Why should you modernize? Developing the Case for Change
Modernizing Pension Administration, Part 1
If you’re a fusings reader, you know that we’ve been spending a lot of time partnering with pension clients on their modernization journey. In our Reframing Retirement research, we identified the imperative to modernize as the first of three critical paths that pension organizations can take to enhance their value proposition to stakeholders.
But what is modernization for a pension anyway?
We define pension modernization as “a program of initiatives that improve enabling technology, support action amid complexity, strengthen core and emerging capabilities, and shift the cultural foundations of an organization” – but we know from experience this is easier said than done!
Fuse has developed a Modernization Playbook, specifically for insourced pension administrators, to help structure and navigate this complex effort. We have hand’s-on experience with pension transformation programs of all kinds and have created this document to support leaders in planning and executing successful modernization programs. In it, we define:
The Case for Change: Why should you modernize?
Modernization Research and Readiness: What should you know?
Delivering Modernization: How do we do it?
This is the first of three articles sharing our expertise and lived experience with you.
The Case for Change: Why should you modernize?
Pensions are long-term, risk-averse organizations and modernization can be disruptive, expensive, and hard! In our experience, it is critical to have a very clear case for change before embarking on a modernization program – or to define one to rally around if your program isn’t going as planned.
First, pension administrators must identify what is driving modernization for their organization and confirm: do all relevant stakeholders understand and support the imperative for modernization? While each organization will have unique challenges in their current state, the main modernization drivers fall into two broad categories:
Business limitations, such as inefficiency and ineffectiveness, fragmented processes, and a suboptimal member and/or employee experience, and
Technology challenges, such as complex and outdated technology stacks that lack flexibility, scalability and the required cyber security and data privacy standards.
Clearly understanding what specific drivers of modernization are compelling change in your organization is important to designing a program that will actually address them. Otherwise, we risk simply doing what others are doing or buying a product someone is selling, rather than knowing we are solving the right problems for our organization.
Once the drivers are clearly identified and understood, the next step is a business case for modernization. Typically, this is built around three areas of modernization value:
Improved productivity and operational efficiency, measured in cost reduction and/or efficiency gains,
Improved risk management and business agility, improving metrics as diverse as operational risk, knowledge retention and system resilience, and,
Improved user satisfaction, measured by member and employer engagement and enhanced employee experience.
Identifying the value to be delivered by modernization, and the metrics by which that value will be measured, up front creates a compelling rationale for the investment required and can help to keep modernization programs on track.
Finally, in building the case for change, pension administrators must consider the implications of industry trends on the future they are building, especially considering modernization journeys are on average 10 years long! The products, members and operating context of today are all evolving and delivering a sustainable transformation requires having a point of view on what tomorrow will look like.
Pension administrators must consider:
What type of experience will our stakeholders expect in the future?
How adaptable will our organization plan to be going forward?
What leading and emerging technology capabilities can help future-proof our modernization investments?
It is valuable to imagine the future we want on the other side of modernization in detail (even if it feels as whimsical as The Jetson’s did in 1962) and ask the most valuable question in strategy “what would have to be true” to make this future a reality in our organization. Thoughtfully and deliberately developing your aspiration for modernization in the context of shifting industry trends will guide your organization through the research and decision-making that follows as you develop a perspective on modernization.
Part two in this series will cover what should you know before pursuing modernization.
Are you a pension administrator on the modernization journey? We’d love to hear about it, or share a copy of our playbook. Drop us a line at hi@fusestrategy.co.