1. Lean in Services
Professor Peter Hines

2. Setting the Context…
Major Insurance player in Global market with Offices in
over 20 countries
Total turnover of approx £1.2 billion worldwide
UK & Ireland accounted for £145m approx. Looking to
grow the business to £200m by 2006
All UK & Ireland business done via brokers - £15.5m
commission in 2002
Profitable but flat sales growth
Lean in Services 2
© Professor Peter Hines, 2009

3. Lean Business System
Shared Vision Common Goals
Cr
os T
t
s- ea
en
oy y
pl lic
Fu ms
m
De Po
nc
tio
Value
na
l
Stream
Management
Su Inte
pp gr
To oc n
ol ess
Pr Lea
ly a t i
it
C on
-K
ha
in
Extended Enterprise Tools aligned to need
Lean in Services 3
© Professor Peter Hines, 2009

4. Issues
The Business Cockpit
Strategic Programmes
Key Strategic Issues December anuary February March April
J May June July August Se
ID 233007142128041118250108152201081522290512192603101724310714212805121926020916233006
• Recruitment
1
• Exchange rate
4
• I.T. System
• New Facility 12
19
Emerging Issues 28
• Far East economic slowdown 38
• New competitor
• September 11th events Progress v Milestones and Forecasts to Completion
Measures & Targets Financials
DIVISIONAL/REGIONAL/MARKET SECTOR FINANCIAL SUMMARY THE BASE CASE
Historic Results In constant 1999 values
1997 1998 1999 2000 2001 2002
Annualised Actual Forecast Plan Plan Plan
RATIOS
#DIV/0! Sales Growth (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0!
#DIV/0! Operating Profit Growth (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0!
#DIV/0! #DIV/0! Gross Profit/Sales (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0!
#DIV/0! #DIV/0! Operating Profit/Sales (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Cust Perc. Sales Lead Time #DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
Operating Profit/Employee
Sales/Employee
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0! #DIV/0! Capex/Depreciation #DIV/0! #DIV/0! #DIV/0! #DIV/0!
PROFIT AND LOSS
Sales
Gross Profit
General Overhead
0 0 Trading Profit 0 0 0 0
Other Income
Exceptional Items
0 0 Operating Profit 0 0 0 0
CASH FLOW
Operating Profit
Depreciation
Capital Expenditure
Working Capital
O.E.E. Cost Emp Sat 0 0
Other
Net Operating Cash Flow 0 0 0 0
Lean in Services 4
© Professor Peter Hines, 2009

5. Set Objectives
2002 2003 2004 2005 2006 2007
Sales £132 £144m £155m £171m £200m
credit Ins £130m £140m £147m £155m £165m
receivables Mgmt £2m £4m £8m £16m £32m
Profit 0% 6% 10% 15% 15%
Lean in Services 5
© Professor Peter Hines, 2009

6. Rank
Value Criteria Insureco
Your Expectations Our Competitors Your best Other
Supplier
Better Same Worse Better Same Worse Better Same Worse
than as than than as than than as than
Quality Decision
1
Quick Decision
4
Price
2
Cover
3
Support
5
Lean in Services 6
© Professor Peter Hines, 2009

7. Competitive Environment
Factor Issue? Significance Short Significance Long
Term? Term?
Products Products are not differentiated Compete on price Constrains growth
for our customers
Little Innovation
Competitors New Players Stops ability to increase price Competition hits critical
Changing main competitors Consuming new business mass/market share
Opportunity to lead
Brokers Dominated by two players who Quoting Nett – transparency Redefine distribution channels
do not add value Reduced distribution costs
Brokers become competitors Lost business and devalue our
product
Substitutes Self Insurance – don’t’ buy it Lost business and inability to Shrinking market and potentially
Credit Information increase price – walk away invalidates the market
Need for repositioning as a
broader offer
Lean in Services 7
© Professor Peter Hines, 2009

8. Internal Environment
Strengths Weaknesses
Knowledge and expertise of people – systems, Skill sets around buyer underwriting
process, country risk, Operating Model
Geographical coverage Too many people in the comfort zone
Pay and conditions. Flexi time
Integrated IT systems Pay structure inflexible.
Multi national proposition Systems are inflexible
Centres of expertise. Centres of expertise.
Insolvency and recovery expertise Lack of one culture
Depth and breadth of product range Group shackles?
Good relationship with existing customers Play by the rules too often
Lack of team working of this team
Re-insurance
Opportunities Threats
Market is looking for an efficient producer. Re-insurance – pull out of market.
Weak competitors New competitors
New owners? More sophisticated customers.
Weak Brokers. Self imposed constraints.
Direct distribution Global economic situation.
Quoting Net
Trade sector activities.
Cross unit alignment
Group leverage on sales.
Lean in Services 8
© Professor Peter Hines, 2009

