5UIBP Level 5 Innovation and Business Performance: Open Book Exam Question Answer
Answer
NOTE – The organisation summary must be completed and must accompany the submission otherwise the assessment will not be marked.
| Business profile (200 words) |
Aviva plc is a Britain originated insurance company functioning globally. The headquarters are located in London, United Kingdom. The organization plans on serving as the best financial service group based in Europe (Aviva corporate website, 2020). It serves about 33.4 million customers from about 16 countries. Apart from being the top insurance company in the UK, it has also set foot in the markets of Europe and Asia (particularly in countries like China and South-East Asia). Aviva is also primarily listed on the London Stock Exchange and is a member of FTSE 100 index. Aviva provides life and general insurance, pensions and other financial services such as savings and management services. Aviva was founded in 1696. It was born as a result of the merging of two British insurance companies, Norwich Union and CGU plc (Aryee et al., 2016). The company adopted its name Aviva in July 2002. Aviva faces competition from AIG, Allianz, Aegon, AXA, Old Republic, The Hartford, and Travelers Insurance. Aviva strives to earn the trust of its customers by providing excellent growing returns and retirement plans. The company also invests with clarity about profitable areas and economic importance. Aviva has classified its business into five divisions: (a)Investments, savings and retirement, (b) UK life, (c)General insurance, (d) Europe Life, (e) Asia Life. |
| Question 1 | 30 Marks |
| Propose measurement techniques that might be beneficial for your chosen organisation to use as an aid to business performance. Use examples to support your answer. In business development, measuring ongoing performance is important. Performance can be measured by various indicators which are trackable against practical outcomes. It compares the actual results to the already set goals and judges the improvement. · Performance management frameworks: It includes Balanced Scorecard (BSC) which is very famous over the last 2 decades. It is an effective method to (a) Making of the objectives and goals clear to the people and also reach out effectively about their business strategy; (b) Comparing the and infer the level of fulfilment of the targets and objectives; (c) Developing and circulating new plans to effectively implement the priorities of the business and related strategies. · Key performance indicators (KPIs): It is also a measurement technique to fathom the extent of performance of the business concerning the targets and purpose (Aviva and Founders Factory, 2017). KPIs are mainly dependent on data. It measures the dynamics in the progress of the business. A well-monitored KPI can present a clear image of the ongoing performance of the business and compares it with the preset targets. · Performance Appraisals: Besides KPIs, performance appraisals are an effective performance measurement tool. If utilised efficiently it is capable of equalising the thoughts of the employee with that of the organization (Aviva Human Rights Policy, 2017). With proper management of this tool, the employees will be motivated to push their limits and perform to uplift the organisation as a whole. · 360-degree feedback: This technique provides feedback about the total performance of an employee considering the views of all the colleagues they are working with (Aviva, 2017). A survey report from the other officials is collected and shown to the employee so that there is no scope of ambiguity. The results from such a survey are put into use during the training of the employee. It is a democratic approach and free from the threats of partiality or injustice. · Management by Objectives (MBO): MBO is an approach in which a vast and general list of goals is discussed and later on moved towards the individual purpose of an employee (Ballinger, 2011). Its main aim is to make everyone aware of the general objectives of the organisation and provide motivation to the employees to attain the goal collectively. By this method, each employee feels important and morally active. The positive impact of innovation in an organisation is a given fact but its impact needs to be measured. Hence certain measures are implemented for this particular purpose (Chartered Institute of Personnel Development (CIPD), 2012). The common measures that are used to aid the business performance of AVIVA include Research and Development expenditure, patent counts and counts for minor innovations, the brand image, its effect on the ecosystem and most importantly, growth and revenue. ● Research and Development: Research and development are considered the most reliable resource for its data is easily available and its figures from different countries can be used, because of its normalised nature (Eccles et al., 2011). But it must be noted that the impact of Research and development is one-sided. The other factors (non-Research and Development) play a more important role. ● Patents: Patents are not always considered a real parameter for innovations for patents do not guarantee success, only help in preserving an idea (Forbes, 2017). However, patents do carry some weightage when it comes to innovations for new ideas that lead to more engagements between the organisation and the customers, sometimes simply because of curiosity. ● Brand and image: One of the easiest ways to measure the impact of innovative ideas is the Brand Image which reaches new heights, thus acquiring new customers in the process (Organization for Economic Cooperation and Development (OECD), 2017). This can also be reviewed through the feedback and reviews that the organisation gets in exchange for their services. ● Impact on the growth and the revenue structure: Perhaps the best measure of an organization’s innovative measures is the outcome, revenue and growth, because of the said innovative measure (Porter and Kramer, 2011). ● The motivational and developmental plan for the employees: More active work ethic and involvement is often observed when newer ideas are being implemented in the workplace. As a life insurance organization Aviva had not been known for digital innovation. However, with the ever-increasing competition in the market and the