ORG 726 Week 4 Digital Transformation Analysis Example

More Than New Systems: Is a Midwestern Mutual Insurer Digitizing or Transforming?

[Student Name]

University of Phoenix

ORG/726: The Impact of Technology on Organizations

Week 4 Assignment

[Instructor Name]

[Date]

Prairie Shield Mutual, its plans, people and figures are composites written for a model paper.

Prairie Shield Mutual, the composite insurer studied in earlier weeks, describes its current program as a digital transformation. In three years it has invested about $38 million in a cloud claims platform, a farm pricing tool and data infrastructure, and it plans a policyholder mobile app and a usage-based auto insurance program. Its board, elected by policyholder members, wants to know whether the investment is changing the company or only modernizing it. This paper evaluates the program against the research literature.

Defining Digital Transformation

Vial (2019) reviewed 282 works and proposed that digital transformation is a process that aims to improve an entity by triggering significant changes to its properties through combinations of information, computing, communication and connectivity technologies. His framework describes a sequence: digital technologies create disruptions in consumer behavior, competition and data availability; organizations respond with strategies that use digital technologies to change how they create value; these changes require structural changes and face organizational barriers such as inertia and resistance; and the results include both positive and negative impacts.

Hanelt et al. (2021) reviewed the literature from an organizational perspective and found that digital transformation research describes a shift toward malleable organizational designs, with organizations becoming more open to ecosystems and more flexible internally, and that the field had moved from seeing technology as a tool toward seeing it as reshaping organizations and their environments.

The Portfolio Against the Definition

The claims platform is digitization in Vial's terms. It made claims handling faster and cheaper, changed some structures, as Weeks 1 and 2 showed, but did not change what the company offers members: payment after a loss.

The farm pricing tool also improves an existing process. It changes who holds pricing authority, as Week 3 showed, but not the value proposition.

The mobile app, as planned, moves existing services, paying premiums, filing claims and viewing documents, to a phone. Members will value the convenience, but the offer is the same.

Usage-based auto insurance is different. It would collect driving data from members' phones, price premiums partly on actual driving and give members feedback and rewards for safer driving. That changes the value proposition from paying after losses to helping members avoid them, a shift from indemnity toward prevention. It also changes value creation: the company would earn on data analysis and engagement, not only on underwriting.

Three of the four projects make the insurer faster at what it already does; only one would change what it does for members.

Digital Business Strategy

Bharadwaj et al. (2013) argued that digital business strategy should be seen as organizational strategy formulated and executed by using digital resources to create differential value, rather than as an IT strategy subordinate to business strategy. Prairie Shield's governance treats digital projects as IT investments approved project by project, with business cases based on cost savings. That framing favors digitization, which saves money measurably, over transformation, whose returns are uncertain and slow. The usage-based program's business case was delayed twice because it could not show savings within three years.

Structural Changes Required

Vial's framework predicts that strategies to change value creation require structural changes. Usage-based insurance needs data scientists, behavioral designers, app developers, actuaries and marketers working together on one product, continuously improving it. Prairie Shield's structure places these skills in separate departments, IT, actuarial and marketing, with project teams that disband after launch. No unit owns the member experience across products.

Culture and Leadership

Structure is not the only change required. Prairie Shield's culture rewards careful, incremental improvement and avoids visible failure, a sensible culture for an insurer's balance sheet but a hard one for product experiments. The usage-based program will need to test features with small groups of members, learn from what fails and change quickly. Leaders can signal that such experiments are expected by funding them as learning, setting milestones based on what the team learns rather than on early revenue and protecting the team from the annual budgeting cycle. The chief executive's sponsorship matters: the claims platform succeeded technically partly because the chief operating officer chaired its steering group, and a transformation program needs at least that level of attention.

Lessons From the Claims Platform

The company's own experience offers lessons. The claims platform delivered its technical targets but produced different structures in two offices and turnover in one, because structural choices were left to chance. A transformation program should decide in advance who will own the member experience, how agents' roles will change and how data will be governed, rather than discovering these questions after launch. Weeks 1 through 3 showed that technology without deliberate organizational design yields uneven results.

Organizational Barriers

Barriers are substantial. Legacy policy administration systems cannot easily accept usage data. The company has two data scientists. Actuarial culture values stable, well-understood rating variables and is wary of behavioral data. Agents, who sell 70 percent of policies, worry that a direct app relationship will reduce their role. Regulators in some of the seven states restrict how driving data can be used in pricing.

The Mutual's Position

As a mutual, Prairie Shield is owned by its policyholders, not shareholders. That shapes transformation in two ways. It reduces pressure for short-term returns, allowing longer investment horizons. It also creates a mission argument: helping members avoid losses fits a mutual's purpose better than maximizing premium growth. But members' privacy concerns carry extra weight when members are owners, so consent and transparency must be central.

Recommendations

Distinguish in governance: classify projects as digitization or transformation, with different investment criteria and horizons.

Create a digital product team: a permanent, cross-functional team owning usage-based insurance and the member app, reporting to the chief operating officer.

Build data capability: hire six data scientists over two years and build a data platform that accepts behavioral data, about $9 million.

Involve agents: give agents access to members' safe-driving results and a role in coaching, preserving their relationship.

Lead with privacy: opt-in participation, plain-language data terms and a member advisory panel.

Sequencing the Work

The recommendations cannot all start at once. In the first year, the governance change and the digital product team come first, since without them the usage-based program will again be judged by short-term savings. The data platform follows, built in stages so that the first pilot can launch with a few thousand volunteer members. Agent involvement and the member advisory panel begin before the pilot, not after.

Measures

Beyond cost savings, the board will track the share of members enrolled in usage-based programs, changes in members' claim frequency, member retention and engagement with the app, and data scientists' time spent on new products. Results will be reported to the board twice a year.

Conclusion

Prairie Shield's program so far is mostly digitization: valuable, faster and cheaper, but not transformative. Usage-based insurance offers a genuine change in value creation consistent with a mutual's purpose, but it requires new governance, structure, skills and attention to agents and privacy. Treating transformation as an organizational change rather than a set of IT projects is the step the company has not yet taken.

References

Bharadwaj, A., El Sawy, O. A., Pavlou, P. A., & Venkatraman, N. (2013). Digital business strategy: Toward a next generation of insights. MIS Quarterly, 37(2), 471-482. https://doi.org/10.25300/MISQ/2013/37:2.3

Hanelt, A., Bohnsack, R., Marz, D., & Antunes Marante, C. (2021). A systematic review of the literature on digital transformation: Insights and implications for strategy and organizational change. Journal of Management Studies, 58(5), 1159-1197. https://doi.org/10.1111/joms.12639

Vial, G. (2019). Understanding digital transformation: A review and a research agenda. Journal of Strategic Information Systems, 28(2), 118-144. https://doi.org/10.1016/j.jsis.2019.01.003