London School of Commerce

TMIAUrvil shah L0695KMKM0210

MBA 1 - C

TMIA - MBA1 C

Contents

Executive Summary …………………………………………………………………………………………………………….…..……. 2

Introduction ………………………………………………………………………………………………………………………………….. 3

Importance of Change & Innovation ………………………………………………………………………………………..……. 4

Types of Innovations ………………………………………………………………………………………………………………..……. 6

Change Management & Innovation as a Strategy …………………………………………………………………….……. 7

Lean Methodology ………………………………………………………………………………………………………………….…….. 8

Organizational Review ………………………………………………………………………………………………………………….. 11AXA PPP Healthcare …………………………………………………………………………………………………...…… 11AXA Strategy ………………………………………………………………………………………………………..……..….. 11Change Management Team …………………………………………………………………………………….………. 11Transformation Project ……………………………………………………………………………………………….…... 12Hits & Misses …………………………………………………………………………………………………………….…….. 15Opportunities & Recommendations ………………………………………………………………………….……. 15

Critical Analysis ……………………………………………………………………………………………………………………….… 16

Conclusion ……………………………………………………………………………………………………………………………...……. 17

References ………………………………………………………………………………………………………………………………..… 18

Bibliography ……………………………………………………………………………………………………………………………..…. 19

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EXECUTIVE SUMMARY

Innovation is everywhere. Right from the day to day advertisements on television to the design of the I-Phone in your pocket to the transport services delivered on the streets of London, people, managers, executives and organizations are constantly creating new ideas, services, and products and adapting old ones to fit their changing circumstances and global environment. This report evaluates the importance of innovation, how change and innovation management are important to an organizations strategic goals and the different types of innovations used by organizations. It also analyzes the success of an Operational innovation carried out by AXA to meet customer needs and reduce operating costs and hence increase profitability.

INTRODUCTION

Innovation is often given complex definitions. We prefer the simple one: ‘new ideas that work.’ (Hiatt 2003). Many companies invest funds, resources and capital to innovate and improve operational efficiencies, create new products, introduce new technologies and improve overall quality. In today’s global environment most organizations have access to similar technologies, human resources, raw material and infrastructure, however the organizations ability to innovate and adapt to the changes in the global environment helps it differentiate from its competitors and gain competitive advantage. Innovation benefits consumers in many ways, through the development of new and improved goods, services, and processes. An economy’s capacity for invention, creation and innovation helps drive its economic growth and the degree to which standards of living increase. Technological breakthroughs such as automobiles, airplanes, the personal computer, Internet, television, mobile phones, and modern pharmaceuticals illustrate the power of innovation to increase prosperity and improve the quality of our lives. (Paton 2008) More and more originations today understand the need and importance of Innovation to maintain a competitive advantage. They understand that change is the way of life, and every organization needs to change and innovate to adapt to the constantly changing business environment. One such industry that is covered in this report is the Health Insurance industry.

Health Care Industry

The Healthcare industry is one of the fastest growing and most dynamic industry in UK

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It is the largest single industry in the United Kingdom. According to a recently released congressional report, the industry is comprised of over 750,000 physicians and 5,200 hospitals, and it receives approximately 3.8 million in patient visits and 20 million outpatient visits daily. When considering the professional workforce and the ancillary jobs within the industry,it is estimated that one in every 11 U.K. residents works in the health care business. (Department of Health, 2009) As overwhelming as these figures are, they pale in comparison to the overall annual expenditures associated with the industry. This is where the health insurance industry plays a critical role. Innovations in medical science and healthcare industry have made it paramount for the health insurance industry to evolve in order to cope with constant changes. Hence organizations providing health insurance need to understand the importance of innovation in order to reduce costs and maintain its competitive advantage.

Importance of Change & innovation

Change and contemporary synonym of innovation are the only constant facts of human lives (Heraclitus). Age by age human environment, ideas, technology and ideas change trough to find excellence or curiosity. The main importance of innovation arises from our changing environments. The word of evolution is continuous process at the end of the world so we need changes and innovations. Through the human history people first needed to kill animals with their stone based weapons after they developed agriculture they establish communities and finally states. They introduced new machines without using man power to match increasing demand. Contemporarily now we have technologies such as information systems, computers and our developed modern ideas. With the human being companies also perform innovations because of continues order and nature of the world. That all factors increase the value and highlighted innovations.

