London

School of
Commerc
e
TMIA
Urvil shah
L0695KMKM021
0

MBA 1 - C
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Contents

Executive Summary …………………………………………………………………………………………………………….…..……. 2

Introduction ………………………………………………………………………………………………………………………………….. 3

Importance of Change & Innovation ………………………………………………………………………………………..……. 4

Types of Innovations ………………………………………………………………………………………………………………..……. 6

Change Management & Innovation as a Strategy …………………………………………………………………….……. 7

Lean Methodology ………………………………………………………………………………………………………………….…….. 8

Organizational Review ………………………………………………………………………………………………………………….. 11

AXA PPP Healthcare …………………………………………………………………………………………………...…… 11
AXA Strategy ………………………………………………………………………………………………………..……..….. 11
Change Management Team …………………………………………………………………………………….………. 11
Transformation Project ……………………………………………………………………………………………….…... 12
Hits & Misses …………………………………………………………………………………………………………….…….. 15
Opportunities & Recommendations ………………………………………………………………………….……. 15

Critical Analysis ……………………………………………………………………………………………………………………….… 16

Conclusion ……………………………………………………………………………………………………………………………...……. 17

References ………………………………………………………………………………………………………………………………..… 18

Bibliography ……………………………………………………………………………………………………………………………..…. 19

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EXECUTIVE SUMMARY

Innovation is everywhere. Right from the day to day advertisements on television to the design
of the I-Phone in your pocket to the transport services delivered on the streets of London, people,
managers, executives and organizations are constantly creating new ideas, services, and products
and adapting old ones to fit their changing circumstances and global environment. This report
evaluates the importance of innovation, how change and innovation management are important
to an organizations strategic goals and the different types of innovations used by organizations. It
also analyzes the success of an Operational innovation carried out by AXA to meet customer
needs and reduce operating costs and hence increase profitability.

INTRODUCTION

Innovation is often given complex definitions. We prefer the simple one: ‘new ideas that work.’
(Hiatt 2003). Many companies invest funds, resources and capital to innovate and improve
operational efficiencies, create new products, introduce new technologies and improve overall
quality. In today’s global environment most organizations have access to similar technologies,
human resources, raw material and infrastructure, however the organizations ability to innovate
and adapt to the changes in the global environment helps it differentiate from its competitors and
gain competitive advantage. Innovation benefits consumers in many ways, through the
development of new and improved goods, services, and processes. An economy’s capacity for
invention, creation and innovation helps drive its economic growth and the degree to which
standards of living increase. Technological breakthroughs such as automobiles, airplanes, the
personal computer, Internet, television, mobile phones, and modern pharmaceuticals illustrate the
power of innovation to increase prosperity and improve the quality of our lives. (Paton 2008)
More and more originations today understand the need and importance of Innovation to maintain
a competitive advantage. They understand that change is the way of life, and every organization
needs to change and innovate to adapt to the constantly changing business environment. One
such industry that is covered in this report is the Health Insurance industry.

Health Care Industry

The Healthcare industry is one of the fastest growing and most dynamic industry in UK
It is the largest single industry in the United Kingdom. According to a recently released
congressional report, the industry is comprised of over 750,000 physicians and 5,200 hospitals,
and it receives approximately 3.8 million in patient visits and 20 million outpatient visits daily.
When considering the professional workforce and the ancillary jobs within the industry,

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it is estimated that one in every 11 U.K. residents works in the health care business. (Department
of Health, 2009) As overwhelming as these figures are, they pale in comparison to the overall
annual expenditures associated with the industry. This is where the health insurance industry
plays a critical role. Innovations in medical science and healthcare industry have made it
paramount for the health insurance industry to evolve in order to cope with constant changes.
Hence organizations providing health insurance need to understand the importance of innovation
in order to reduce costs and maintain its competitive advantage.

