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"Innovation is often given complex definitions. We prefer the simple one: 'new ideas that work.'" Innovation benefits consumers through the development of new and improved goods, services, and processes. An economy's capacity for invention 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, the Internet, television,
telephones, and modern pharmaceuticals illustrate the power of innovation to increase
prosperity and improve the quality of our lives. More and more originations today the understand the need and importance of Innovation to maintain a competitive advantage. 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,
it is estimated that one in every 11 U.K. residents works in the health care business. 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.
In competitive market place Innovation is inevitable fact for companies to survive. Technological, ideal, sociological and environmental changes is turnover being of the world and with time people struggle to catch innovations actually. Innovation is " a process that takes an invention and develops it all the way to a marketable product and service that changes the economy'' initially highlighted as an academic concept by Joseph Alois Schumpeter, a Harvard economics professor (Tan B.S. 2004 pp.1). As we understand Schumpeter concept word 'process' struggle to catch changes. In competitive area companies should create new managerial system, new products and appropriate financial systems to struggle to their competitors, because market does not accept gaps. Therefore innovation is as important as any other factors significantly important for a company to Survive.
On the other hand Innovations is not only needed for firms to survive; also increase their performance, efficiency, Productivity and to maintain the competitive advantage. Productivity expansion depends on many factor which created by innovation such as technological, managerial, psychological etc... The Figure 1(Rao S., Ahmad A., Horsman W. & Kaptein P 2002 pp.13) shows a strong positive relationship between domestic patents in force per capita and GDP per capita, across OECD countries. States with higher output measures of fundamental innovation have higher labour productivity and higher incomes than countries which have less innovation with lower labour productivity and incomes (Rao, Ahmad, Horsman & Kaptein 2002 pp.13).
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).
Another importance of the innovation gives opportunity to influence the direction and shape of industry. Apple Computers took the industry with production of iTunes, iPod and iPhone with innovative sense (Davila, Epstein & Shelton 2006 pp.1). Christensen find resource allocation is a problem while company innovating, also he adds matching the market to technology is another difficulty (1997 pp.). However Apples' success to keep their resources while they were entering the mobile phone and mp3 player because they have expanded and redefined their sector with their effects on other sectors, also increase company resources with these interventions.
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 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 activity. 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.
When it comes to product and service innovation, there are four growth paths:
1. Core market growth which is making improvement to product and services that are already exist in order to help customers get a job done better ,
2. Adjacent or related market growth which is improving existing products and services to help customers get related or ancillary jobs done (for example by adding a tongue cleaner to a tooth brush)
3. New market creation which is creating a new product or services for customers who are to get a job but cannot because no solution or only Adhoc solutions exist
4. 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.
It is important for a company to be specify in the way it defines its innovation strategy, as different strategies require different tactics. Companies must keep in mind that not everything is disruptive innovation - innovation - a better categorization scheme is needed.
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.
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.
Generally Strategic management depends on allocation of resources to accomplish organizational goals and hunting new strategy and successful implementation. The overall strategic plan involves the contribution of line managers from different purposeful department such as production, marketing, financing, research, development and innovation. Thus organization is needed excellent middle managers to perform the challenging task force to conquer across the functional barriers. Furthermore strategy can change the management to reach its desired results in a challenging environment. Opportunity is perfectly allowed in an organization by strategy. In addition positive main policy and strategy may be the same essentially. A new idea or policy of developing of new product that adopted in marketplace may be an essential element of a company strategy for new development or marketing. One company would be grown by only present markets and products while other company may be invented new way or strategy to develop their company. The key factor of strategies is given direction and introduced new idea. Also strategy affects planning and greatly changes other areas of managing as well. It has been seen that it is effectively important to be able to classify the right product to present in the competitive market that is a part of innovation. Innovation may be indicator to success as a strategy in an organization while it can give right direction in right time or present new method in management sector. Overall strategy can change the company goals focus on both the end points including purpose, mission, goals, and objectives and achieved them while innovation introduces new method of strategy.