Another importance of Innovation is it gives companies an economic advantage. For example our research project on Lean Methodology proves companies to reduce their expenses, improve productivity & customer satisfaction as which covered in details ahead in the Organizational Review section. Cainelli, Evangelista and Savona’s “comparison [with empirical data’s] of the economic performances of innovating and non-innovating firms across sector do confirm that innovation seem to play a positive effect on economic growth in most sectors’’ (2004 pp.123). Furthermore SCALES research report finds that “innovation seems to have a positive effect on the turnover growth and employment growth of organizations’’ (Kemp, Folkeringa, De Jong and Wubben 2003 pp.57).

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To sum up, Changing political trends, economic conditions, product trends and decreasing global resources often affect product development, economic situation and finally expand all areas of people. Innovation and change have great importance for companies to survive, Introducing new sectors, Productivity and economic cases. Innovation is not only important for individual organisations but also important for states and communities. Furthermore Van der Wiel states that ‘’Innovations are the engine of economic growth, not only for manufacturing but also for services (2001 pp.32)’’ that means markets, sectors and companies have big influence of the change upon them, additionally workplaces needs better conditions, Trough years economy reshape itself and technology always change. All previous factors shows innovation is inevitable; therefore companies must perform innovations to survive and catching the age.

TYPES OF INNOVATION

Innovation is not a random event or intangible acti vity. It is a process, more specifically, innovation is best defined as “the process of devising a solution that addresses un-met customers needs’’.

Broadly there are three different types of innovation: (1) Product and service innovation which focuses on improving a product or service, (2) Operational innovations which focuses on making an internal business process a core strength, & continuous process improvement, such as Toyota did with the automotive production and (3) Business model innovation which focuses on creating a new formula for making money. Google, for example, has reinvented the way a company makes money with advertising on the web (Harvard business press 2003)

Disruption which is specifically defined as the creation of a technology that enables a new set of customers to perform a job that only specialists could previously perform. Crest White stripes for example made it possible for people to whiten their teeth on their own, eliminating the specialist - the dentist.

Disruptive innovation so much has been written about disruptive innovation that the word “disruptive’’ has become a way to refer to practically any type of innovation that changes anything. Although a company can be impacted even to the point of its devise - by a competitor that employs a strategy or operational and business model innovation (we see this with Wal- Mart in the retail industry), This is not disruptive innovation.

Out Come - Drive Innovation using the job customer is trying to get done as the unit of analysis, rather than technology, we say that companies can engage in product or service

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innovation by (1) helping customers get a job done better (2) helping them get a related job done (3) Helping them get a new jobs done where no product currently exists and (4) helping a new set of customers perform a job that was a previously performed by other, more skilled people. Using this simple frame work, product and service innovation initiatives can be planned and executed predictably. This report studies an Operational innovation done by AXA PPP healthcare, which resulted in the customers getting better service and helped the organization to reduce costs. (Kaplan & Warren 2009)

CHANGE MANAGEMENT & INNOVATION AS A STRAGTERGY

Nowadays most business enterprises are engaged in strategic planning with using new ideas, objects, practices and reaching the goals. Generally strategy is a simple way to analyze the current situation of organization, expected future situation, right direction confidently and achieving the objects. Actually it is more than that which provides the systematic way for identifying and evaluating factors external to the firm and fixing them with the organization’s abilities. In addition strategy is a long process over long time period with individual of resources with a competitive environment to meet up customer needs. In other words, strategy is a method of process of direction and scope of an organization to achieve opportunities with its pattern of resources and meet the demand of markets and stakeholder expectations. Innovation is the one part of strategy which introduces new technologies, ideas, practices, products, marketing policies and a new ways to merchandise. Likewise innovation normally relates to new ideas which are implemented successfully. Innovation is a great idea to make a job better while it introduces new product that are adopted for the marketplace. William ylvisaker, the former CEO at Gould inc. introduces a new innovation by changing the firm a manufacturer of car batteries and electrical equipment to a high-tech electronics firm. In case of changing in personnel half of the committee members are left the job. In the ten toughest corporate managers in Fortune magazine Ylvisaker was named one for making such radical decisions in innovation sector.

This report evaluates the use of Innovation in strategic planning of AXA and structure of the change management team which is covered in the Organizational review.

