In October 2006, Allianz Global Board challenged their leaders to think about innovation globally and strategically.
Allianz’s Blank Canvas for Global Innovation
The Board in its wisdom decided innovation globally simply could not be generic in its approach or thinking. Rather each country would need to chart its own innovation course based on its specific culture, leadership values, environment and ways of working.
This case study looks at the Allianz UK’s response to that challenge and its experience since 2006 and charts its course as it, at first, tooled up and stumbled into innovation and its progression from there into a sophisticated innovator in a mature and highly regulated industry through harsh economic times.
It makes the case strongly that innovation isn’t something that can be measured quarterly. It requires a strong leader with vision, proper resourcing, a cool team in the hard meetings and a commitment to staying the distance to change the organizational behaviours to obtain the results.
Allianz UK took the bold step to properly resource this global innovation challenge initially by establishing an innovation budget of £1m($1.8million). This enabled the organization to employ a full time staff of 5 led by a former Accenture consultant. 3 employees were deployed to create and implement breakthrough ideas working top down with senior leaders whilst the other member of the team was tasked with encouraging and developing ideas from bottom up, across all departments within the organization using idea campaigns and a bespoke technology platform.
Harvey Wade, Manager Innovation, Strategic Innovation Unit, Allianz UK was made responsible for the bottom up process and recalls the anxiety when the innovation team suddenly realised it had a blank canvas and needed to buy the paints to produce the work of art – innovation!
In other words, how and in what way would they spend their budget to produce innovation? Immediately, they realised they didn’t have much of a clue and neither did they know what was going to happen when they did spend it.
Their purpose was simple enough - locate breakthrough ideas that would produce value and dollars to the bottom line. Clearly, the allocation of three employees within the team working from the top down demonstrated where the team expected they would find most engagement.
Initially, an electronic suggestion box to support a series of internal communication campaigns as a call to action for ideas from across the entire organization was implemented. This served as both a launch of the innovation agenda andas a way of getting things moving. Line managers were charged with endorsing ideas, and where they could within their remit, agree to their implementation.
Early on, the innovation team discovered there was much less chance that breakthrough ideas from the top would ever be implemented. The real value came from the quantity of ideas emerging from the bottom levels of the organization, though, even there was a difficulty. The ideas that came through where not always relevant to the purpose and there were simply not enough ideas being generated.
At this juncture, needing to overcome the paucity of ideas, the team engaged Alan G. Robinson, author of “Ideas Are Free”. He introduced them to the Kaizen concept of the Total Quality Management movement (TQM) that grew out of the post War World 2 industrialisation of Japan. Japanese for “improvement” or “change for the better”, Kaizen is a way of thinking about work practices by focusing upon continuous improvement. When used in a business context and applied to the workplace, Kaizen refers to activities that continually improve all functions, and involve all employees from the CEO to the assembly line or front line workers.
The innovation team took the Kaizen principle and began working with teams by asking them to define a problem within their sphere of work and responsibility, to look at ways of solving the problem, in the process reflecting on how they improved the way they worked. How a team works to produce ideas around its practice and knowledge is now Allianz UK’s current innovation focus.
This moved the focus of idea generation from the fuzzy to the practical and instantly the volume and relevance of ideas increased.
The Innovation Team had strong senior management sponsorship from the CEO to go in this direction. The support from the Innovation Steering Group, made up of Lead Innovation Champions from each department, focusing on making innovation relevant in context has meant meetings that occurred monthly are now happening every other month, a fair indication a coherent innovation process is embedded in Allianz UK and flowing.
The Trials and Tribulations at the Commencement of The Journey
So what have been the lessons, the failures and the bumps along the way to get the Allianz UK innovation system in flow?
Jeremy Trott, Head of Innovation, Allianz UK was unequivocal in is his response.
“Lesson Number One - the importance of having a robust benefit measurement process for each idea is crucial to get credibility across the organisation.”
