Benefits can be seen within and outside organizations

Have you ever replaced a light bulb and wondered why the new bulb fits? The answer is simple–standardization.

Today, we live in a world where many of the things we use from day to day have been built around common standards. From light bulbs to high-tech products, the use of standards touches our lives each day. Within the world of information technology, cell phones from different manufacturers are able to communicate with each other because they connect using the same wireless communication standards. Personal computers connect to each other through Internet standards. Computer manufacturers produce parts that are compatible with each other because they are based on the standards created by IBM and Intel Corporation. Most desktop software is compatible with other software because the programs have been developed to run on the Microsoft Windows standard.

These are some examples of information technology standardization in action–enabling businesses to become more efficient and effective through improved compatibility and connectivity. Within the insurance and related financial services industries, where IT spending traditionally has been conservative, organizations that have adopted or are adopting technology standards will be able to differentiate themselves better with improved efficiency and service.

How can your organization become more effective by implementing IT standards? Depending on the size of your company and the complexity of its products, your IT team is likely focusing on intrinsic standardization, and possibly also on extrinsic standardization.

Intrinsic standardization involves ‘streamlining’ the internal environment–activities that enable internal systems and processes to work better with one another. The usage of Microsoft(R) Windows for all desktop users within an organization is an example of intrinsic standardization.

Extrinsic standardization efforts involve separate organizations working together to achieve common goals, such as the cell phone communication standard mentioned above. Extrinsic standards allow separate organizations and systems to communicate effectively with one another.

Insurance organizations can use intrinsic IT standards to achieve positive business impact in two ways.

o Process Standardization: IT organizations can align their service processes to better support their businesses. Program and project management offices can manage strategic IT initiatives; software development methodologies can be rolled out to ensure that IT products are developed using prescribed control procedures; and software support procedures can be shared across business units to ensure that customers of IT services receive consistent levels of care. The net result is improved customer service and IT product quality.

o Hardware and Software Standardization: Companies can select key types of hardware and software–such as servers, personal computers and programming tools–that will be used across all business units. These IT assets, once installed, can then be used at any business location within the organization, improving business flexibility.

The extent to which your organization is currently adopting the intrinsic standards above depends on the size and complexity of your organization’s processes. Smaller and startup organizations tend to have simple processes and limited staff, and thus focus primarily on profitability and growth. Larger organizations tend to have multiple operating units, complex products and complex business processes. They cannot grow without proper operational and cross-company standardization practices. In general, the larger and more complex the organization is, the greater the efficiencies that can be derived from standardization.

Organizations that take intrinsic IT standardization very seriously can make significant improvements in operational performance and business efficiency.

Now, let’s turn our attention to some examples of extrinsic standardization within our industry.

o Connectivity Standardization: Many insurance and related financial services organizations are currently exchanging data with one another by connecting to centralized “hubs.” These hubs generally are software programs or databases created by third parties. Each organization connects to a hub once and is then able to exchange data seamlessly and inexpensively with other organizations connected to the same hub.

This increases the speed and consistency of cross-business transactions and enables automated processing of transactions, resulting in improved operational performance.

o Data Standardization: Many organizations within the insurance, reinsurance and related financial services industries worldwide are collaborating to develop common standards for communications and transactions. One of the largest of these collaboration efforts is being facilitated by ACORD. The collaborative sessions generally occur in the form of recurring working groups, where attending members use consensus to agree on data standards. Established standards can be used by all member organizations to improve data interchange and operational efficiency.

Extrinsic standardization is not a new phenomenon within the insurance and financial services industry. Insurance carriers and their distribution “partners” such as banks and other insurance retail organizations have been using custom data exchange methods over many past years. However, the collaboration of multiple organizations to achieve one common set of data standards within the industry is a relatively new effort.

As more organizations move toward data standardization, the overall industry will see a shift from paper-based processing to more precise automated processing. Many of the transactions that are processed manually today will become automated, and will result in cost reductions and dramatic improvements in consistency and speed.

We’ll be cheaper, faster, better and satisfy more existing customers and attract more new ones. Data standardization should therefore be a top priority for all IT units within our industry. Organizations that are serious about improving their service capabilities within the next few years should now start participating in the standardization forums.

Riad Hasan is senior project manager, Customer Solutions, for Genworth Financial, based in Richmond, Va.