dependency of people on digital technologies, Aviva has come up with major digital innovations. To be able to cumulate everything at a global level, a platform was created by Aviva for the employees at the organisation, to help communicate with each other. Gathering data for Research and Development from different organisations, the organization came up with a platform which enabled its employees to not just work faster and better in teams, but also learn about the different processes at the same time. The platform that has been developed for this purpose is Microsoft Office SharePoint based which helps the employees to keep a track of their work, communicate with each other better and also maintain web records which can later be easily accessed. The governance model used by Aviva for Information and Technology is controlled centrally but the local branches do have some control over it. The increase in the number of internet users has proven to be one of the most important factors in this case. Increased productivity by the employees and a better outcome has been seen since the introduction of Information and Technology, the digital platform. Introduction of a digital interface has made customer operations run more easily, with customer care dealing with the customer feedback and providing an instant solution to their problems. Information and Technology and digitalization is not a patented idea, it helps Aviva most positively. Online forums are also created where customers can often ask their queries and doubts regarding the services that Aviva provides. Employees are specifically hired for clearing their doubts more systematically, leading to more employment opportunities. Online payment and receipts of Insurance premiums have been a boon for not only the employees but also the customer. Another example of an innovative idea used by Aviva is the introduction of Chatbot and SMS bots. Chatbots tend to provide answers about premiums of Aviva, in an instant. The mobile application is also another innovative idea. These innovative ideas have led to a higher number of customers which is easily seen when one checks the number of people who have the Application downloaded, or the reviews received through the application and website. Hence, innovative ideas implemented by Aviva and their impacts can be measured, to a large extent, if not entirely. | |
| Question 2 | 25 Marks |
| Discuss potential sources, drivers and patterns of adoption of innovation appropriate to your organisation’s goods or services. Use examples and theory to support your answer. Innovations act as the catalyst towards the economic growth of an organisation. Hence it becomes more important for organisations to identify these drivers and sources and create an environment which encourages such innovative and technological breakthroughs. The sources and drivers of innovations may be internal or external. It is really important for the insurance sector like AVIVA to not just identify these sources and drivers, but also nurture and encourage them. The insurance company which was formed between Dabur Invest Corp and Aviva group is commonly known as Aviva Life Insurance Company. Since time immemorial Dabur Invest Corp has been producing traditional healthcare products being India's one of the oldest and most respected business houses. Aviva group serves 31 million customers across 16 countries and it is an insurance group which is mainly UK based. ● Potential Sources of AVIVA The potential Sources for Aviva are their customers who never have to worry about how to deal with the hardest they may face in the road of life. It is commonly said that "life is not a bed of roses" but the customers of Aviva can always count on them because they will always be by their side. Aviva helps their customers to plan their journey of life by assuring them that if something goes wrong they will put it in the right place. £33.2 billion have been paid by Aviva in 2019 to their customers through claims and benefits as per the statistical record of 31st December 2019. Aviva helps people from Norwich to Naples, they save for the future, navigate retirement and insure, this is what matters to them the most. Making choices about the most precious aspects of life is not easy but Aviva makes it easier by offering different plans and policies to their customers regarding how to look after homes, their health, their family, their business, how to save and productively invest their money and the most important is when they will get older how they pay for the life they want. ● Drivers of AVIVA A well established evolved insurance market like Aviva is a boon for economic development. It is known to all that the whole world is focussing on Digital Platform for quite some time now, which has resulted in substantial changes and innovations in several industries. Though it is needless to say that the insurance sector is no exception to the rule, companies like Aviva in the insurance sector have also faced sudden changes and innovations. The insurance sector has been substantially disrupted by the technology leading towards several innovations and these innovations are responsible as the drivers of the different companies like Aviva. · A few major innovations that the insurance sector have been through are listed below: 1. Insurance on personal assistant devices People across many age groups are using personal assistant devices or personal social apps as fancy. Insurers like Aviva have realised the point that these devices could be a great means to reach out to their untouched but the desired audience in a very personalized yet targeted manner. Many insurance companies like Aviva has taken up using the advantages of this new technology by offering various services which include offering a policy, inquiring about a policy, renewal of policies and many more. 2. Micro-insurance Aviva has also introduced policies for people belonging to the low-income group. This type of insurance is known as micro-insurances. Here the customers get specific coverage for a particular need at a lower cost. ● Patterns of Digital up-gradation in AVIVA Aviva has taken up different patterns of adoption of innovations in the insurance sector. According to the Economist Intelligence Unit in the report "Digital Adoption in the Insurance Sector " the digital adoption is shaping