Importance of Change & innovation

Change and contemporary synonym of innovation are the only constant facts of human lives
(Heraclitus). Age by age human environment, ideas, technology and ideas change trough to find
excellence or curiosity. The main importance of innovation arises from our changing
environments. The word of evolution is continuous process at the end of the world so we need
changes and innovations. Through the human history people first needed to kill animals with
their stone based weapons after they developed agriculture they establish communities and
finally states. They introduced new machines without using man power to match increasing
demand. Contemporarily now we have technologies such as information systems, computers and
our developed modern ideas. With the human being companies also perform innovations because
of continues order and nature of the world. That all factors increase the value and highlighted
innovations.

Another importance of Innovation is it gives companies an economic advantage. For

example our research project on Lean Methodology proves companies to reduce their expenses,
improve productivity & customer satisfaction as which covered in details ahead in the
Organizational Review section. Cainelli, Evangelista and Savona’s “comparison [with empirical
data’s] of the economic performances of innovating and non-innovating firms across sector do
confirm that innovation seem to play a positive effect on economic growth in most sectors’’
(2004 pp.123). Furthermore SCALES research report finds that “innovation seems to have a
positive effect on the turnover growth and employment growth of organizations’’ (Kemp,
Folkeringa, De Jong and Wubben 2003 pp.57).

To sum up, Changing political trends, economic conditions, product trends and decreasing
global resources often affect product development, economic situation and finally expand all
areas of people. Innovation and change have great importance for companies to survive,
Introducing new sectors, Productivity and economic cases. Innovation is not only important for
individual organisations but also important for states and communities. Furthermore Van der
Wiel states that ‘’Innovations are the engine of economic growth, not only for manufacturing but
also for services (2001 pp.32)’’ that means markets, sectors and companies have big influence of

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the change upon them, additionally workplaces needs better conditions, Trough years economy
reshape itself and technology always change. All previous factors shows innovation is inevitable;
therefore companies must perform innovations to survive and catching the age.

TYPES OF INNOVATION

Innovation is not a random event or intangible acti vity. It is a process, more specifically,
innovation is best defined as “the process of devising a solution that addresses un-met customers
needs’’.

Broadly there are three different types of innovation: (1) Product and service innovation which
focuses on improving a product or service, (2) Operational innovations which focuses on
making an internal business process a core strength, & continuous process improvement, such as
Toyota did with the automotive production and (3) Business model innovation which focuses
on creating a new formula for making money. Google, for example, has reinvented the way a
company makes money with advertising on the web (Harvard business press 2003)

Disruption which is specifically defined as the creation of a technology that enables a new set of
customers to perform a job that only specialists could previously perform. Crest White stripes for
example made it possible for people to whiten their teeth on their own, eliminating the specialist
- the dentist.

Disruptive innovation so much has been written about disruptive innovation that the word
“disruptive’’ has become a way to refer to practically any type of innovation that changes
anything. Although a company can be impacted even to the point of its devise - by a competitor
that employs a strategy or operational and business model innovation (we see this with Wal-
Mart in the retail industry), This is not disruptive innovation.

Out Come - Drive Innovation using the job customer is trying to get done as the unit of
analysis, rather than technology, we say that companies can engage in product or service
innovation by (1) helping customers get a job done better (2) helping them get a related job done
(3) Helping them get a new jobs done where no product currently exists and (4) helping a new
set of customers perform a job that was a previously performed by other, more skilled people.
Using this simple frame work, product and service innovation initiatives can be planned and
executed predictably. This report studies an Operational innovation done by AXA PPP
healthcare, which resulted in the customers getting better service and helped the organization to
reduce costs. (Kaplan & Warren 2009)

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CHANGE MANAGEMENT & INNOVATION AS A STRAGTERGY

Nowadays most business enterprises are engaged in strategic planning with using new ideas,
objects, practices and reaching the goals. Generally strategy is a simple way to analyze the
current situation of organization, expected future situation, right direction confidently and
achieving the objects. Actually it is more than that which provides the systematic way for
identifying and evaluating factors external to the firm and fixing them with the organization’s
abilities. In addition strategy is a long process over long time period with individual of resources
with a competitive environment to meet up customer needs. In other words, strategy is a method
of process of direction and scope of an organization to achieve opportunities with its pattern of
resources and meet the demand of markets and stakeholder expectations. Innovation is the one
part of strategy which introduces new technologies, ideas, practices, products, marketing policies
and a new ways to merchandise. Likewise innovation normally relates to new ideas which are
implemented successfully. Innovation is a great idea to make a job better while it introduces new
product that are adopted for the marketplace. William ylvisaker, the former CEO at Gould inc.
introduces a new innovation by changing the firm a manufacturer of car batteries and electrical
equipment to a high-tech electronics firm. In case of changing in personnel half of the committee
members are left the job. In the ten toughest corporate managers in Fortune magazine Ylvisaker
was named one for making such radical decisions in innovation sector.