LEAN METHODOLOGY

Lean method is a system used as a production practice for organizations and management products, customer service and operations trying to reduce and save human effort, space, capital and time. Business use often known as Lean to create customer value at the end of the productivity chain with high quality and fewer defects. Lean is a methodology that is used to

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accelerate the velocity and reduce the cost of any process (be it service or manufacturing) by removing waste. Six Sigma [on line] (cited 2 April 2009) Available from <URL:http://www.isixsigma.com/library/content/ask-02.asp>.

Services companies such as AXA which is the company in study, require developing robust, waste free, flexible processes, while also keeping the views of the customer paramount as the processes are executed (Sarkar, 2007). It is important because even with advances in technology the customers face long lead times and unexpected errors and Lean helps to improve the efficiency in the processes, quality and standardization in order to give an excellent customer service.

Lean manufacturing derived from the Toyota Production System (TPS), has evolved over the past fifty years (Zidel, 2006), this term was created after the II World War, when Toyota had the necessity to have good quality in its products but with competitive prices, they tried to optimize their processes, reducing lead times and unnecessary activities, minimizing mistakes and wastages. The table below shows the health care process value in striving for Six Sigma level, demonstrating that 99% it is not enough to get the health care delivery excellence.

SigmaLevel

Patients WithMisplaced

Personal Items

CodingErrors

RequiringCorrection

Phone CallsExceeding the Two-

Minute-on-Hold LimitDefects/MillionOpportunities

PercentYield

3 Sigma

3,660 Every Day 770 Per Day 257 Each Day 66,800 93.32000

4 Sigma

340 Every Day 72 Per Day 24 Each Day 6,210 99.34900

5 Sigma

12 Every Day 13 Per Week 5 Each Week 230 99.97700

6 Sigma

6 Every Month 10 Per Year 3 Each Year 3.4 99.99966

Existed many examples about successful projects in health care industry around world like patient satisfaction, money saved and better quality in the service, time reduced in the process and an increase number of people served. This report will throw some light on how Lean

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Methodology was used by AXA PPP healthcare to improve the Claims processing process, which resulted in better customer service & reduction in operating costs.

ORGANISATIONAL REVIEW

AXA PPP HealthCare

AXA PPP healthcare is one of the UK's largest, most experienced providers of private medical insurance. They have been providing private medical care since 1940. They offer a range of private medical insurance plans to enable individuals and employers to meet their healthcare needs. AXA PPP healthcare is a member of the AXA Group - a world leader in financial protection with over 170,000 employees across UK, Europe, America, Asia- Pacific & Africa, 400,000 shareholders and revenues of €93.6 billion in 2007.

AXA Strategy

AXA has set five operational priorities or catalysts for change & innovation, which together are known as the five cylinders of its growth:

Product innovation: a source of differentiation that reflects AXA desire to offer added value every time it introduces a new product in one of its markets.

Distribution management: a second source of differentiation that reflects AXA's aspiration of enhancing sales performance by lessening the administrative load on its distributors.

Productivity: AXA seeks to reduce operating costs and improve quality every year.

To achieve operational excellence in all of these key areas, AXA has adopted the strategy of continuous process improvement program. AXA performs these programs, creates new products and runs various innovative projects through its Business Excellence team.

Business excellence Team

AXA has a Business excellence team which is responsible for driving all initiatives taken towards process improvement, innovation & change. The Business Excellence team is an integral part of the organization and plays a key role in strategic planning to help achieve long term goals and objectives set by the company. Following teams are a part of the Business excellence team in AXA

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Six Sigma Team – Team consists of six sigma experts, Green belts & Black belts responsible for driving process improvement and process re-designing. They also brainstorm to come up with innovative solutions to operational challenges

Eureka team – Team is responsible for administration and utilization of the idea data base. This team encourages employees to think out of the box and come up with innovative ideas

Transformation project

AXA PPP Healthcare conducted a “voice of the customer” survey in 2008 which called for a need for change to ensure AXA keeps its competitive advantage in the fast growing and dynamic Health care industry. The key area of improvement identified was the turnaround time for the claims processed by the Claims processing team which operates from UK & India. The Business excellence team was given the responsibility to drive and implement the project with the support of Change agents identified within the operation teams. The first step taken by the Business excellence team was to review the existing process used for claims processing and then use the Lean methodology to reduce waste of time and intellect to enhance productivity.

Objective – To improve productivity by 20% (increase number of claims processed per day per assessor) and improve turnaround time of claims (to 93% of claims to be completed in 6 days) by end of 2008.

