The financial services industry, including insurance, is undergoing rapid change in response to new technology, FinTech startups, and shifting customer expectations. On this episode, we talk with the CIO and Chief Digital Officer at a large insurance company to understand digital transformation in this important industry.

Dr. Alexander Bockelmann is the CEO of the UNIQA IT Service GmbH and responsible for the IT at the UNIQA Insurance Group AG Together with his team, Alexander is building a new international IT shared service provider for the UNIQA Group, rolling out innovative new IT services across 19 countries.

Alexander is responsible for improving customer value through digital innovation and solutions at UNIQA Insurance Group as well as responsible for the overall IT services within the UNIQA Insurance Group. He is responsible for the IT strategy and IT service delivery within the UNIQA Insurance Group. In 2015, he completed the build up of an IT Shared Service organization while improving IT stability by 50% and improving the success rate of IT enabled business projects by 20%.

Dr. Alexander is currently working on the digital transformation on UNIQA and its related IT activities.

Transcript

 

Michael Krigsman: Welcome to Episode #207 of CXOTalk. I’m Michael Krigsman, industry analyst and host of CXOTalk. CXOTalk brings together the truly the most interesting, and innovative people in the world, talking about disruption, talking about the leadership challenges, and talking about what’s going on in their company, and they’re industry. And today, I’m so happy because my old colleague and friend Dion Hinchcliffe is here as a guest co-host with me. Hey, Dion, how are you?

Dion Hinchcliffe: Hey, Michael! Good to be on the show again, and looking forward to our conversation today.

Michael Krigsman: Yes, we’ll have a great conversation. We’re going to be talking about digital transformation in the insurance industry, and Dion, if you would, please introduce our wonderful guest!

Dion Hinchcliffe: Absolutely! Well, it’s my great pleasure to introduce a very special guest, I think, based on our conversations, it wouldn’t be too hard to say he is a visionary when it comes to information technology. He is the CIO and now, the Chief Digital Officer of UNIQA Insurance Group in Europe. I’d like to welcome to the show Mr. Alexander Bockelmann! Alexander, welcome. Thank you for coming on CXOTalk.

Alexander Bockelmann: Hi Michael, thank you for having me! It’s a pleasure. I’m looking forward to our discussion.

Michael Krigsman: So Alexander, please tell us about UNIQA, and what does UNIQA do, and what is your role?

Alexander Bockelmann: UNIQA is a mid-tier insurance company in Europe. Our headquarters are located in Austria. We’re doing business in 18 European countries, predominantly to the east of Austria ─ so, Central and Eastern Europe, Southeastern Europe up to Russia. And, we’re a multi-line insurer, meaning we’re insuring life products, health products, and non-life products. And, we have about 6 billion in revenue, 14 thousand employees, and about 10.5 million customers.

Dion Hinchcliffe: Well very good! And so, we talked a little bit before the show about your background, and I was struck by some of the concepts you were telling us about that we’ll explore later on in the show. And I was wondering can you tell us a little bit about your background? How did you become the CIO at UNIQA? What was your mandate? You know, what led you to that role in the first place?

Alexander Bockelmann: Originally, I [was] an environmental scientist. After doing that, I had a stint in strategy consulting. And there, one of my first projects was innovative technology in financial services, which started essentially my IT career in the transformation jobs in the industry. And, after working for another insurer for a couple of years, I got the opportunity to join UNIQA, first as the head of IT to build up a new shared service IT organization. And since the middle of this year, [I’ve been spearheading] the digital transformation as the CDO.

Michael Krigsman: It’s really interesting that you have both roles. So you started as a CIO, and now you’ve taken on the CDO role. And I’m always interested what is the connection? What’s the distinction between the CIO and the CDO?

Alexander Bockelmann: The interesting thing is also the setup that we have chosen, because the CDO is essentially a business function. So, I’m now essentially with one foot in the IT world, and with one foot in the business world. {This] gives me an opportunity essentially to not only be stuck with the traditional CIO role, which is often fighting to get a seat at the table, but with the CDO role. It’s now my responsibility to work with my business partners and develop and bring to life new business models. And, spending essentially both roles is also an opportunity, because you can help in the prioritization and getting things done if you have also the IT operations behind you to actually execute on the digital projects.

