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Case for an 80/20 rule.

Our cover story on business intelligence and its value to the insurance industry includes some interesting thoughts from a variety of sources. One of those sources (see "Turn It Around" on page 12) made an insightful point about BI and how its value can be traced to virtually every project a carrier undertakes.

John Lucker, a principal with Deloitte Consulting, addressed the importance of project managers sticking to the 80/20 rule. He believes scope creep is a major dilemma for carriers to contend with. With BI projects in particular--because of their depth and breadth--insurers can't afford to be distracted from the mission of the project.

"I've been in project planning meetings and clients will say they understand the 80, but what about focusing on a small amount of the business," says Lucker. "They end up focusing an inordinate amount of time on the 20 percent and completely lose track of the business value and the value of time in accomplishing the 80 percent sooner rather than later."

We all know the 80/20 rule (Did you know it's also called the Pareto Principle?), but what amazes many observers is a company's complete inability to follow the principles of the rule.

As we've all learned, any project involving an insurer's own data--or even involving third-party data--is fraught with peril. The thought of spending thousands of man-hours cleaning all that data into something that resembles intelligent information can paralyze a company. There are many examples of carriers who have backed away from business intelligence or predictive analytics projects because the task can be overwhelming.

But as Lucker points out, the effort isn't nearly as imposing if insurers can focus on a large percentage (80 percent) of the data that has similar--and valuable--characteristics and not come up with foolish expectations that every internal problem can be solved through the use of business intelligence.

Over time, the organization may find the answer to dealing with the specialized factors that make up the remaining 20 percent, but by that time your company will have gained some terrific value from the work already being performed--the 80 percent.

Too many business users expect technology to solve every problem that they deal with. We all know how that theory is working out.

Insurers should know better than anyone that such expectations are foolish and that any attempt to solve them right out of the box is foolhardy. After all, isn't that why the insurance industry has an entire market known as specialty lines?

Robert Regis Hyle

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Title Annotation:Hylelites
Author:Hyle, Robert Regis
Publication:Tech Decisions
Date:Mar 1, 2011
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