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This article first appeared on The Times

The first year of any new chief executive’s role is tough enough at the best of times – let alone when the period includes having to cope with the impact of the coronavirus pandemic and the levels of uncertainty and anxiety that have accompanied it.

But for Penny James – the former CFO of home and motor insurance specialist Direct Line Group who stepped up to the top role in May last year – the opportunity to lead the organisation at a time of crisis has been a powerful experience. “It has been hugely challenging but immensely rewarding. A rollercoaster, but I am glad that I was the chief executive rather than the CFO – the chance to lead people like this doesn’t come along very often.”

And just as Direct Line’s 10,000 employees have had to manage dramatic shifts in the way they work thanks to COVID-19, so James has had to think about adapting her role and behaviour to the new, predominantly online, world. “A CEO develops a radar system to give them a feel for the organisation. I have had to replace some of the elements of that radar system,” she says. So the traditional office walkabout is out, and frequent all-staff video calls are in. “I have to make myself much more accessible to everyone, so that people will engage with me and tell me what’s going on.”

Being accessible means being approachable, and that calls for a leader who can keep it real – the most important thing, says James, is to “be yourself”. In return she finds that people are generally more engaged and more likely to ask questions online than they were before. “The level of communication has shifted. I used to speak and get one question, now I get questions on everything from strategy and competitors to Black History Month and mental health. It’s fascinating.”

Transformative work

When the pandemic hit, DLG was up to its elbows in a major digital transformation programme involving a new cloud-based tech architecture and new, more agile ways of working. Despite the temptation to batten down the hatches and go into survival mode, James decided that the long-term transformative work must continue, alongside the immediate challenges of working from home and shifting customer behaviour. But the results surprised even her.

“We are blessed with great people, so I was confident that we could get more than 10,000 people working from home very quickly, but I was amazed that we could do all that and within six weeks we’d be delivering a new cloud-based accounting system, too.”

That’s not the only bit of legacy tech that has been replaced during the pandemic – there’s also been a new claims management system for the Green Flag breakdown recovery business, and the policy admin system for DLG’s core motor insurance line is also about to go into the cloud. “The world moves so fast now, customer journeys can change all the time and you need to be able to respond quickly. I inherited a great organisation but it wasn’t nimble. You can’t expect that the outcomes of a plan should be the same now as they were when you set it up three years ago.”

Slick new tech

Being able to move fast makes an organisation more resilient, she adds, but also requires a different kind of leadership. “As a leader you have to have the confidence to know when someone else in the organisation is better placed to make certain calls than you are. It’s not a traditional style of leadership.”

The next step is bringing in new ways of working to make the most of all the slick new tech, and to that end DLG is introducing cross-functional teams to speed up delivery and problem solving. It’s also brought in an innovative new M&A strategy to complement its digital transformation, attract new customers and enhance growth; one of the early fruits of which is the acquisition of Brolly, an app-based insurance tech start-up specialising in more personalised and flexible contents cover, aimed specifically at younger customers in rented accommodation. “It’s a brilliant team and they have joined us to think about building those more bespoke products,” James says.

Her ultimate goal is to create an organisation where the culture, technology and processes all have the capacity for change and collaboration built in, so that effort can be directed externally at tackling long-term social and business issues. Because despite all the adverse effects that the pandemic has undoubtedly had, she concludes, in the long term it’s not the only – or even the greatest – challenge that society faces.

The KPMG view

Every good CEO knows that the customer is king. And as the pandemic has shown only too clearly, those customers increasingly prefer to engage with companies digitally – because it is safe, convenient and effective. So the drive to digital is only going to get faster, says Mark Longworth, partner and head of insurance consulting at KPMG. “Our latest data shows that more than 70 per cent of customers have moved to some form of digital interaction during the crisis, and that 80 per cent of CEOs intend to accelerate their digital transformation accordingly.”

In the insurance sector, a key driver of digital transformation is to use data to offer more personalised pricing of products. “That’s the nirvana state for insurance companies – if I drive my car very well and safely, I should be able to access a lower premium. Personalisation means that insurers can price risk differently, so that customers really do pay the premium they deserve,” Longworth says.

Personalisation starts with data, but while insurance companies hold a good deal of data on their customers, it’s often fragmented and not on a single platform. “The data they hold is not inconsequential, but companies are often sat on legacy technology that makes it hard to access that data in the right way or at the right moment in time.”

Consolidating the technology into fewer cloud-based systems in the way DLG has done is a vital part of the journey, but effective digital transformation comprises a triangle of three interdependent factors, says Longworth; people, process and technology. “Sometimes businesses will try and fix only one or two aspects of that triangle without getting the full value out of digital transformation. You have to do it from end to end.”

That means agile processes and workflow, with fluid, multidisciplinary teams focused on customer issues rather than sitting in old-fashioned product or departmental silos. This calls for leaders with a new and different skill set, less about command and control and more about vision, empowerment and accountability. The way that top teams work together has to adapt too – quarterly or monthly board and senior leadership meetings are not up to the task of managing teams whose output is assessed daily or weekly.

External collaboration is another key ingredient in the digital recipe, whether that be through partnerships, JVs or even – as with DLG and Brolly – full acquisition. Each approach has its own pros and cons, says Longworth. “The attraction of ownership is control and, especially if it’s something that will give you a market advantage, exclusivity.” Just be careful, he warns, that you don’t kill the goose that lays the golden egg: “Don’t strangle the innovation that attracted you in the first place.”

One final advantage of digital transformation is particularly pertinent to the current environment, he says – it forces businesses to quickly move to the reimagine phase and scan the horizon for new opportunities. “The winning organisations will be those which take advantage of all the changes that are happening now and use them as a springboard for the future.”

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