Allianz UK therefore requires each employee or team to validate their implemented ideas by declaring a value for each idea. This requires perception and agreement from individual managers and teams and can only happen if the initial idea is visible and transparent. This creates tension around sharing and collaboration if there are cash incentives involved
Since mid-2007 a monthly single page Dashboard of innovation performance has been produced for the management board in which everyone in the organization can see their and each others contributions and the progress of all current innovation contributions circulating in the innovation system.
This has produced more engagement at a board level where competition between board members has led to an uplift in innovation engagement. It has proven to be the vital element in the organization’s innovation strategy because without board engagement there is no possibility of any meaningful development. This dashboard approach has then been repeated across all of the divisions, highlighting superior performance across each of the business areas.
Focusing their innovation endeavours initially on these elements has enabled Allianz UK to develop a robust and public ideas benefit declaration process, offering quick idea facilitation and realisation, in the process validating the importance and strength of innovation and its financial benefits to the business.
The importance of developing a network of innovation champions within the organization who are the eyes of innovation, influencing, connecting and engaging with the Innovation Team was vital in the early days to give the Innovation Team, representation deep into the organization. Being involved in innovation campaigns in an organization always requires effort over and above an employee’s normal duties. In the author’s experience, innovation champions generally elect themselves because they have a natural aptitude driven by curiosity and passion for creativity and change and this is why they are so important to an organization. They are the subconscious usurpers of the constraints of the organizational processes and protocols, giving confidence and support to those around them to experiment, to dare and to push through with their initial thought. .
However the biggest challenge both Trott and Wade expressed they are facing is trying to find a way for the organization to move innovation from an outcome to an enabler, ensuring employees at all levels have a better process understanding of their practice such that an employee thinks of innovation as part of what he or she does normally.
Currently they are experimenting with team based conversations, in a sense formalising a process of reflection, by exchanging insights and problems around the processes in which team members are engaged.
Their ultimate goal is to have the higher echelon of Allianz UK participate in a conversation concerning organizational problems that stretches across all levels of the organization.
A Personal Reflection on the Journey So Far From One of Its Leaders
As a leader and manager of innovation in a large financial services company, Harvey Wade offered some important personal observations and insights about the inherent behaviours that drive management innovation that have shaped his thinking and practice.
Firstly, the recognition a number of ideas will be influenced by personal agendas and associated standards of behaviour rather than for the common good of organizational innovation. It is important to acknowledge these ideas in the right way whilst knowing they won’t be acted upon. The role of the innovation leader is to make certain idea generation is continually encouraged, whilst at the same time actively developing communication campaigns and exhorting greater thought effort around the purpose for idea generation.
Secondly it is important not to target an individual idea’s financial value at the outset because it is impossible to predict. Most value in ideas comes from the accumulation of lots of little ideas so the volume of small ideas around any topic is absolutely crucial.
When working in a highly regulated and mature market such as Allianz UK does, strategic innovation may not come in the form of a Blue Ocean Strategy or new product development but from the way existing products themselves are offered, sold or serviced.
Wade cautions about offering financial rewards not really linked to the value of the idea.
Allianz have an annual CEOs Award in which the most valuable innovation each year, as recognised by the CEO, receives 10% of the value of the idea in its first year of implementation. Since its inception, an award of around £50,000 ($90,000) has been won annually by an individual or small team.
This has created perceived tension in the organization in several ways.
Firstly the question is being asked whether idea generation and implementation is part of an individual’s day job or whether the extra money is a separate reward for additional effort over and above the normal tasks of a day job. This again highlights the dilemma between moving innovation from outcome to process. When incentivisation is in play, is the manager’s mind focused on thinking about how to improve the processes associated with his/her day job and producing ideas in that context or on seeking ways to create ideas for financial benefit for the manager?
Secondly is the tough challenge of trying to value ideas. Many great ideas simply won’t be valuable, yet may very well fit into Allianz’s idea benefit recognition rules. Areas such as procurement and claims that save large amounts are at an advantage as they are seen as being able to generate value. So how do you balance what these areas do with other areas in the business who may not have the opportunity to create such savings for the company and thus contribute cash to reward efforts in these areas?