This report evaluates the use of Innovation in strategic planning of AXA and structure of the
change management team which is covered in the Organizational review.

LEAN METHODOLOGY

Lean method is a system used as a production practice for organizations and management
products, customer service and operations trying to reduce and save human effort, space, capital
and time. Business use often known as Lean to create customer value at the end of the
productivity chain with high quality and fewer defects. Lean is a methodology that is used to
accelerate the velocity and reduce the cost of any process (be it service or manufacturing) by
removing waste. Six Sigma [on line] (cited 2 April 2009) Available from
<URL:http://www.isixsigma.com/library/content/ask-02.asp>.

Services companies such as AXA which is the company in study, require developing robust,
waste free, flexible processes, while also keeping the views of the customer paramount as the
processes are executed (Sarkar, 2007). It is important because even with advances in technology
the customers face long lead times and unexpected errors and Lean helps to improve the
efficiency in the processes, quality and standardization in order to give an excellent customer
service.

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Lean manufacturing derived from the Toyota Production System (TPS), has evolved over the
past fifty years (Zidel, 2006), this term was created after the II World War, when Toyota had the
necessity to have good quality in its products but with competitive prices, they tried to optimize
their processes, reducing lead times and unnecessary activities, minimizing mistakes and
wastages. The table below shows the health care process value in striving for Six Sigma level,
demonstrating that 99% it is not enough to get the health care delivery excellence.

Coding
Patients With Phone Calls
Errors
Sigma Misplaced Exceeding the Two- Defects/Million Percent
Requiring
Level Personal Items Minute-on-Hold Limit Opportunities Yield
Correction
3
3,660 Every Day 770 Per Day 257 Each Day 66,800 93.32000
Sigma
4
340 Every Day 72 Per Day 24 Each Day 6,210 99.34900
Sigma
5
12 Every Day 13 Per Week 5 Each Week 230 99.97700
Sigma
6
6 Every Month 10 Per Year 3 Each Year 3.4 99.99966
Sigma

Existed many examples about successful projects in health care industry around world like
patient satisfaction, money saved and better quality in the service, time reduced in the process
and an increase number of people served. This report will throw some light on how Lean
Methodology was used by AXA PPP healthcare to improve the Claims processing process,
which resulted in better customer service & reduction in operating costs.

ORGANISATIONAL REVIEW

AXA PPP HealthCare

AXA PPP healthcare is one of the UK's largest, most experienced providers of private medical
insurance. They have been providing private medical care since 1940. They offer a range of
private medical insurance plans to enable individuals and employers to meet their healthcare
needs. AXA PPP healthcare is a member of the AXA Group - a world leader in financial
protection with over 170,000 employees across UK, Europe, America, Asia- Pacific & Africa,
400,000 shareholders and revenues of €93.6 billion in 2007.

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AXA Strategy

AXA has set five operational priorities or catalysts for change & innovation, which together are
known as the five cylinders of its growth:
 Product innovation: a source of differentiation that reflects AXA desire to offer added value
every time it introduces a new product in one of its markets.
 Distribution management: a second source of differentiation that reflects AXA's
aspiration of enhancing sales performance by lessening the administrative load on its
distributors.

 Productivity: AXA seeks to reduce operating costs and improve quality every year.