Projected Benefits – Enhance customer satisfaction by improving turnaround time of claims and reduce cost by improving productivity.

Methodology – The lean methodology was adopted by the Business excellence team to identify improvement potential. Lean took kit was utilized to identify key areas for enhancing productivity and turnaround time.

Phase 1 – Data collation for the existing process, review of current KPIs & use the Lean Tool kit to analyze the “as is” process. Conduct time motion study to identify the true potential or capacity.

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Phase 2 - Post analysis and time motion study, following improvement areas and implementation levers were identified.

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Phase 3 – To monitor the performance of the process on the new implementations, new measurement metrics and KPIs were introduced. These KPIs were drilled down to each team in the claims processing department and monitored regularly by using visual dashboards

The Results

Claims processing team – Performance against KPIs for Q4 2008

KPIs Target Actuals RAG StatusAbseentism < 12 % 10.50%  Log in efficiency >82% 83.50%  Average handling time 300 secs 315 secs  % of claims referred < 14% 12%  

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% of first touch completes >80% 82%  Random Audits % >95% 98%  Ageing % <4 % 4.20%  Inter Agent variation 22% 32%  

Benefits achieved from Transformation project

Productivity benefit of 24% achieved which resulted to a reduction of 28 FTEs and cost savings of 17920 GBP per month. Claims processed per person per day increases to 82 from 65.

Target for Turnaround time exceeded, 94.3% claims were completed in 6 days for Q4 of 2008.

Voice of Customer – Score for “Voice of customer” survey for 2008 was 87% which improved by 8 % compared to the score for 2007 which was at 79% .

Recommendations

Productivity can be further enhanced by reducing AHT. Innovations like use of dual monitors, new key board shortcuts & Typing tutors can help to reduce AHT.

Ageing % can be reduced by improving work force management. Currently teams are working from Monday to Friday (9 am to 5 pm) however the scanning of work happens till

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8 pm and on Saturdays as well. Splitting teams into dual shifts and getting a small % of staff to work on Saturday will help reduce the Ageing %.

Inter agent variation can be reduced by introducing Buddy to Buddy program, where top performers can buddy up with bottom performers to help them improve.

CRITICAL ANALYSIS

AXA as an organization understands the importance of change and innovation. It has a competent set up for managing innovation in form of the Business excellence team. We further analyze the strengths and weaknesses AXA posses with regards to innovation management.

Strengths:

A very well structured Business excellence team

Business excellence team plays a vital role in company’s strategic planning

Well defined objectives set for the Business excellence team which are in sync with organizational goals and objectives

Talented pool of resources employed in the Business excellence team

Eureka tool in place to manage & implement ideas given by employees

Strong tools and systems in place to monitor performance of ongoing project (E.g Visual dash boards, weekly reviews etc)

Effective Communication of changes and results (Townhalls, weekly newsletters etc)

Regular trainings and up skilling for staff (GB certification)

Rewards and recognition for ideas given by employees and participants of various projects

Weakness

Business excellence is a separate department, hence on occasions change agents lack the process expertise

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Lack of support from other departments like Operations, HR, Finance etc

Approach towards innovation is more reactive and not proactive

CONCLUSION

For services the “process if the product” because the customer participates directly in the services delivery. Improvement in service delivery has a direct impact on customer satisfaction. Hence, the success of innovations in service industry is very important. We can conclude from this report that innovation management is one of the key areas and focus of every organization. Effective innovation management not only helps the organization to survive in the competitive market, but can also help the organization develop new markets, provide better customer service, enhance productivity, reduce costs & increase profits. From the example of AXA on can evaluate that innovation helped the organization to cater to its customers needs & reduce operating costs. AXA has enjoyed the rewards as it has given the required importance and attention to innovation and Business excellence. To conclude, Just as energy is the basis of life itself, and ideas the source of innovation, so is innovation the vital spark of all human change, improvement and progress.

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Personal Interview with Mr. Niall Stirling – Client Relationship Manager (niall.stirling@axa-ppp.co.uk) AXA PPP Healthcare, Phillips House, Tunbridge Wells, TN1 3PL, 14th July 2010

Personal Telephonic Discussion with Solomon Deveraj – Vice President

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(Solomon.devaraj@axa-abs.co.in) –AXA Business Services, Telephone conversation, 18th July.

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