Situation – Three Companies Tried the Old Way and Failed
During the 1980s, three software companies, Cybertek, EDS and Tracor Computing were competing fiercely in the same life insurance market. These were the three big players, all selling old outdated software. So, they each tried to create a modern solution that was so comprehensive you could use it to run an entire life insurance company. Many life companies were looking forward to using one of these new state of the art solutions. These were large projects. Each had lined up at least ten of their existing customers to help fund the project. Each invested millions. Each project cost at least $30 million and one over $100 million. Each devoted scores of people for several years. They all failed. None were finished to completion.
Problem - But a Solution Was Still Needed
In July of 1988, I was sitting in the office of my good friend, Jerry Peters, CIO of Keyport Life Insurance Company. Keyport was using the old outdated Cybertek software. They weren’t caught up in the failure but they were keenly aware of it.Jerry took me in to meet their CEO, Bob Sharp. I’d never met Bob but had heard a lot about him and his many achievements. I knew from previous talks with Jerry that Bob was a very bright man, always full of ideas. On this occasion, he mostly just looked frustrated.Then, Jerry said something I’ve heard many times over the past 40 years. Most recently just a few days ago from Tom Schroeder, president of Commerce Group Service. He said, “Bob, you’ve got to meet Art, he’s an IT consultant who speaks the language of business.”
To Get Innovative Products to Market
We exchanged some pleasantries and finally came to the source of Bob’s frustration. He said, “Art, I have some killer annuity product ideas, but no software support. My Cybertek software just won’t do the job and a $30 million rewrite is out of the question.I said, “Bob, what would you like to see happen?” He said, “ There’s only two options, change my software or create new software. Both take years and cost millions with high risk. The board would have my head! I want to be first to market without going bankrupt.”I said, “No Bob, I mean what if it’s your luck day. What if you could make magic? What magic would you make? What would be your perfect solution?” He thought for a minute and said, “Well, if I’m dreaming, get rid of my old software, replace it fast with some that does exactly what I want, without costing much, and without any risk. And don’t forget the Genie and the magic lamp”.
Solution - We Tried My Magic Cure – We Changed the Information Process
In fact, I did have a magic lamp of sorts. Twenty years before, the frustration I spoke about earlier, caused me to quit my IT job. My mission was to find a better way. As fate would have it, I’d found it and proven it many times. I created a solution for Bob with vastly different results from the previous three failures, which demonstrates the awesome power of changing the way information is manufactured.
- I created a solution more comprehensive than the three failures were even attempting.
- Where they planned several years; I took 18 months.
- Where they used scores of people, I used six.
- They spent $30 million; I spent less than $2 million.
- The $2 million included more than just creating software. We converting Bob’s old data to the new solution, cleaned it up, tested it and put it into production with a comprehensive plan for backing it out if it didn’t work.
Keyport didn’t back it out. They still use it today. Other companies use it too. Today it manages over $50 billion in assets.
Later, when Allstate began using it, they performed a function point count, which valued the solution at over $60 million. We created $60 million of value for less than two million. A 30:1 improvement over traditional methods. Maybe there is a magic lamp. Now you know why Bob calls me “Genie.”
Results – With Astounding Success
As you can imagine, Bob was thrilled beyond belief. His wish was granted. He tossed his old software, for some that did exactly what he wanted, without costing much, and with very little risk. He was even more thrilled when I gave him his $2 million back. It was such a great solution; I wanted to own it and make it available to others. Bob said, “Go ahead, I’ve got just what I need.” Bob transformed his business and stomped his competition:
- He doubled his business without hiring any new people and decreased his IT costs by over $1 million a year.
- Products and services his competition couldn’t touch, doubled his business
- The new workflows meant no staff increases
I used that solution to do something similar for a number of companies.
A Standing Ovation
Allstate had a problem with competing, and their best estimates were it would take two years and $2 million to get in the market they wanted. We managed to do it in 90 days for less than 10% of that cost. Our advocates at Allstate received a standing ovation from the board of directors.
The Chairman’s Award
Soon, we found ourselves the darling of the insurance world. American Express called and said, “We want the same kind of competitive advantages. We want to introduce new products in just days instead of literally the years it takes us now.” Our advocates at AMEX received the American Express Chairman’s award.
40% Reduction in Operating Cost
Bruce Long, President of Guardian Annuity, said; “We launched new innovative products, reduced back office costs by 40%, and even received a patent on our new functionality.”
And Many More
So many other success stories; Capital Banker’s Life, Grange, Genworth, Commerce Group Service and many others along the way.All from the process I discovered and perfected 38 years ago.
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