To achieve operational excellence in all of these key areas, AXA has adopted the strategy of
continuous process improvement program. AXA performs these programs, creates new products
and runs various innovative projects through its Business Excellence team.
Business excellence Team
AXA has a Business excellence team which is responsible for driving all initiatives taken
towards process improvement, innovation & change. The Business Excellence team is an
integral part of the organization and plays a key role in strategic planning to help achieve long
term goals and objectives set by the company. Following teams are a part of the Business
excellence team in AXA
Six Sigma Team – Team consists of six sigma experts, Green belts & Black belts responsible for
driving process improvement and process re-designing. They also brainstorm to come up with
innovative solutions to operational challenges
Eureka team – Team is responsible for administration and utilization of the idea data base. This
team encourages employees to think out of the box and come up with innovative ideas
Transformation project
AXA PPP Healthcare conducted a “voice of the customer” survey in 2008 which called for a
need for change to ensure AXA keeps its competitive advantage in the fast growing and dynamic
Health care industry. The key area of improvement identified was the turnaround time for the
claims processed by the Claims processing team which operates from UK & India. The
Business excellence team was given the responsibility to drive and implement the project with
the support of Change agents identified within the operation teams. The first step taken by the
Business excellence team was to review the existing process used for claims processing and then
use the Lean methodology to reduce waste of time and intellect to enhance productivity.

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Objective – To improve productivity by 20% (increase number of claims processed per day per
assessor) and improve turnaround time of claims (to 93% of claims to be completed in 6 days) by
end of 2008.
Projected Benefits – Enhance customer satisfaction by improving turnaround time of claims and
reduce cost by improving productivity.
Methodology – The lean methodology was adopted by the Business excellence team to identify
improvement potential. Lean took kit was utilized to identify key areas for enhancing
productivity and turnaround time.
Phase 1 – Data collation for the existing process, review of current KPIs & use the Lean Tool kit
to analyze the “as is” process. Conduct time motion study to identify the true potential or
capacity.

Phase 2 - Post analysis and time motion study, following improvement areas and implementation
levers were identified.

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Phase 3 – To monitor the performance of the process on the new implementations, new
measurement metrics and KPIs were introduced. These KPIs were drilled down to each team in
the claims processing department and monitored regularly by using visual dashboards

The Results

Claims processing team – Performance against KPIs for Q4 2008

KPIs Target Actuals RAG Status

Abseentism < 12 % 10.50%  
Log in efficiency >82% 83.50%  
Average handling time 300 secs 315 secs  
% of claims referred < 14% 12%  
% of first touch completes >80% 82%  
Random Audits % >95% 98%  

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Ageing % <4 % 4.20%  

Inter Agent variation 22% 32%  

Benefits achieved from Transformation project

 Productivity benefit of 24% achieved which resulted to a reduction of 28 FTEs and cost
savings of 17920 GBP per month. Claims processed per person per day increases to 82 from
65.
 Target for Turnaround time exceeded, 94.3% claims were completed in 6 days for Q4 of
2008.
 Voice of Customer – Score for “Voice of customer” survey for 2008 was 87% which
improved by 8 % compared to the score for 2007 which was at 79% .

Recommendations

 Productivity can be further enhanced by reducing AHT. Innovations like use of dual
monitors, new key board shortcuts & Typing tutors can help to reduce AHT.
 Ageing % can be reduced by improving work force management. Currently teams are
working from Monday to Friday (9 am to 5 pm) however the scanning of work happens till
8 pm and on Saturdays as well. Splitting teams into dual shifts and getting a small % of staff
to work on Saturday will help reduce the Ageing %.
 Inter agent variation can be reduced by introducing Buddy to Buddy program, where top
performers can buddy up with bottom performers to help them improve.

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CRITICAL ANALYSIS

AXA as an organization understands the importance of change and innovation. It has a

competent set up for managing innovation in form of the Business excellence team. We further
analyze the strengths and weaknesses AXA posses with regards to innovation management.