the insurance sector by providing new potential revenue streams, different consumer relationships and new commercial partnerships and by forging new business models. They say boot up and save, this is indeed a challenge for non-digital insurers, which according to the Economist is the most insurers. Aviva has trained its employees to cope up with the rapid growth of digital platforms; they have employed special people to take care of this new evolving mode of business. They have provided opportunities and challenges in the context of insurance, specifically for the digital savvy centre, Data controversy, data dilemma and the internet of insurable things. In terms of digitally processing insurance claims the growth of the evolving consumer behaviour in the insurance sector is threatening the traditional growth levers, such as TV advertising, it necessitates a transfer to personalized mobile and online channels. Aviva Life Insurance has a combination of rich customer data, telematics and enhanced computing power which embraces digital innovation leading to the increase in customer engagement. Observations have been drawn concerning variations in the fundamental transformation of innovative techniques in the insurance industry. Technological adoption in the insurance sector is comparatively slow. Aviva joined hands with Crowdlinker and conducted a panel discussion consisting of leaders from various segments of the Insurance technology industry. Mobile applications have also been developed assisting in customer data analysis. A pan-India financial literacy survey was conducted by Aviva to ascertain the progress of females in financial planning. The insurance industry is not an industry which is exactly known for digital innovation, the players of the insurance sectors are now playing catch-up so that they can meet the demands of rapidly increasing tech-savvy customers. Aviva is re-strategizing many of its models because of the policyholders who are increasingly demanding digital first-distribution models. | |
| Question 3 | 25 Marks |
| Assess the information requirements needed to maintain and manage an appropriate level of innovation within your organisation. Use examples to support your answer. Owing to the constant changes in the conditions of marketing for different goods and services, innovative thoughts and ideas are the only way to keep up. Never-ending changes and ability to accept alterations are required for strong business competitions for any sector like the automobile or the insurance sector. Business performance and growth in productivity is driven by innovation. Whenever there arises the need to maintain the information, an organisation observes the strategies of its potential competitors like Aegon or Allianz like their claim and policy management platforms, automation of their internal workflow, insurance blockchains, kind of insurance fraud detection software used and their personalized insurance pricing format. Aviva faced a tough year due to poor performance in the investment market due to intensive economic backdrop. The external environment also started shifting due to the arrival of competitive firms on the insurance market thereby resulting in a complicated macroeconomic environment. However, Aviva's capital position in the market has not only facilitated it to overcome these challenges but also understand what are the factors it needs to focus on to make it unique in the eye of consumers so that they avail it. The innovation measures should mostly be focused towards the delivery of outcomes to customers, business firms and individuals. Aviva should also lay its attention towards excelling at their customers' insurance, savings and retirement needs. · To have a piece of more detailed knowledge about customer requirements, Aviva should start digitalising how to maintain business with their customers and also attract others towards it. Knowing the expectation of customers is also an important aspect. Insurance companies focus on fulfilling the basic needs of the customers but customers can get carried away by deals which are distinct from others and attainable. · Quality is a primary value to customers. Along with it comes the ease of use. Aviva should also retain loyalty towards their customers and bring innovative measures to deliver the value that the millennials are looking for. It should also offer a heterogeneity of services beyond the insurance policies to prioritise customer-centric innovation. · The needs of insurance customers are not complex. They require information that is transparent and free from hassles. Aviva should understand and try to alleviate the anxiety of its customers during an injury or theft which will also help in gaining customer trust. Additionally, since customers also want their insurance companies to provide other services, Aviva can bring in innovative policies by delivering guidelines on roadside assistance. · Aviva needs to keep a track on the digital innovators of other insurance companies that have intruded into the market with services and products that they directly sell to the customers and creating more value thereby. This shall slowly hit the insurance market. · Awareness regarding insurance policies has been increasing in rural markets and Aviva needs to implement policies to increase its share in the market by the expansion of its customer base. It also needs to be kept in mind that controversial advertisements can affect the image of the brand to a great extent so Aviva should focus on innovations simultaneously. · A panel was held in the Digital Garage of Aviva to understand its position in the P&C insurance industry of Canada. It has planned to release innovative features and experiences that are new to the users. Kelvin Lam, a consultant of Deloitte explained that there are generally two types of insurance models namely the traditional insurance model and the usage-based insurance model. Kelvin Lam suggested Aviva implement new ways to cover emerging technologies. · The CEO of Planswell, Eric Arnold advised Aviva to shift focus on the substantial impact that falls on the people's ability of lifestyle maintenance. He said that instead of helping people save money on holiday plans, car insurances or insurances for saving money on transport, Aviva must focus towards insurance relating to critical insurance, insurances on the disability of life and management of wealth (Dey et al., 2019). · It was also predicted that insurance companies should begin on being more informative about innovating creating personalised products that will attract policyholders. If this process is formulated, it might take an average of three to five to bring successful innovation on their sales distribution model. · The Head of Innovation of Aviva has expected to look into several new cases that can provide sophistication at an unprecedented level. He is also looking forward to the blockchain technology where reinsurance and insurance companies are transacting in the union. Aviva is indeed excited to integrate with the emerging technologies. | |