Dion Hinchcliffe: Yeah, I can see there would be a lot of advantage in having all

 

Michael Krigsman: Welcome to Episode #207 of CXOTalk. I’m Michael Krigsman, industry analyst and host of CXOTalk. CXOTalk brings together the truly the most interesting, and innovative people in the world, talking about disruption, talking about the leadership challenges, and talking about what’s going on in their company, and they’re industry. And today, I’m so happy because my old colleague and friend Dion Hinchcliffe is here as a guest co-host with me. Hey, Dion, how are you?

Dion Hinchcliffe: Hey, Michael! Good to be on the show again, and looking forward to our conversation today.

Michael Krigsman: Yes, we’ll have a great conversation. We’re going to be talking about digital transformation in the insurance industry, and Dion, if you would, please introduce our wonderful guest!

Dion Hinchcliffe: Absolutely! Well, it’s my great pleasure to introduce a very special guest, I think, based on our conversations, it wouldn’t be too hard to say he is a visionary when it comes to information technology. He is the CIO and now, the Chief Digital Officer of UNIQA Insurance Group in Europe. I’d like to welcome to the show Mr. Alexander Bockelmann! Alexander, welcome. Thank you for coming on CXOTalk.

Alexander Bockelmann: Hi Michael, thank you for having me! It’s a pleasure. I’m looking forward to our discussion.

Michael Krigsman: So Alexander, please tell us about UNIQA, and what does UNIQA do, and what is your role?

Alexander Bockelmann: UNIQA is a mid-tier insurance company in Europe. Our headquarters are located in Austria. We’re doing business in 18 European countries, predominantly to the east of Austria ─ so, Central and Eastern Europe, Southeastern Europe up to Russia. And, we’re a multi-line insurer, meaning we’re insuring life products, health products, and non-life products. And, we have about 6 billion in revenue, 14 thousand employees, and about 10.5 million customers.

Dion Hinchcliffe: Well very good! And so, we talked a little bit before the show about your background, and I was struck by some of the concepts you were telling us about that we’ll explore later on in the show. And I was wondering can you tell us a little bit about your background? How did you become the CIO at UNIQA? What was your mandate? You know, what led you to that role in the first place?

Alexander Bockelmann: Originally, I [was] an environmental scientist. After doing that, I had a stint in strategy consulting. And there, one of my first projects was innovative technology in financial services, which started essentially my IT career in the transformation jobs in the industry. And, after working for another insurer for a couple of years, I got the opportunity to join UNIQA, first as the head of IT to build up a new shared service IT organization. And since the middle of this year, [I’ve been spearheading] the digital transformation as the CDO.

Michael Krigsman: It’s really interesting that you have both roles. So you started as a CIO, and now you’ve taken on the CDO role. And I’m always interested what is the connection? What’s the distinction between the CIO and the CDO?

Alexander Bockelmann: The interesting thing is also the setup that we have chosen, because the CDO is essentially a business function. So, I’m now essentially with one foot in the IT world, and with one foot in the business world. {This] gives me an opportunity essentially to not only be stuck with the traditional CIO role, which is often fighting to get a seat at the table, but with the CDO role. It’s now my responsibility to work with my business partners and develop and bring to life new business models. And, spending essentially both roles is also an opportunity, because you can help in the prioritization and getting things done if you have also the IT operations behind you to actually execute on the digital projects.

Dion Hinchcliffe: Yeah, I can see there would be a lot of advantage in having all of the assets of IT to be able to bring to bear to the CDO role, but we said that the CDO role’s primarily a business role, and makes me think of being a P&L, right? A profit / loss center. Whereas IT is traditionally viewed as a cost center. How do you balance those two views there? Are you going to wear both hats? You’ve got to be everything to everybody.

Alexander Bockelmann: It is an interesting situation to play both roles ─ essentially the P&L impact and the cost center part. But the interesting thing is to be in the position to be a credible partner for the C-Suite to work on the transformation that I think is responsible or is needed in the industry. And, I think the CDO role in a company is now very popular. I think last year, or up to last year, 2.5 thousand CDO roles were created. And I think a CDO is crucial at the beginning of a transformational journey as the catalyst and the driver for some of that change. But, it’s a little bit a “role of goal” situation for the enterprise ─ meaning either the digital realities kick in, and the organization is adopting those. And then the CDO becomes a temporary role, because the business is itself taking over that responsibility. Or, you will always have a CDO which is screaming and fighting [on] the sidelines trying to call the plays, but the organization is still moving in the traditional way. And then, actually, the transformation or the digital revolution has failed.

