The Overall Functional Manager Of The ViaDIGITAL Program Project

Introduction

Daniel Green, product architect and a subproject manager at Hillside, prepared his project status presentation for Ethan Blue, the overall functional manager of the viaDIGITAL program.

The project Daniel was responsible for was part of the long-term viaDIGITAL program fostering the digital transformation within Hillside’s commercial insurance division.

The shift to buying commercial insurance policies online had been slower than domestic insurance policies as the risks covered by the contracts were more complex.

While reviewing and reflecting on his slides, Daniel remembered the day when he entered a team meeting and enthusiastically announced that the team would be more agile.

He had read about the Scrum methodology and was very confident about its characteristics and benefits. However, his teammates were surprised about this plan since everything had been working fine. Daniel countered that the change was a necessity to cope with a project designed to improve the ongoing digital transformation within Hillside’s commercial insurance market. For a successful subproject, his goals were:

1. to intensify the interaction of all developers and stakeholders
2. to increase transparency regarding development goals
3. to strengthen the self-responsibility and self-control within the team.

After participating in several workshops, Daniel was assigned as Scrum Master, and he began to form his team by integrating people from the internal IT service provider, Hillside Systems, and the external service provider, Alpha Systems, which had maintained a strong relationship with Hillside for many years.

The IT World in the Australian Commercial Insurance Market

In recent years, Australian insurers have increased their spend on IT system. The sector spent $4.4 billion on their digital infrastructure, which is equivalent to a 3.8% increase over the previous years. From a strategic perspective, the support of an Enterprise/IT strategy was receiving high priority within commercial insurance companies. Investments were mainly made in digital transformation processes and in the modernisation of application landscapes corresponding to the rising IT cost ratio. The goals were productivity and efficiency enhancements through agile software development approaches, improving workflows, and the support of IT. In line with this goal, cost optimisation activities increased in significance.

Additionally, the business processes’ degree of automation increased. Expenses for external consulting had grown from 24.4% to 26.9% in three years. Correspondingly, investments in external providers and outsourcing engagement were increased from 8.0% to 9.7% in three years.

The Hillside Insurance Group

The (fictitious) Hillside Insurance Group (Hillside) has a long history. The company was founded in 1880 in Sydney as a mutual insurance company. During the following decades, the business grew fast and extended into many other areas including life, transport, commercial, and health insurance. Today, Hillside had become one of the largest insurance companies in Australia, having 29 branches and a head office in Sydney. With nearly 6000 employees and over 4 million insured customers, the company generated more than $133 million revenue, $4.5 billion premium income, $1.8 billion group equity, and $1.2 billion investment results last year. Table 1 summarises Hillside’s corporate figures for last year. Figure 1 shows the age profile of Hillside IT employees.

The viaDIGITAL Program

Last year, the Hillside Group decided to improve their commercial insurance product. An important part of this was the strategic viaDIGITAL program which was designed to align the commercial customer business with the requirements of digitalisation. The program, with planned costs of more than $10 million, aims to develop a new commercial insurance policy system; at first only for the commercial customer division, afterwards for the other Hillside products. The new system underpinning viaDIGITAL uses standard software for insurance products and contains product design, policy management and eventually claims processing.

The system should allow the management of insurance products and policies throughout their life cycle and should digitally transform the business along the entire value chain.

The reasons for undertaking the project included providing benefits to Hillside in the competitive commercial market, where high price competition places pressure on all insurance groups. In addition, the commercial customer business will be repositioned. The goal of the new system is to flexibly standardise and automate the distribution of insurance policies. With the introduction of the policy system, new hardware was required. In contrast to previous Hillside projects, in which the company developed systems internally, Hillside has changed its strategy into buying and integrating standard software instead of performing in house development. In viaDIGITAL, Hillside acts as an integrator working with the software development company Alpha Systems – a specialist provider in the insurance sector.

The project was originally using a classic, sequential waterfall model consisting of various stages. The first stage ‘Commercial Customers’ started three years ago and was completed in a year. The goal of the first stage was the go-live of the new policy system for commercial insurance customers. However, it initially focused on smaller commercial customers with a maximum insurance sum of $1 million for building insurance. The second stage extends the system to commercial customers with insurance sums of up to $15 million for building insurance. The development phase of the second stage is due to be completed in 12 months.