This report evaluates the use of Innovation in strategic planning of AXA PPP healthcare and structure of the change management team which is covered in the Organizational review.
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>.
Lean system has helped many industries such as health care, and many concepts including standardization, control and elimination of non-value steps have been effectively to improve the customer expectation in goods and services.
The real challenge of lean manufacturing is how to progress beyond eliminating waste in broken processes to creating brilliant processes (Jones, 2003). Lean is a system which lets to companies to focus on managing processes; it means the company has to identify the different processes in the organization such as primary and support processes and then monitoring the multiplicity of steps required to obtain a final product or service. It will provide value information about the procedures and all the wasted time and effort in the processes.
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.
Lean is an enterprise wide initiative to bring operational service excellence to service business. It is an approach that facilitates improvement of process efficiency and quality while also delivering quicker service and cost savings (Sarkar, 2007), which will add value especially in services companies.
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.
Six sigma represents through statistical procedures how the process is improving or performing, this process must not have more than 3.4 defects per million of opportunities. The methodology describes defects in a product or service as anything outside of the customer specifications.
The question about health care industry and its Six Sigma application is related to know how this process has been introducing and what results have contributed to the industry and the health care environment. The method has been adopted in hospitals and health systems increasing the number of companies achieving long terms results. Six Sigma has the challenge to improve from patient safety to market growth and can be used on a specific department or process. Six sigma is helpful to everyone in the organization and therefore it should become an integral part of everyoneÂ´s job. (Brussee.2005). Page 142 libro encontrado
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.
Exceeding the Two-
3,660 Every Day
770Â Per Day
257 Each Day
340 Every Day
72Â Per Day
24 Each Day
12 Every Day
13Â Per Week
5 Each Week
6 Every Month
10Â Per Year
3 Each Year
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.
AXA PPP HealthCare
AXAÂ PPPÂ 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. AXAÂ PPPÂ 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 â‚¬93.6 billion in 2007.
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.
Core business expertise: AXA's goal is to offer the best service at the best price.
Distribution management: a second source of differentiation that reflects AXA's aspiration of enhancing sales performance by lessening the administrative load on its distributors.
Quality of service
Productivity: AXA seeks to reduce operating costs and improve quality every year. Cost reduction is an ongoing challenge, not a one-off reaction to a difficult operating environment.
To achieve operational excellence in each of these key areas, AXA has adopted a continuous process improvement program based on listening to the voice of the customer. AXA performs these programs and runs innovative projects through its Change Management team.
Change management Team
AXA has a change management team which is responsible for driving all initiatives taken towards process improvement, innovation & change and Process compliance. The Change management 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 Change Management team in AXA
Six Sigma Team - Team consists of Green belts, Black belts & Master black belt who is mentor and leader of the team. Responsible for driving process improvement and process re-designing.
Eureka team - Team is responsible for administration and utilization of the idea data base. All employees can log any ideas on Eureka, which are then filtered and implemented by the Eureka team through appropriate channels.
ISO & Risk - Team of consist of internal auditors who ensure AXA complies with ISO requirements, Business continuity planning and Risk management.
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. This could be achieved by improving productivity, reducing reworks, improving service delivery and achieving operational excellence. The Change management 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 change management 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.
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 Change management 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.
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
Claims processing team - Performance against KPIs for Q4 2008
Log in efficiency
Average handling time
% of claims referred
% of first touch completes
Random Audits %
Inter Agent variation
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% .
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. This can also be improved by enhancing and building a stronger knowledge base. A knowledge base can help new staff to improve their performance and gain required knowledge faster
A DMO project can be done to sustain operational efficiency achieved after the transformation project.
AXA as an organization understands the importance of change and innovation. It has a competent set up for managing innovation in form of the Change Management team. We further analyze the strengths and weaknesses AXA posses with regards to innovation management.
A very well structured change management team
Change management team plays a vital role in company's strategic planning
Well defined objectives set for the Change management team which are in sync with organizational goals and objectives
Talented pool of resources employed in the Change Management 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
Change management 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
Better & effective utilization of change agent
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 change management. 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.