So I think the digital part and the CDO part is important, but I think at some point, you should not need it anymore. And then roles should either go away, or maybe transition to something like a Chief Customer role, bringing in the customer value operation at the board level into the strategic thinking.

Michael Krigsman: So, why is this notion of “customer value” so central to digital transformation?

Alexander Bockelmann: I think the game at the end of the day is lost on one with the interface and the relationship with the customer. If you can create customer value, you will basically not be able to provide your services and products. At the end of the day, nowadays, the digitization is creating different ecosystems and platform businesses, which are topics we can discuss further on. And, if you can then decide to either become a product provider for a service ecosystem, or be the orchestrator of the service ecosystem. If you lose the customer value creation part ─ if you are not relevant for your customers on your own, then you will be absorbed by somebody else’s service environment and ecosystem. So, therefore, the ability to be relevant for your customer ─ to have useful, enjoyable, transparent, and relevant services ─ becomes the win-or-break point in a business strategy.

Dion Hinchcliffe: Yeah, so that’s a very interesting topic, given that you’re in the insurance business, which, you know, it may be different in Europe, but here in the US is a highly regulated industry, not known for its superior digital experiences, I’d say. And so, it sounds like you’re doing some very innovative things, like you know that research from Deloitte that says it’s the platform orchestrators that will bring the most value overall, right? Those individuals in Amazon and so-on. And it sounds like your positioning UNIQA to be in [that] role. Is that [how] you get around the regulation, that you’re enabling other products and services? Or, you know, how are you going to be able to deliver a superior customer experience, given the constraints of your industry?

Alexander Bockelmann: Lately, the constraints are not necessarily limiting you to create great customer value.  Banking is also a regulated industry. Healthcare is a regulated industry. I think you need to transform yourself from a pure product provider and try to develop more holistic services that solve the need for a customer, so that you become relevant on a high frequency basis. The traditional insurance business has the disadvantage that you have literally no touch requirements for your business, or with your customer.

Dion Hinchcliffe: And customer value.

Alexander Bockelmann: Yeah. Imagine you have a life insurance [policy]. You buy it. It goes on for thirty years. And you only have one negative touchpoint each year, which is when you have to pay the premium, right? So, insurance companies are now under pressure to provide the same customer relevancy like retail companies, or other companies, because that is what the customers experience in their daily lives. And when they then approach their insurance company, you don’t want to be seen as going to the dentist, right? It needs to be something enjoyable and useful, and that is where insurance companies need to, well, definitely change their business model and the way they serve customers.

Michael Krigsman: So, how do you manage? It seems to me you’re managing two different hats. Number one is as the Chief Digital Officer, you’re always thinking about the customer as a reference point, and how does our business model incorporate that? And yet, at the same time as the CIO, and correct me if I’m wrong, I’m assuming you’re thinking about our systems - our technology systems; and so, one is a very customer value role, and the other is a kind of inward-looking tech role. How do you reconcile those?

Alexander Bockelmann: When we talk about digital, then we are talking about five different dimensions. And that’s maybe explaining your valid question. If you imagine a simple diagram with a horizontal and a vertical axis, the way we illustrate our digital approach is on the horizontal axis. We have basically all the internal digital activities, which we did for a couple of years before all the buzzwords, basically in here. That’s everything that has to do with automation, with process and product standardization, with legacy modernization ─ all those activities; and that’s the traditional home-turf of the CIO.

The second dimension ─ the vertical dimension ─ is the external role, which is one of the key pillars basically of digitization, which is “How are you approaching your customer?” And from an IT perspective, you have the internal employee as a customer, you’re business partners as a customer, and your ultimate business customer. So, for each of those, we are basically in our digital endeavor. We want to change how they experience the world on a daily basis ─ make it more value-driven. And not only do that for our customers, but also our employees. Otherwise, we will not have the momentum that we need. So those are the framing two conditions.