Strengths:

 A very well structured Business excellence team

 Business excellence team plays a vital role in company’s strategic planning

 Well defined objectives set for the Business excellence team which are in sync with
organizational goals and objectives

 Talented pool of resources employed in the Business excellence team

 Eureka tool in place to manage & implement ideas given by employees

 Strong tools and systems in place to monitor performance of ongoing project (E.g Visual
dash boards, weekly reviews etc)

 Effective Communication of changes and results (Townhalls, weekly newsletters etc)

 Regular trainings and up skilling for staff (GB certification)

 Rewards and recognition for ideas given by employees and participants of various
projects

Weakness

 Business excellence is a separate department, hence on occasions change agents lack the
process expertise

 Lack of support from other departments like Operations, HR, Finance etc

 Approach towards innovation is more reactive and not proactive

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CONCLUSION

For services the “process if the product” because the customer participates directly in the
services delivery. Improvement in service delivery has a direct impact on customer satisfaction.
Hence, the success of innovations in service industry is very important. We can conclude from
this report that innovation management is one of the key areas and focus of every organization.
Effective innovation management not only helps the organization to survive in the competitive
market, but can also help the organization develop new markets, provide better customer service,
enhance productivity, reduce costs & increase profits. From the example of AXA on can evaluate
that innovation helped the organization to cater to its customers needs & reduce operating costs.
AXA has enjoyed the rewards as it has given the required importance and attention to innovation
and Business excellence. To conclude, Just as energy is the basis of life itself, and ideas the
source of innovation, so is innovation the vital spark of all human change, improvement and
progress.

References:

Creasey, T.(2001) Change management: the people side of change, Prosci.

Christensen C.M, (1997) The innovator’s dilemma: when New Technologies Cause Great
Firms to Fail. Boston, MA: Harvard Business School Press.

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Change Management (2005) - Elearn Limited

Cainelli, G., Evangelista, R. & Savona, M. (2004) The impact of innovation on economic
performance in services, Service Industries Journal, 24/1, pp. 116 - 130.

Davila, A., Epstein, M. J., & Shelton, R. (2006). Making Innovation Work: How to Manage
it, Measure it and Profit from it. New Jersey: Wharton School Publishing.

Department of Health, 2009 [Acessed on 14 July 2010]

http://webarchive.nationalarchives.gov.uk/

E-thots Q1 (2009) AXA Group Quarterly Magazine: London

Klomp L, Leeuwen G.V., (2001). Linking Innovation and Firm Performance: A New
Approach, International Journal of the Economics of Business, Taylor and Francis Journals,
vol. 8(3), pages 343-364, November.

Harvard business press (2003) Managing creativity and innovation, Havard Business school
publishing, USA.

Kaplan, J. & Warren, A (2009) Patterns of Entrepreneurship Management, John Wiley and Sons,
USA

Kemp, R.G.M., Folkeringa, M., De Jong, J.P.J., Wubben, E.F.M. (2003), Innovation and Firm
Performance: Scientific Analysis of Entrepreneurship and SMEs (SCALES), Research
Report H200207: EIM, Zoetermeer.

Rao S., Ahmad A., Horsman W. & Kaptein P. (2001) The Importance of Innovation for
Productivity, International Productivity Monitor, Number Two, Spring, pp. 11-18. Posted at
www.csls.ca.

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Tan, B.S. (2004) The Consequences of Innovation, The Innovation Journal: The Public Sector
Innovation Journal, vol. 9 (3), 2004, pp. 1-43. Available at: http://www.innovation.cc/peer-
reviewed/tan-9-3.pdf [Accessed 2 July 2010]

Van der Wiel, H. (2001), Innovation and productivity in service, CPB Report, 2001/1.
Available at: http://www.cpb.nl/eng/pub/cpbreeksen/cpbreport/2001_1/s2_2.pdf [Accessed on 8
July 2010]

AXA Company Profile (2009) Data Monitor, www.datamonitor.com

Phelps, Charles E. (2002) Health Economics 3rd Ed. Addison Wesley. Boston, MAHiatt, J.

Paton, R. & McCalman, J.(2008) Change Management: A Guide to Effective Implementation,

Sage publication.

http://www.axappphealthcare.co.uk (accessed on 019 July 2010)

Personal Interview with Mr. Niall Stirling – Client Relationship Manager (niall.stirling@axa-
ppp.co.uk) AXA PPP Healthcare, Phillips House, Tunbridge Wells, TN1 3PL, 14th July 2010

Personal Telephonic Discussion with Solomon Deveraj – Vice President

(Solomon.devaraj@axa-abs.co.in) –AXA Business Services, Telephone conversation, 18th July.

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