The protocols in the idea benefit recognition rules are based on generating financial value and the challenge then is how to understand and capture the substance and the value of the idea simultaneously in teams or by the individual employee in context.
“Money is not the prime motivator” says Wade ”It’s the discovery of ideas with potential value and the discussion around them where the problems occur. If to implement the idea, I have to share it with you, I will be less inclined do to this, as I don’t want to share the reward. If I have to share the cash with you by revealing my insights that sets up a real tension in me.”
This thinking is unhelpful and impedes collaboration and is something Wade is struggling with the rest of the Innovation Team to overcome.
One very positive part of the recognition programme is the Allianz Annual Innovation Awards, this year held in Shakespeare’s Globe Theatre, London. All board members, the CEO and 160 representatives from all areas of the business whose ideas have been shortlisted for prizes attend, which gives a clear and strong signal about the importance of innovation and collaboration. This is the inner circle of Allianz UK as shown by the attendance of all the senior executives and it says loudly “You too can be part of this if you start out thinking collaborating is the way to go. Act on your own and it is doubtful you will get an invitation to attend”.
The Nature of Organizational Innovation and Why It is Fuzzy, Never Constant or Precise
When asked what is the best part of his role Wade sighs and then like all insightful creatives who genuinely understand the process of organizational creativity responds “The challenge for me is to actually understand what my role is as it keeps changing. For the first 6 months in 2006 I was part of a team of five, with a £1m budget and we simply didn’t know how to best invest our time and money.”
By April 2007, with 20 ideas producing only an additional £13,000 value against a target of £1m, things didn’t look good. Wade along with the rest of the team feared for their future. The Chief Financial Officer was looking closely at the results and declared (sarcastically), “This was a good investment‼!”
In response, the team realised that they had to make the innovation performance visible to all so that each divisional head would begin to understand their role in achieving “innovation numbers”. By designing andproducing a dashboard with clear and understandable metrics, each board member began to take interest to ensure their area topped the table.
This was a big moment in the life of Allianz’s innovation evolution and one that yielded relatively quick success. As a result of the board members taking responsibility for their area’s numbers, rather than blaming the Innovation Team, performance and engagement massively improved. By the end of 2007, ideas had been implementedworth over £2m in financial value to the organization.
By 2008 the Innovation Team knew they had garnered respect because instead of the team itself having to explain what innovation was, why it was important and how it was meant to work within the current organizational context, often being met with a brick wall in the process, the Divisional Heads themselves were suddenly coming to the Innovation Department seeking advice and assistance.
From being seen as a threat to the status quo and the natural order of things, the department suddenly had a real purpose and a heap of friends who needed help in spades. Divisional Heads had discovered with innovation you can’t say ”be innovative” and it appears! Innovation, based on subtle understandings of complexity, collaboration and communication in context, is a difficult science requiring specialist knowledge, just like other professions and practices and the Divisional Heads and the organization suddenly understood this.
Wade believes consciously that making innovation part of his work practice is essential, the challenge is how to capture and convey that personal process to his colleagues, team and generally across the organization at all levels meaningfully. Here he quotes Alan Robinson, “never be too busy to find ways of being less busy.”
He sites the important role the Management Innovation Index has played in revealing the perceived time barriers and impediments to organizational creativity to the leadership team, as it was an independent, dispassionate analysis of the current environment and culture. The Innovation Team has used the Management Innovation Index to reflect on this aspect of their work by focusing in on specific departments or areas they think can use some specialist innovation knowledge and experience.
The constant mantra from organizational innovation specialists like Wade is the absolute necessity of making innovation visible and transparent! Everybody, and that means everybody, needs to see how they are doing and what’s happening‼
Reflecting on strategic challenges he perceives haven’t been resolved is what he calls “the rear view mirror indicator “ of the Allianz UK innovation approach with its emphasis on financial and volume values.
The best lead indicators that an organization is going to be successful is around the number and quantity of ideas in play at any given moment in time, as opposed to the value that is just appearing now in the organization’s financial reports and balance sheet for the previous year.