Within that little graph, you then have the dimension of data and analytics, which is very important for digital business models. And the crown jewel is essentially the development of new business models. And, underlying all of that, the key enabler to do any of that work is essentially a cultural change in the company. If you don’t do that, your digital journey will essentially not work very well. So, those are essentially the five dimensions.

And, with the CDO role, it’s all about external data, [and] new business models. With the CIO role, it’s all about culture, internal processes and procedures. And that’s how it’s balanced.

Dion Hinchcliffe: That’s very interesting. So, this brings us to the hot topic of the day that we read in all of the trade journals, and that is the process of digital transformation that all organizations really have to undergo. Now, we see that the technology role is changing faster than our organizations, and you say we have to roll out these new products and build these ecosystems, and layer in these new business models. Can you tell us about your journey at UNIQA, and how you’re going about it?

Alexander Bockelmann: Yeah, we’re trying to manage three different phases. Essentially, you have to take care of your business of today ─ your customers of today. You have to deliver on your promise. So, you need to develop and optimize today’s business, which is the automation, standardization, improvement part of the journey. Then you have the second phase, which is the transition phase moving from your existing business model; and augmenting that, strengthening that, with new business models. So, there’s a big change management component in there.

What I always say is that this part is where I use the phrase, “You have to provide digital leadership.” What that is, is you landed on an island, which is your current state where you work today. Unfortunately, your boats are beginning to smolder and to catch fire. So, your old model starts to burn, and you have no idea yet what new boats you’re building ─ what the new business models will be ─ because nobody knows today what the silver bullet of tomorrow is. And as a digital leader, one of your key requirements is to manage that transition phase, and keep your employers and peers engaged in that journey.

And the third phase is then actually building the new business models. And there, it’s all about learning with the experience, not trying to reinvent the wheel, and being the world dominator in the first step. Think big, start small, and learn from your customer feedback.

Michael Krigsman: What are some of the difficult challenges? You know, it’s interesting as you describe it, it’s nice and neat. But, in practice, I’m sure that it’s not quite as simple and as easy as it sounds when one talks about it.

Alexander Bockelmann: No, of course, there are tons of pitfalls, and we learn something new every day. The one challenge is, as Dion already said, “Insurance is not well-known for innovation.” It’s a 400 year old industry, or maybe older. Our company is very proud to have over 200 years of company history. So, you have very established and organically grown products, processes, and procedures. You also have, as a bank or as an insurance company that has always dealt with a lot of data, everything that was commercially available at one time in your data center. Right? At one point, I was basically jokingly saying that I can improve my budget by going to the local IT university, and selling tickets for people to look at very old-fashioned technology! And, it’s still working. It’s working fine. But, most of these systems that you deal with are predating the Internet. So, they have no concept of microservices. They have no concept of connectivity. They’re not designed for flexibility and for supporting ecosystems, so obviously you have to deal with that.

And, the the third topic is something that I call the “expert dilemma.” The expert dilemma is if you are in a very successful company, you tend to project your past success to the future. And, in the new world (in the digital world), the rules of the game have changed. And what made you strong in the past will not make you strong in the future, and therefore, there is this mindset shift that needs to happen to gain momentum on a digital journey. So you have technical opportunities for improvement; you have cultural ─ mindset-wise. And as insurance, you don’t have an industry with much experience for need for action, where something dramatic needs to happen as the business model was so stable for such a long time. So you don’t have a lot of change agents that are ready to go the next change program, because they have done it so often. Insurance has not reinvented itself in the past, and that’s a major transformation challenge.

Michael Krigsman: It’s pretty extraordinary. So, in a sense, there’s really no choice. So, what kind of sense of urgency is there within the organization to embrace the kind of changes that you’re talking about? And it’s difficult for any organization to change the way you’re describing.

Alexander Bockelmann: I am very fortunate to work in a company where the board of management and our supervisory board basically have that sense of urgency. And we can talk about our transformation program maybe later on. But, if you look at the insurance business, and I mentioned the three parts of it: life, health, and non-life; think about what’s happening in the industry. We have a very low interest regime right now. In the past, the business model in life insurance for an insurer was very simple. Get the premium. Put it into an asset management account. Get 10% returns, and promise your customer let’s say 4-5%. You have 2% admin expenses and 3% of that asset-under-management income. The investment income is your profit. So that business model was very simple. If you have an interest rate that is zero or negative, that model doesn’t work anymore. But, you have promised your customers an annuity. If it’s a fixed annuity, you have promised them a certain return. So, the life insurance business right now is not profitable for most of the life insurance companies, so there is a sense of urgency.

