several weeks. Such Microservices should also be available across all channels.  3. DevOps and Automation: Continuous Integration/Continuous Deployment (CI/CD) for faster more reliable deployments How applying Conway’s Law can help achieve Two–speed architecture?To achieve the responsiveness and agility businesses will need to modify their big ecosystems of software to allow for small experimental changes in production with the ability to gauge what the amortized change will be to the existing code base. In other words, how teams & the   infrastructure can respond to changes quickly?The answer to this question can be found in Conway’s Law which suggests that it is not just a development team problem but an overall organizational problem.The right question should be…What is the organizational structure one needs to be able to deliver the software quickly?Teams which are focused and have small code footprint react better to changes & the nimbleness of team(s) has direct correlation to the team size and relationship among development team and product owner. The better the communication channel, the better a development team is able to model the design to the problem domain. Most of the time when the team fails to deliver what was promised  is due to flawed communication with multiple layers of translation existing between the team & the business stakeholders  or may be the process to implement a change quickly are broken . Discreet teams owning discreet problem can develop code base tailored to the subdomain rather than worrying about the enterprise wide change. Cutting down the time to get something to production is also very crucial as multiple layers in between pushes the development team further away from context that is needed to make the right decision. We need to ensure that teams are smaller (E.g. 2 pizza team size in Amazon) and closer to business.Netflix is an example of such a company where the organizational structure is created around the development culture. They thought of the dev ecosystem they want and then built an organization communication structure around it Outcome based team structure.Digital transformation is a lot more dependent on Agile transformation than is apparent from high altitudesIn his book  Agile IT Organization Design, author Sriram Narayan points out that when we grant autonomy to a team, we run the risk of local optimization—the team cares much more about its own success than the success of the business as a whole. As it turns out, it is less risky to grant autonomy to outcome-oriented teams. Since outcomes are independently valuable and achievable, local optimization is less of an issue. Therefore, a greater degree of autonomy can be afforded to a team that is responsible for an outcome. This makes it possible to assign a single outcome owner and provide him/her with a team (organization) to realize the outcome.Decentralizing along product or region usually retains alignment with business outcomes. Functional decentralization (e.g., marketing, sales, product development, and support), on the other hand, does not align with business outcomes because each function represents only one of several activities required to achieve the outcome.When we organize by outcome, each team owns one outcome and all the activities needed for it. By contrast, when we organize by activity, no single team owns an outcome. Each team owns just one of many activities that contribute to an outcome. Activity-oriented teams are often single-specialty teams—each member is a specialist in one activity, for example, a testing team or a vendor-management team. Outcome-oriented teams are multispecialty teams because the outcome needs the coordinated effort of multiple disciplines Final Thoughts…Companies today must operate in an environment where they are able to respond quickly to changing market conditions and capitalize on new opportunities – through close collaboration with project stakeholders and the efficient delivery of working software.  Brocchi and her McKinsey co-authors 2 make the following recommendations which can help us navigate through the turbulent waters of Digital disruption.Adopt a business-driven approach: This can be accomplished by creating a master list of possible business use cases as well as opportunities for new or enhanced products and processes & identify the most important ones across a range of business domains.Promote joint ownership. To break down cultural barriers representatives from the business side need to physically sit with members of the IT organizationBuild and empower cross-functional teams. Scrum teams could include “representatives from the business units and IT – for example Business owners, IT developers, Infrastructure support (DevOps) and QA.Develop and introduce key performance indicators. “Metrics that are directly tied to agile ways of working are critical for sustaining long-term commitment to agile data,” Brocchi and her co-authors stateIn digital channels, not only are you competing or being compared with global players like Google and Facebook but generations who have grown up as digital natives have high expectations as to user experience and how rapidly your organization will respond to their needs and interests.Being successful in the competitive digital world requires an ability to deal with a range of new uncertainties including how users will behave in respond to new digital offerings. Dealing with this requires an ability to maneuver in response to customer feedback cheaply and easily, rather than upfront planning.  In other words, to discover successful solutions by being able to …”turn on a dime for a dime.”1 Conway, Melvin E. (April 1968), “How do Committees Invent?” 2 Using agile to accelerate your data transformation,


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