However, the current challenge for the Innovation Team as a whole is to have that premise accepted at senior levels and they are not there yet.
How did Wade become involved in what is one of the most difficult of career paths – organizational innovation?
His journey into innovation evolved from his personal disposition of wanting to fix things, to make things better, always encouraging, supporting this type of thinking amongst his peers in whatever role he had. In a wonderful innovation irony, Wade says he just simply liked the “idea of ideas”.
After 16 years in insurance, an industry that operates in the most regulated and compliant ways, it was great to have people around him who were expressing what he had been thinking - why do we do it this way?
Suddenly, he saw people being encouraged to challenge the status quo and, furthermore, implementing ideas that came out of these challenges and for Wade the question became how can I be part of this, what else can I change and why not?
To see light bulbs going off with people at all levels, to see passion coming through and the empowerment that occurs through ownership of ideas…well...here was nirvana for Harvey Wade!
“If you ask me, am I passionate about insurance, the answer is no. If you ask me is my passion about making things better, solving problems and seeing better performance, then the answer is yes and that’s where I get my kicks‼”
The Dilemma of Measuring Innovation
In May 2011, Allianz UK began seeking a way of assessing its overall organizational innovation development to date. Was it possible to benchmark and measure an organization’s innovation in some way? To view the organization’s innovation holistically, enabling it to envision and plan a more deliberate and coherent approach to innovation across the entire organization.
For some time, it had been researching examples of tools or diagnostics that had the potential of revealing lead indicators and just better ways of thinking about the topic. Some tools explored creative behaviours, others explored innovation audits and some the organization’s supposed readiness for innovation. None had all the components Allianz was seeking.
Harvey Wade sort advice from a LinkedIn chat room of peers and the Creative Leadership Forum responded offering its service, the Management Innovation Index.
The Management Innovation Index enables an organization to benchmark, measure and map an organization’s entire management innovation system in a moment in time through a survey that captures and identifies manager’s perceptions of the system and how it works.
The outcome is a comprehensive document, the Management Innovation Assessment Report, which an organization’s senior leaders can use as a lens onto the organization’s innovation ecology, its strengths, opportunities and impediments to innovation.
Allianz UK chose to work with the Management Innovation Index because of several quite unique features it offered.
Firstly, the senior executives and partners in the Creative Leadership Forum, the designers and developers of the Management Innovation Index, have global reputations in management innovation in theory coupled with proven commercial innovation practice. Lead on the project was Matthew Ayres, Managing Director, Growth and Innovation Asia Pacific who is the Creative Leadership Forum’s Global Commercial Advisor and has implemented innovation and growth strategies in many top tier international and publicly listed companies. This meant Allianz wasn’t just talking to academics with little commercial experience but with an organization who understands innovation teams and the many inherent difficulties they have operating in large bureaucratic organizations. In that sense, the Creative Leadership Forum was much more of a partner in innovation than an educated consultant.
Secondly, the Management Innovation Assessment Report, the outcome of the Management Innovation Index Survey, did more than just attempt to reveal innovation behaviours or offer an innovation audit. It offered deep and substantial in-depth analysis on the organization’s entire system of innovation.
The way the collected data and details were interpreted and presented meant that it gave Allianz real numbers and measures, assisting them to re-enforce what they felt intuitively. The importance for the innovation team, though, was in obtaining real measures with genuine rigour as it represented the views of over 150 people across the business that gave meaning to their intuition. For example, its qualitative data revealed a blockage in middle management and the reasons for the blockage that had not been clear before.
The most important point of difference for the Management Innovation Index as a form of measurement was its clear perspective on the strategic dynamics of organizational creativity.
Whilst it did recommend the use of tools and methodologies, like other organizations, it was distinctly not the Management Assessment Report’s main focus.
What it did was put innovation into a proposition that enabled focus.
As Jeremy Trott, Head of Innovation Allianz UK says “With the Management Innovation Assessment Report, we have enough information to really concentrate on shaping our strategic innovation plan over the next two or three months, that will drive the success of the business for the next five years!”