If you take health insurance. Health insurance is taking some of your premium, [and] putting it in an asset account. And this [assumes] that you get a certain interest rate to pay for higher medical expenses when you get older. If you don’t get that interest rate, then you have to either ask for more money or reduce your level of service. As you don’t want to do the latter, you have to do the former, which the customer’s not appreciating. So two of your three business models are currently under pressure.

The third one [is] non-life. For many insurance companies, 50% of their non-life business is motor insurance. So, you know what’s happening with motor insurance with the Teslas and other innovations coming our way. So that business model, where you insure a driver of a vehicle is evaporating.

So, three out of three business models are under pressure in insurance. So, if somebody has not received the sense of urgency to do something, then maybe insurance is not the right place to be right now.

Michael Krigsman: We have a question from Twitter. Wayne Anderson is asking, “How do you balance the privacy requirements in this shift to digital?”

Alexander Bockelmann: Privacy requirements are extremely important for us, because insurance companies are living off their reputation. If there would ever be a breach or a misuse of personal data, that is a code of conduct that all insurance companies are basically following. We don’t want that. So, we take extreme care, and that is actually limiting some of the activities that we can do. For example, in Austria, it took us 2.5 years of negotiation with the local regulator to get a video identification process in place that is accepted by the regulator. And, we also are not only in a situation where it’s very tricky which data we want to use, we are so far advanced in technology that it becomes an ethical question, not only a legal data usage question. What I mean by that is we all know privacy laws and all the challenges we have with that, but technology nowadays allows us, when a baby is born, to get a test (usually on the third day) for certain diseases that they could have. Nowadays, it would be economically feasible to get a DNA imprint of that newborn child, and then identify the likelihood for diseases, how well the medicines will work, etc. And, you could profile a lot size of one ─ meaning a very personalized health insurance product for this person. But, that would completely destroy the underlying idea of insurance where you spread that basically across a bigger audience and a bigger group. And therefore, data usage ─ the information that is available ─ especially in healthcare and digital health, which for us is very important, becomes an ethical question. And there’s information and data that we would not use even if we legally were allowed to do it.

Dion Hinchcliffe: Yes, so the picture you just painted reminds me of something you told us when we were speaking earlier that I thought was really amazing to hear from a C-level leader of a large organization, and that is: given all the things you just relayed about each one of your business models, your existing business models is under pressure, even the insurability of people is changing because of DNA imprints; what you said was you believe in the five to ten years, the classical insurance company will disappear. And so, how does that affect your role? It sounds like you are the one - you are on the hotseat for building that bridge into the future to something that’s hopefully on the other side. Is that right?

Alexander Bockelmann: Well, it’s always a team sport. Right? If you would depend on only one person, you’re not working in cross-functional teams, which I think are most effective. If we build now a silo where there is only one single person driving innovation and change, then it will probably not succeed. But having said that, as part of our journey, we created two new roles midyear in 2016. One was my role, the CDO role on top of the CIO role, to tackle all of the topics that we just discussed. I have a partner in crime, which is a colleague of mine with the title of Chief Innovation Officer. And what we are doing there is that he is looking specifically at the idea of what could be new business models; what could be new partnerships; what could be new ecosystems to join to create, to strengthen our overall business approach. And to be ready for the third phase that I’ve mentioned ─ the start of at least the testing of new business models.

Michael Krigsman: Again, it’s another very interesting point. So, if the Chief Digital Officer is responsible, or let’s say very heavily involved with searching out new business models, and new business models of course are a key form of innovation; and, the Chief Innovation Officer is obviously responsible for innovation; how are these two roles different?