9. Ansoff Matrix – Where will we grow?
Existing Products /New Consumers New Products /New Consumers
• Trade sector alignment – efficiencies • SME product
•Specialist capacity issues
£20m in Years 1- 4 £6m in Year 2-4
Existing Consumers /Existing Products. Existing Consumers / New Products
• New business replaces lost business • SME product
• MRA income • trade finance
• Price increases • Integrated recovery fee.
• Additionality.
• Specialist capacity issues
£0m in Year 1- 4 £9m in Year 2-4
£5m replace lost business
Lean in Services 9
© Professor Peter Hines, 2009

10. The Implications of these choices!
Existing Products /New Markets New Products /New Markets
Acquisition
Process
Sales
k
r is
h
ig
H
Existing Markets / New Products
Existing Markets /Existing Products
NPI
Order Fulfillment
NPD Process
Supply
Chain
Lean in Services 10
© Professor Peter Hines, 2009

11. A Culture ready for Change?
Create Constancy Drive
of Purpose Performance
Take an
Define
Integrated
Constraints
Approach
Encourage Keep it
Innovation Simple
Care for Adapt to
People Circumstances
Lean in Services 11
© Professor Peter Hines, 2009

12. Strategic Direction Statement
We will: Grow the Credit Insurance business to £200m by
2006, delivering 15% return on sales.
by:
• Delivering outstanding service at reasonable prices and
delivering greater retention.
• Delivering significant growth from new sales
• developing integrated and aligned new offerings and then
taking them to new markets.
• achieving greater trade sector alignment
• Creating a culture of innovation and performance within our
business.
in order to: Turn the UK business into a leading performer
within Insureco, securing its future and the
future of our people
Lean in Services 12
© Professor Peter Hines, 2009

13. Our Critical Success Factors
The ability to….
• manage the relationship with the wider group successfully
• understand, achieve and proactively manage customers expectations
• operate joined up, cost effective processes
• agree a common goal, through supportive culture and trust in our people.
• spot and convert growth opportunities in sales in current and new markets
• innovate in new offerings.
• identify and respond to changes in market conditions
• deliver the right number of appropriately skilled, motivated people.
Lean in Services 13
© Professor Peter Hines, 2009

14. Determine the Measures Set
Critical Success Factor Measure Got one?
STRATEGIC ISSUE
manage the relationship with the wider business
successfully
Customer Perception N
understand, achieve and proactively manage customers index.
expectations Speed Y
Quality N
Profit Y
operate joined up, cost effective processes Claims ratio. Y
Cost ratio Y
Culture index N
agree a common goal, through supportive culture and trust
in our people.
Customer retention Y
spot and convert growth opportunities in sales in current % sales from new N
and new markets markets
% sales from current Y
markets
Portfolio value Y
% sales from new N
innovate in new offerings offerings
Speed to Market N
STRATEGIC ISSUE
identify and respond to changes in market conditions
People satisfaction N
deliver the right number of appropriately skilled, motivated index
people. Skills index N
Lean in Services 14
© Professor Peter Hines, 2009

15. Lean Business System
Shared Vision Common Goals
Cr
os T
t
s- ea
en
oy y
pl lic
Fu ms
m
De Po
nc
tio
Value
na
l
Stream
Management
Su Inte
pp gr
To oc n
ol ess
Pr Lea
ly a t i
it
C on
-K
ha
in
Extended Enterprise Tools aligned to need
Lean in Services 15
© Professor Peter Hines, 2009

16. Lean Sales Order Fulfilment
Process
Insureco

17. Strategic Direction Statement
We will: Grow the Credit Insurance business to £200m by
2006, delivering 15% return on sales.
by:
• Delivering outstanding service at reasonable prices and
delivering greater retention.
• Delivering significant growth from new sales
• developing integrated and aligned new offerings and then
taking them to new markets.
• achieving greater trade sector alignment
• Creating a culture of innovation and performance within our
business.
in order to: Turn the UK business into a leading performer within
Insureco, securing its future and the future of our
people
Lean in Services 17
© Professor Peter Hines, 2009

18. The Current State
See the wall charts
Lean in Services 18
© Professor Peter Hines, 2009

19. Current State Summary
Time Line (days) Resource (man-days)
Min Max Min Max
Typical (BUS) 1 18 0.1 0.4
Typical (JUMP) 7.25 65 0.2 17.7
Worst case (BUS) 33 199 3.6 27.2
Worst case (JUMP) 40 281 3.6 27.4
Lean in Services 19
© Professor Peter Hines, 2009

20. Features of the Current State
Customers information comes in to many possible locations.
Lots of delays
Lots of reworking information – key information not available
when required.
Don’t talk to each other across departments
Authorisation based on value, not on risk – causing significant
delays
We have 77,500 applications for £5k or less (26%)
• 64% are for SME customers
Lean in Services 20
© Professor Peter Hines, 2009