It will go live after testing and bug fixing. After the system roll-out has completed, a claim processing system will be developed for the entire commercial customer segment.

This will also be implemented in other divisions in Hillside including private insurance, vehicle insurance and health insurance. Each of these segments represents one stage of the larger project, meaning that there is a core project with several subprojects. Each stage will only begin once the previous one has been completed. Exceptions include the business departments, which are responsible for preparing the underwriting rules and setting tariffs where there is a small overlap.

Each project of the viaDIGITAL project is staffed individually with suitable people from Hillside, including the Hillside’s IT subsidiary Hillside Systems and from another company called Alpha Systems. The previously completed first and the current second stage of the program can be regarded as an implementation project and a related change project with multiple subprojects. The implementation project is managed by an overall project lead and three additional project leads for functional aspects, technical aspects and product delivery. The implementation project consists of several subprojects such as ‘Architecture’, ‘Product’, ‘Distribution’, and ‘Release’. Daniel’s team is responsible for the subproject ‘Product’. The related change project is led by two project managers and contains the three subprojects ‘Governance’, ‘Communications’, and ‘Committee work’. Each of the subprojects in the implementation or change project is also managed by a subproject lead. Additionally, the project is supervised by a steering committee including members of Hillside’s Management Board, an expert committee with representatives from business and technical areas of the company and a Project Management Office. The complete structure of the project organisation is illustrated in Figure 2.

The Subproject Stage 2

The Product Machine

The role that Daniel’s team plays in the program is to model commercial insurance products including tariffs and underwriting rules within the product machine. This product machine is the repository for validly assembling and correctly pricing commercial insurance contracts. Without automation, many commercial insurance products require cumbersome contract negotiations. The product machine, together with a policy system and a distribution system, will enable customers to individually ‘build’ their own insurance contract. This will release human resources at Hillside. After a user has created a commercial insurance contract customised for their needs, it only needs to be reviewed and approved by the staff to check for exceptions (e.g. numerous previous claims). The process from a commercial user deciding to enter into an insurance contract until they sign the contract can therefore be made more efficient.

The product machine is integrated into the system environment by having the policy system and other systems accessing it. While the product machine is used to design an insurance product and considering all rules and standards determined by the insurance company, the finalised contracts are not stored within the machine but in the policy system. The development task of Daniel’s team also does not include building the user interface, but only the backend including the underwriting rules of contract building and the tariff decisions. Since Hillside decided not to develop the system in-house, they purchased a product machine developed by Alpha Systems. However, they did not purchase the product from Alpha Systems directly but from Beta Systems. Beta Systems uses the product machine developed by Alpha Systems, but instead of providing only an empty product machine, they also include master templates for products. Because Hillside was the pilot customer for Beta Systems, they were able to influence the development of this master.

Figure 3 shows the structure and consists of the Master, the Hillside Commercial (HCOM) component and the Sample Commercials (SCOM) component. The master obtains the basic functionalities of the product machine and templates for insurance products and is developed by Alpha Systems and delivered to Hillside every 2 weeks. The development team at Hillside then designs the HCOM part, which includes specific product building blocks based on the templates for modelling of insurance products and extensions of the basic functionalities. In addition, every 2 weeks, the operable HCOM part is sent to Beta Systems, where the product machine is integrated with the policy system. The SCOM specifies sample products designed and implemented by Alpha Systems, which also includes design patterns applicable for HCOM development.

Finding a Suitable Project Model

Some years ago, Hillside ran a project to replace an old system with a new policy system for the property and casualty insurance sector. Hillside developed the system in-house, but it took 5 years for the development of the first increment. Unfortunately the first increment did not meet the company’s requirements. Rework was needed and the project suffered scope creep. When eventually ready, the system had many useful functions but did not support operations in property insurance. The system was overly complex, had a low usability and, during the test phase, new problems were found. These problems were often hard to solve due to the system’s high complexity. Eventually the was cancelled and was replaced by a different project.