| Question 4 | 20 Marks |
| Evaluate the risks and uncertainties that innovation might create in relation to the performance of your organisation. The types of risk Aviva inherits 1. Risk of credit The actual credit default and the expected market default puts a major impact and does not make the company not to allow investment returns on the investment. 2. Market Risk The equity shares are before preference shares and debentures. The share capital of the company is the asset of the firm which is liable to fluctuate, the property prices, foreign exchange and inflation along with the interest rates. 3. Life insurance risk This may include the longevity risk factor where the customers live more than what we expected. In the case of life insurance, the general risks observed are mainly the Critical illness risk, protected life risk, persistency risk. The general insurance risk can be explained as the risk which predominantly arises from the natural calamities or due to emergencies like fire, accidents, flood and drought. The health and accident risk which covers the accidents and the cost of healthcare of the customers and the loss of losing a job due to illness. 4. Liquidity risk The liquidity assets which are counted to a financial risk potential enough for a source of investment return besides by permitting us to invest in higher-yielding, but on account of less liquid assets such as commercial mortgages. 5. Asset management risk This enhances the major fund liquidity and operational margin of performances, products and persisting risk. 6. Operational risk The operational risk can be caused and can arise during the hiring process of stimulating conduction, regulation and the purpose of people, process, technology and data security. The program of the code of performance with the skill of people maintains and the way it functions is provided The major external factors of risk 1. Economic and credit cycle The economy of the country displays an impact highly as the rate of change in macroeconomics in growth, production, interest rates and the response of the Central Bank and resources generally impact on the credit valuation and default payments to the customers. 2. Change in Public Policy The immediate change in public policy takes place where the government regulatory policies highly interfere with the demand and supply of production and sales (Guenole et al., 2017). It completely depends upon the market and profitability of the company's product. 3. New technologies and operating data With the new upcoming and advancement of technologies, the company with the approach of new sources of data, it can cause the problem of customer behaviour and the channel or mode of product distribution, sale and promotion, the advertisement should be at ease and comfort. If it fails then it might result in the business module to go obsolete. Besides this, if they cannot maintain the pace with the use of data to price and to detect the insurance fraudulence will be a major cause of losing competitive advantages and underwriting losses. 4. Change in consumer behaviour The firm's key priority is to maintain the standard of customers and their preferences. It says that any change in how the customers are likely to go prefers their choices and tastes is an external risk. 5. Cybercrime The firm is always exposed to frauds and other online hackers where they try to utilize and access the IT operational system. Steal customer data and input malware viruses to interpret the customers' financial bank statements and funds or to damage and spoil the name, brand and goodwill of the company. 6. Outsourcing The company performs by contracting out its business functions, processes etc to an outside agency. It relies on the third party to take advantage of the agency's expertise and experiences. So this engagement of an outside agency may be a fault or mismanagement or failure in delivering the business processes may cause poor IT support and disruption service performance. Management of risk Due to risk management sources help to protect and control the factors of risks. The firm has its risk management system which guided along with it which is governance, risk appetite framework and risk management process. 1. Holding a substantial amount of capital against market risk. Continuous assessing and regular monitoring of exposures and put on work the ad hoc and formal processes to evaluate the change in the market. Along with reducing the production sale with guarantees and made a shift towards the protection and unit-linked products. 2. The Management committee authorizes and participates actively with the regulation policies if the public, government so that it can be updated with the formal changes and can enhance it in the company for the better outcome. It can develop a multi-channel of distribution to coordinate and diversify geographically the accessibility of product maintenance. 3. The firm also puts the effort on the creation of making strategic development and transformation into a digital leader by combining an enterprise-wide approach to digital and automation 4. Digital Customer-centric proposition 5. It adapts to perform consolidation individually and company data on a single platform 6. Creation of digital portal for customers and intermediaries 7. Developing IT security defences where prolonged communication of theft and alertness if frauds would be informed in a trained manner. Business continuity and disaster plan recovery will be on count highlighting to the point of financial stability and suppliance annually. | |
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