Alexander Bockelmann: They are part of the same puzzle. I think you (in some sort of fashion), in whatever organization you are, you need to tackle the challenges that those two roles are addressing. If you think about it, in traditional innovation management, you have at the beginning a lot of ideas that go into a funnel, and then they go into execution or piloting or something similar. So, now imagine you do that with a topic of business models. So the Chief Innovation Officer is essentially screening the fintech and insurtech world of where could there be ideas for partnerships, for investing into new models, for observing what others are doing, and also for designing ideas for additional models for UNIQA. And, at some point, those topics become more concrete and prioritized, and then the Chief Digital Officer comes into play to think about the aspects associated with that role: what’s the customer value; what’s the customer journey; touchpoint analysis; etc. And then it goes further into the execution, either in our new digital team, if it’s an external-facing activity, or in the basic traditional core IT unit, which is still essentially the central nervous system of our UNIQA business models. So that’s how two roles play together.

Dion Hinchcliffe: Yeah, that makes a lot of sense. And so, when we talked before, you were saying some very interesting things about how the importance of data had shifted. I think you mentioned it before, but what’s the role of data in your digital transformation? I think you talked about that it should support customer experience, but I think there’s more to it than that.

Alexander Bockelmann: Yeah, I think all digital models at the end of the day by definition are data-driven business models. But, outside of that, as an insurance company, you have a lot of information available and most insurance companies are quite good at analyzing those for whatever opportunities and insights you can gain out of those. But, those have not changed a lot over the last decades. There are the same type of information that is linked to underwriting, risk underwriting, assessing a risk, and invoicing, billing, claims handling ─ that kind of thing. Nowadays, however, with the internet, with mobile devices, within the internet of things, with telemetic technologies, you have in theory a much, much bigger universe of data points, which allow you the opportunity to improve the risk-based products that you have with new service offerings.

For example, I said the motor business is under pressure, right? And, we all know that the self-driving cars are around the corner sooner or later. Most projections say by 2021, all the major players will have those on the road. Add another 5-10 years for the exchange cycle, and then you will have a meaningful number of self-driving cars on the road.

At some point, and also with the sharing economy where people are not owning stuff anymore, there will be a tipping point where you’re essentially developing a new need, which is a mobility need. The person wants to get from point A to point B, but they don’t want to own a car to get there. Depending on the weather, they might use a bicycle, or a car, or take public transportation. So is there an opportunity for insurance companies, similar to the car OEMs, to develop ideas and exchange the old business model of insuring a driver, and just link, for example, a mobility service with your home insurance. If you live at Location A, and you work at Location B, why couldn’t an insurance company not offer you with your home, and life, and health insurance, a mobility package that could bring you from A to B, in whatever fashion you fancy?

Michael Krigsman: We have a question from Twitter, and I just want to remind everybody that you’re watching CXOTalk. Right now, there is a tweet chat going on using the hashtag #cxotalk. And, we are speaking with Dr. Alexander Bockelmann, who is the Global CIO and Chief Digital Officer for a major European insurance company, UNIQA Group. And we have a question, Alexander, from Arsalan Khan on Twitter, who says, “What kind of labs do you have?” Essentially it’s the innovation question, and how do you manage experiments, and how do you manager failure? And along the same lines, I’m going to throw in and ask if you can touch on your view of fintech, and startups, and competition coming from those directions.

Alexander Bockelmann: Ok, thank you for the question, first of all. And, what kind of labs did we have? Let me take a step back before I answer that. I think disruptive innovation is very hard, if at all achievable within a given organization. So if you want to do something that is really new, you most of the time do not have the resources in the existing organization, which is streamlined for efficiency to manage your existing business, to do all that disruptive stuff on top of everything else. So, I think that is the main driver why people have certain labs.

What we have is, we have a digital team that is centered around a customer experience group. As I mentioned, that customer value creation and customer experience is for me one of the key winning ingredients in digital solutions. And surrounding that, we are building teams for the web and portal space, for the mobile space, and for the data analytics space. Why is that important? The first two [are] web and mobile. I think we are obviously in a mobile-first world. And you always need to be there where the customer wants to engage you, and always when the customer wants to do this. So, you have an “anytime, anywhere, 24/7” obligation for good customer service, at some point depending on your services. And, the third pillar, the data pillar, is very important to manage all the additional data volumes. And I believe that insurers need to transform from pure risk product providers to be more predictive and preventive life solution providers. And, that’s where you need a new competency in data and analytics to make that happen.