In the current ‘viaDIGITAL’ project, Hillside took on the role of integrator. Hillside bought a system from Alpha Systems, a software development company which specialised in the insurance market. Hillside had worked with Alpha Systems before and both companies trusted each other. Alpha Systems was responsible for developing the new software package for Hillside, which contained the new product machine, and was delivered in increments much faster and much more frequently than was the case in previous Hillside projects. Every 2 weeks, the new Master (which provided basic functions and templates for the product machine) was provided and Hillside then worked on developing the HCOM. This was then returned and was integrated into the policy system.

For Daniel’s team, this was a special challenge because his employees were not used to delivering new increments so fast. His team was used to working with a sequential waterfall model, which had been used in all other projects executed at Hillside. All of Daniel’s team members were familiar with waterfall process and knew the sequence of activities in each process.

The waterfall model is a process model consisting of several project phases that sequentially follow each other. This means a phase is only started when the previous phase has been finished. Typical phases of the waterfall model are a requirement analysis phase, in which the customer’s requirements specification is analysed, a design phase, in which the functional specification on how the product will look is created, an implementation phase and a testing phase. After the software testing, the system is deployed and if applicable a maintenance phase begins. In the traditional model, the waterfall process was strictly followed until the end of the project leading to a cascading progress. A typical adaption of the waterfall model is done when one of the phases fails, the project returns to the previous phase and revises it. If, for example, the implementation phase discovers a major mistake in the software design, the design phase is executed again, to create a new design specification. For most of the teams this worked fine, but the new approach to collaboration with Alpha Systems and the two-week rhythms of new increments meant that Daniel’s subproject team faced many difficulties when developing the HCOM increments. Daniel realised that his team had problems with the new environment, and he considered how to adapt to the new situation.

The Discovery of Scrum

Daniel researched agile and Scrum. He discovered the benefits of agile working with respect to managing changing priorities and improved communication and interaction between the members of the team. At the centre of Scrum is the Scrum team and the different roles compared to waterfall. Daniel decided to adopt Scrum and provided his team with a 3-hour video about Scrum and a one-day training course. Daniel became the Scrum Master, and two employees from the business department were chosen to divide the Product Owner role between them and received some short training about this new role. The most important difference between Scrum and Daniel’s Test-Scrum was that no Product Owner was included. Although Carla and Arnold, the two functional employees, performed the Product Owner role, they were not part of the trial run. Instead, they attempted to prepare the product backlog for development at the start of stage 2 together with the team, without being part of the Scrum team. The work packages that the team used during the Test-Scrum were written by the development team themselves and focused on bug fixing during the stage 1 system test phase of viaDIGITAL. In addition to the missing role of the Product Owner, all roles, events and artefacts of Scrum were implemented. Although there were problems in the beginning regarding the time-boxed meetings and the length of the Sprints, those were eventually resolved, resulting in fixed deadlines and meeting lengths. The retrospective was considered one of the most important meeting during the Test-Scrum since it enabled the Scrum team to continuously reflect on their approach towards Scrum and identify problems that needed to be resolved. Despite the concerns of certain team members that the meetings would take an excessive amount of time, the team quickly adapted to the meetings and the complaints subsided. The conversion from waterfall to Scrum itself occurred without requiring much change; the members of the development team knew each other before Scrum; therefore, no team building was necessary. Furthermore, before Scrum they had worked with certain Scrum-like elements such as delivering software every 2 weeks and performing daily stand up meetings. However, to ensure that the transformation was performed appropriately, a Scrum coach was hired to help the development team and especially the Scrum Master, Daniel, in adopting Scrum. Since the Product Owners were not part of the Test-Scrum, they did not receive professional support.