21. Features of the Current State
Customer doesn’t follow rules and neither do we!
Risk averse at the moment – automatic underwriting not being
applied.
Using the wrong measures and targets – driving departmental
behaviour.
Cross-country targets and standards / criteria are different.
Currently employing 1 FTE person just to input applications
Lean in Services 21
© Professor Peter Hines, 2009

22. Analysing the Map
Major Wastes / Issues Root causes Opportunities
Process Cultural Process Cultural
Multiple points of entry. Some No overall People don’t Enforce a single Educate
get delayed and some may get single point of like saying point of entry internal staff
entry for “NO” to for customers and customers
lost causing delays and lost
customers. customers. that do not use to help to build
applications (10% of applications the on-line relationships.
don’t use the on-line system) * system.
Ensure that all
possible
customers use
the system on
all possible
occasions.
Lean in Services 22
© Professor Peter Hines, 2009

23. Future State Summary
Time Line (days) Resource (man-days)
Min Max Min Max
Typical (BUS) 1 2 0.0 0.1
Typical (JUMP) 2 2 0.1 0.2
Worst case (BUS) 18.67 99.25 1.7 6.5
Worst case (JUMP) 19.67 100.25 1.7 6.5
Lean in Services 23
© Professor Peter Hines, 2009

24. The Benefits
Time Line Resource
Current Future Current Future
Bus Typical 9.5 1.5 0.3 0.1
Average of Average of
Worst Case 72% reduction59.0
116.0 15.4 5.0
69% reduction
Jump Typical 36.1 2.0 9.0 0.2
Worst Case 160.5 60.0 15.5 5.0
Lean in Services 24
© Professor Peter Hines, 2009

25. Lean Sales Acquisition Process
Insureco

26. Strategic Direction Statement
We will: Grow the Credit Insurance business to £200m by
by: 2006, delivering 15% return on sales.
• Delivering outstanding service at reasonable prices and
delivering greater retention.
• Delivering significant growth from new sales
• developing integrated and aligned new offerings and then
taking them to new markets.
• achieving greater trade sector alignment
• Creating a culture of innovation and performance within our
business.
in order to: Turn the UK business into a leading performer within
Insureco, securing its future and the future of our
people
Lean in Services 26
© Professor Peter Hines, 2009

27. The Plan…
We had already completed mapping work within the UK division and
had identified major savings within their Order Fulfilment process
Having improved the speed & quality of their existing offering to
existing customers, they then needed to turn their attention to
growing new business
The plan was to map their current Sales Acquisition Process and look
at designing an improved process at no additional cost to the business
The longer term objective was to combine their two business streams
into a single flexible process
Lean in Services 27
© Professor Peter Hines, 2009

28. REFCLA Goes Into Working Tray – Receiving Information
Phases Participants/Stakeholders Time Line Resources Standards/Criteria
RS CST AM IF CUST BUYER Min Max
* ALLRS All
REFCLA into Policy Breach
info
W/F Tray available
Pol Decision Before it is looked at
1 1 min
10 days query 10 day print?!
• All info either + or –
+2-3 days +2-3 days +2-3 days + 1-2 days +1day • Info available online,
Take Meeting in system
n Meeting Meeting Meeting Meeting 1 15-25 mins
Decision • Within Authorities
• Within TPE levels
Y Ring sub
Customer 1 21-26
Decision
Taken
Y
Ring Customer
Meeting for
further Info
70% of cases we have
enough info to
underwrite on Current state Four Fields map
for further info
Ring Buyer? Meeting with
Buyer
Y
Info can be
provided
Info to CST Info to CST Info to Y
CST Info to CST
Info to U/W
Analyse Info 5-10 mins
Decision Taken 2-3 days
Y Issue: Cancellation of
CLA why would
Decision Confirmation U/W?
Taken of Decision 3-13 days 26-36 mins
Future State – REFCLA goes into Workflow Tray & Receiving Information
Phases Participants/Stakeholders Time Resources Standards
Line
Risk Services Account Mngr Customer Buyer
0 • Automatic allocation (to Invo. U/W)
RECLA into Policy • Within Authorities
Tray Breach • Within TPE levels
• Mandate to enable U/W’s to divulge
Look at Case 6-16 mins customer name (our insured) when
& Analyse contacting buyer for information
• Customer & Buyer details are correct on
the system
• Buyer/UW contact encouraged to help
Meeting for Meeting 10 mins build relationships for portfolio control
Take N Info for info (Feasibility of someone else sourcing info
Decision?
for UW – work already completed not
Y practical in this context)
• Process in place to capture up to date
info for active buyers
• AU
Future state map Credit Limit
Decision Issued
Info is
provide N – Principles & practicalities agreed
Across group
- “What if” examined to ensure max %
Y (‘X’) automatically underwritten
• Main speed of service target =no
REFCLA in any tray older than X days
• Fully utilise credit check facility
Info to (review threshold of £10K? & price
Underwriter differential between credit check &
credit limit)
• Group wide agreed priority progress
Analyse 5-10 mins in place
Info • Authority thresholds are value at risk
& lay with nominated individuals rather
than committee
Take Decision? • Interface system errors resolved
N within 24hrs
Y • Small limits thresholds reviewed
• Reduce amount of paper sent to
Credit Limit imaging
Credit Limit Decision
• Quality measure to be defined
Lean in Services
Decision Issued
Letter 1 21-36mins
28
© Professor Peter Hines, 2009