Dion Hinchcliffe: So, we’d be remiss in not bringing up another subject of industry conversation lately, and that is something that our mutual friend Martin Lanford has been talking about which is just, “CIOs are shackled to Legacy Mountain,” as it were, that 70-90% of our budgets are required to just keep what we already have going, and that leaves very little left over to maneuver to innovate, to move your organization across that bridge into the future. How do you cope with that? I mean, this is the best-kept secret in our industry, that people don’t understand what holds back so many organizations. How do you cope with that?

Alexander Bockelmann: That’s true. That’s a major challenge, especially when you have regulated industries. On top of that, you also have the change projects driven by new regulations. And that is obviously more often than not eating away all your change capacity that you have in a given year. So, due to the sense of urgency that is for us needed in the industry, our board made a very bold decision, and started on the next stage in our UNIQA 2.0 strategy. We started a transformation program that is founded above and beyond the regular outlets for those change activities in the three phases mentioned: the existing business, the transition period, and the development of new business models. And, we started a ten year program that is funded with 500 million Euros, and that gives us additional capacity and budget to tackle the challenges that we discussed today.

Michael Krigsman: We have another question from Twitter. And, Shelley Lucas is asking about the use of virtual reality, augmented reality, mixed reality in risk and in your models, and how is that going to affect the insurance industry?

Alexander Bockelmann: Very good question. Personally, I think augmented reality will have a bigger and faster impact than virtual reality. Doesn’t mean that virtual reality is not coming, but I think that’s a little bit further down the road. With augmented reality, a lot of things are in theory possible in the insurance phase from risk assessment over solution design for certain things. So, I’m very big on the idea that augmented reality will become available quite soon. You already see some innovative companies that use it more in the machine industry for maintenance tasks, on turbines, and things like that. So I think that is coming.

For us right now, the more short-term usage is not the virtual or augmented reality piece, but the machine learning piece. So, I think that machine learning and artificial intelligence are extremely impactful for business models. I believe that a lot of the customer interaction in the future in many service environments will be at least optimized by artificial intelligence , if not conducted by artificial intelligence. And, we also have a pilot running right now to use machine learning for the optimization of certain processes and procedures in our health insurance segment. So, I believe that there is a lot going on in that space.

And you asked earlier: Fintech, startups, etc. If you think about the money that is being poured into those fintechs and startups over the last couple of years, it enabled an immense amount of innovation. And I think that’s very helpful to bring that amount of new ideas into a lot of industries, and the one thing everybody should not do is ignore that. I always have a sign in my mind that says, “Ignore at your own peril,” so … like a danger sign. For me at least, at least insurtech companies are very useful in our transformation journey, because often, they have an opportunity to develop or find a solution to a problem where we neither have the resources or have the idea how to do that. I think Cisco is a model of buy, partner, observe and so, forth is the right one. So you have to think about fintech and insuretech as a partnership model. I think 85% of those companies don’t want to disrupt incumbents, they want to work with them. And the combination can be very powerful.

Michael Krigsman: And we have another question from Twitter. Sohail Sarwar, and I hope I’m pronouncing his name correctly, if not I apologize, is asking about the impact of blockchain.

Alexander Bockermann: Blockchain for me is a very interesting technology because it has the potential to solve a lot of efficiency problems. So it has the potential to solve things in the space of fraud detection in the area of identity management. It can be a very cheap transactional documentation ledger technology. For me, however, blockchain is still missing a couple of key ingredients for making really a big impact. The key ingredients are scalability, standardization, and adoption. Because for me, blockchain has the biggest impact. The bigger the network that is using a certain blockchain solution. I could easily imagine now having an in-house blockchain use case, but then the impact would be very marginal. If we, on the country level, suddenly would have a blockchain network across multiple providers, service providers, including customers or so-forth, then blockchain could really be powerful. And I think it will come, but I think it will come in a couple of years. And now I’m falling probably in the same dilemma that I mentioned before, that we always think linearly in the development of certain technologies, but they develop exponentially. So, if I say it will take three to five years, maybe it’s only one or two. Take it with a grain of salt.

Dion Hinchcliffe: Absolutely. So, as you wrap up the show, I was wondering if you could share some practical advice about digital transformation. You’ve been down the road at least part of the way, right? And you would be able to have lessons learned and presumably battle scars…What would you tell other CIOs in terms of advice? How should they go about digital transformation?