Daniel was approached by one of his team members. There were ambiguities regarding one of the user stories and none of the two Product Owners could be reached. Since Daniel worked together with them on the product backlog, he was able to answer the question. Daniel preferred to think that the Test-Scrum was a promising idea to familiarise his development team with the Scrum approach; however, he was no longer sure if the way in which he conducted the test was right. Initially he was satisfied with his approach. But after having completed stage 1 of the viaDIGITAL program, Daniel and his development team reviewed how well the Test-Scrum had worked. The team was content with the approach since it allowed them to test the agile approach and get a feeling for the process. In addition, the Scrum coach spoke highly of how the team managed the conversion. After hearing how happy his development team was with the testing phase and that the product backlog for stage 2 was in a satisfactory state, Daniel decided to end the Test-Scrum and established Scrum. Therefore, the first real sprint started together with stage 2 of the viaDIGITAL program. In addition to Daniel’s team, all other teams that were part of viaDIGITAL in Hillside continued to use the waterfall approach.

The Real Scrum Is Implemented

Since the team had previously established how to use Scrum, not much had to change between the testing phase and the ‘real’ Scrum. The development team stayed the same, consisting of 10 members, partly from Hillside and partly from Alpha Systems. In addition, Daniel continued to be Scrum Master. The only addition to the team was the role of the Product Owner. However, in contrast to that required by the traditional Scrum approach, this role was divided between two employees who did not work full time as Product Owner; instead, Daniel could only use 20–30 percent of their time for the team. The decision to use two Product Owners was the result of them having many other responsibilities. Because they would not be able to be available for the team at all times, the hope was that the two Product Owners could substitute for each other.

However, Daniel quickly noticed that this arrangement resulted in unclear task allocations between the two of them and that occasionally, neither of the Product Owners were available; occasionally this occurred for one or two consecutive weeks. Furthermore, because the Product Owners were not part of the testing phase, their roles were not clearly defined and Daniel often had to support them in their tasks, for example prioritising backlog items. Daniel then received an email from one of his team members asking to delay the next daily Scrum by 1 hour since he had a doctor’s appointment. Daniel sighed, knowing that there would be complaints but quickly wrote an e-mail to the whole team informing them of the change in schedule. The Scrum meetings did not change much from the Test-Scrum to the actual Scrum implementation. Every Sprint lasted 2 weeks, beginning with a 3-h Sprint planning and ending with a 1-h sprint review and 1-h sprint retrospective. Every day, a 15-min daily Scrum was performed and every week a refinement meeting was held in addition to the traditional Scrum meetings. While the development team and the Scrum Master were present for all meetings, the Product Owners did not attend the daily Scrum and only attended some refinement meetings. While the general response to these meetings was positive, certain team members considered the sprint planning meeting excessively long or the number of people attending the meetings overly large. Because stakeholders had not yet been involved, they did not attend meetings. The team also worked in different offices as it was difficult to fit the whole team in one room. While the development team and the Scrum Master had offices on the same floor, the Product Owners were located in another building. To support their Scrum approach, the team used collaboration software and software versioning tools. This arrangement allowed them to add backlog items and to track their status. Instead of having a Scrum board, the team used a screen during the daily Scrum to show the progress of the project. For quality assurance, a product management tool from Alpha Systems was used. Requirements for the product backlog were determined by the Product Owners in workshops together with the business departments and then documented in a business concept paper. The user stories contained in the backlog referred to this concept paper as requirements regularly changed. Unfortunately this resulted in many questions from the development team regarding the requirements. In addition, other teams had problems coordinating progress with Daniel’s team. Because there were dependencies between the work his team did and the work of the other teams, user stories were being delayed because the other teams did not deliver on time. This problem was intensified by Scrum because the other teams worked to different deadlines and different priorities. Nevertheless, Daniel’s development team were happy with Scrum.

Current Situation

Putting away the notes in the folder he intended to take to his meeting with Ethan Blue, Daniel considered a conversation he had with Ethan 2 weeks ago. Ethan’s functional project lead was not as optimistic as Daniel and his team particularly because there was only one Scrum team in contrast to all the other waterfall teams. Therefore Ethan was concerned with whether Scrum could work in the long term. Ethan had concerns about whether the synchronisation with the other teams was working as well as it should. This concern did not surprise Daniel since the Scrum meetings use additional time, but this time be used for development. Daniel was not sure what he should tell Ethan.

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