29. Mapping the Sales Acquisition Process
Lean in Services 29
© Professor Peter Hines, 2009

30. The Maps…
Lean in Services 30
© Professor Peter Hines, 2009

31. What We Found…
The business operated almost 100 % via brokers to whom they were
paying commission of 15% direct to the brokers - £15.5m
The brokers were not giving good value for money and were not
accurately interpreting the VOC
The conversion rate for enquiries was very low
On the very odd occasion where they dealt with the customer direct,
the level of conversion was very high – over 80%
No cohesive marketing strategy to support the Sales Acquisition
Process – hence low enquiry level
The company were effectively order takers as opposed to order
getters
Lean in Services 31
© Professor Peter Hines, 2009

32. Current State
Phase 1 Phase 2 Phase 3 Phase 4 Phase 5
Setting Market Making Selling Selling
Direction Research Contact In On
100
%
50%
0
%
y
Enquiry Conversion Retention
No
teg
rate rate rate
Ma
t ra
current
S
rke
25% 8% 75%
No
tin
g
Lean in Services 32
© Professor Peter Hines, 2009

33. What We Did…
We devised a new future state Sales Acquisition Process with the
team which removed their sole reliance on brokers and enabled them
to get a clear understanding of the Voice of the Customer
We devised a new sales structure to help them achieve this
We identified the skills required at each phase of the process
We identified the need for measures & targets at each phase of the
process
The new process will enable major sales performance improvement at
no additional cost to the business
Lean in Services 33
© Professor Peter Hines, 2009

34. How the Future State Compared
Phase 1 Phase 2 Phase 3 Phase 4 Phase 5
Setting Market Making Selling Selling
Direction Research Contact In On
100
%
50%
gy
0
te
G
ra
%
ot
st
Enquiry Conversion Retention
a
a
pl
ot
rate rate rate
an
G
current 25% 8% 75%
Future 1 50% 50% 95%
Lean in Services 34
© Professor Peter Hines, 2009

35. The Process Benefits
Future
Credit Insurance Current 1 Change
Time Resource Time Resourc Time Resources
Phases
Days s Days Days es Days Days Days
1. Trade Sector Development 50 14 See 2 See 2 See 2 See 2
Per TS
(per TS) ( 700)
2. Strategy - targeting 96 9 217 25.4 - 10.00%
customers/sectors 0.72
%
3. Enquiry Received 1.2 0.09- See 4 See 4 See 4 See 4
(accepted/rejected) 0.12
Reg & Average of 5.25
91.5 35 0.65 -38% -88%
SME Key
Average of 50%
128 5.25 84 4.00
4. Enquiry accepted to closure
Acct
40% reduction in -24%
-38%
Global reduction 7.9
180 84 4.00 -65%
man hours
-24%
44 1.15
Sales Closure 33 0.75 -25% -35%
Min
5. Servicing
Max speed 13.5
145 47 2.20 -68% -84%
145 13.5 59 3 -59% -78%
6.1 Renewal process (Reg & Min 91 0.5 30.40 0.40 - -10%
SME) Max 121.5 1 47.8 0.80 0.67 -20%
%
6.2 Renewal Process (key acct & 94 4.5 51 3 -
- -0.33%
global) 0.46
0.61
%
%
Lean in Services 35
© Professor Peter Hines, 2009

36. Business Benefits Summary
Much improved levels of enquiry – from 25% to 50%
Substantial conversion rate improvements – from 8% to 50%
Much improved bottom line performance – (£15.5m Commission )
Major reduction in Customer waiting time identified – over 40%
Dramatic reduction in man hours identified - over 50%
Planned Sales growth being achieved - £145m to £200m by 2006
Lean in Services 36
© Professor Peter Hines, 2009

37. Further Information
For further information please contact:
Professor Peter Hines at: peterhines@hotmail.com
See also at UniSA:
10 Day Lean Principles course
3 day Lean Leadership course
LinkedIn site:
Lean Enterprise Australia & New Zealand
Lean in Services 37
© Professor Peter Hines, 2009