Alexander Bockelmann: I would say take ownership, and leverage the sense of urgency to get into a driver’s seat for the journey. Kim Stevenson from Intel once had a famous quote saying there are no IT projects, only business projects. And today, there are no IT roles; there are only business leaders. So therefore, every new digital business model is an IT-enabled and empowered business model. So, CIOs should basically feel empowered to have a voice in that.

The second one: provide the digital leadership. Your C-suite is often probably not as well-educated on the new technologies. You have an opportunity to have a coaching and educational aspect there. And, whatever you do, do not build the strategy for … Do not build the digital strategy, but build a strategy for a digital world. That is a play with words, but it basically has a totally different perspective if you design your strategy in that way.

And then, start now. There is no right way of doing it. You have to think big ─ that your idea can scale. You have to start small, and learn from your customers. So, engage customer feedback as early in the process as possible, and then figuratively improve the outcome. And, if possible, engage your employees. And find change agents at all levels ─ from the C-level down to the individual expert at the desk ─ to carry the torch with you, because there’s potentially a lot of good energy and ideas in your team already that just needs a way to express that. And that’s the experience that we did. Once we created the environment, there were a lot of people that stepped up and helped us essentially in our first steps of the journey.

Michael Krigsman: And as we finish the show in the last couple of minutes, what advice do you have for Chief Information Officers? You came into this role as a business leader, not as a technologist. And so, you have a broad perspective. So, what is your advice to CIOs to manage this very difficult and challenging transition period, where it’s not even clear where we’re transitioning to?

Alexander Bockelmann: I think it doesn’t sound pretty, but the first thing is get your ship in order. If your day-to-day business is not working, then you’re so much in firefighting mode that you have no chance to get out of that, and you will not have the credibility to build something new. So, first of all, take care of your business today. The second one is Show & Tell, meaning try to find some resources to build the mock-up ─ to do something that doesn’t take a lot of effort. But, get away from any powerpoint strategy presentations, and show an idea as a click dummy. What we once did is we wanted to get the point across that customer journeys are important, and you have to look at things from a customer perspective. And we very quickly found out that giving powerpoint presentations is not the best way of doing that. And what I’m sharing now is not the silver bullet thing, it’s just an illustration. Think differently. So what we did is we did a very short Playmobil stop motion movie, and we played the life of customers in a certain situation before and after a project that we proposed. And suddenly, people understood on a totally different level what we want to achieve with this project, and how it can influence the life of our customers in a much different way than if we would just have used powerpoint. So, just find creative ways to show how a digital project can be different, and then find one or two lighthouse projects to build momentum. And don’t pick the most difficult ones. So, these ones should really be …. not as a first. These ones should be ones with a relatively high likelihood of success.

Michael Krigsman: Okay, wow! Dion, this has really been quite a conversation, hasn’t it?

 

Dion Hinchcliffe: Yeah, no it’s amazing to see how things are changing, how industries really are going right up to the brink and how Alexander probably has his role at the most interesting possible moment in the evolution of moving from the industrial age to the new modern world. So yeah, that was a great conversation, really appreciated that.

Michael Krigsman: And you know Dion, one of the things that I found most fascinating is the fact that Alexander has this perspective as a Global CIO, but at the same time has equally his feet on the business side, and thinking about the customer impact, and the business model impact as well.

Dion Hinchcliffe: Yeah, and you really would think that’s a recipe for success. You know, we always had this talk about the IT business divided, and Alexander seems to have found a way to bridge that by having that CDO role and that CIO role, so it’s great to see.

Michael Krigsman: Well, we have been talking with Dr. Alexander Bockelmann, who is the Global CIO and Chief Digital Officer at UNIQA Insurance Group. Alexander, thank you again for taking time to speak with us today.

Alexander Bockelmann: Michael, Dion, it has been a pleasure, and I’m honored to be a part of your show. Thank you very much.

Michael Krigsman: And I hope you’ll come back again! [Laughter]

Alexander Bockelmann: Any time, any time! Thank you for having me!

Michael Krigsman: And Dion Hinchcliffe, thank you for being the guest co-host today!

Dion Hinchcliffe: Yeah, thank you so much, Michael! I really enjoyed being here!

Michael Krigsman: Everybody, there will be another show next week, and please come back and watch. Have a great day! Bye-bye.