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4 mindsets to beat a recession

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COVID-19 is changing and challenging the world. Nothing you’ve never heard of, is it?

One thing is certain, however: we will continue to experience recessive conditions due to COVID-19, at least in the short term. That’s why we recently released a report designed to help insurers respond to this recession. While the report highlights winning strategies from companies that have successfully navigated past recessions, success is more than just the right combination of cutting costs and investing. Success also depends on your mindset. Times like these are difficult, but they also offer the opportunity to be even stronger than before. This is the point in time when wealth changes and market positions shift.

Mindset Matters …

The insurance industry should assess risks and protect against risks. However, this lens can sometimes inadvertently make companies risk averse, avoiding insecure or bolder strategies, and limiting potential. When combined with a recession, these restrictions can have a significant impact.

So how should you think during a recession? Should you be brave or conservative? Looking for opportunities or avoiding risks? Most leadership teams fall back on what they’ve done before and generally take action that is consistent with their existing beliefs or beliefs.

Instead, you can improve the quality of your thinking and decision-making by changing the way you think. If you stop thinking about how you make decisions, you can help your business not only in this recession but also in difficult times.

Mindset One: ask a question

How you frame or display something is extremely important. Frame things too tightly and you will spend time focusing on something that the watch face may not move. Take artificial intelligence (AI), for example. When many people think of AI, they think of a tool to improve processes, increase speed and reduce costs. And that’s true, but it’s also near the surface and limits the potential of what could be achieved.

We can look at AI differently by asking a different question. For example, instead of asking, “How can we reduce the cost of handling claims?”, Ask, “How can we prevent claims?” If you rephrase the question this way, you will see the potential of AI differently. I wrote about it a few years ago.

The important point here is that you should think about the questions you are asking and focus on your teams – especially during a recession. If you design things to resolve them in the short term, you can do so at the expense of the long term.

Mindset Two: Remember the Long Term

A recession can instantly change a company’s outlook from long-term to short-term for good reason. Recessions are stressful, full of uncertainty and often require short-term weather measures.

Cost reductions are usually required during a recession, but should focus on structural changes that fundamentally change the way work is done, as the following graphic shows.

Click / tap to view a larger image

Strategies like reducing the workforce based on percentage targets or reducing capital expenditures consistently can be quick and relatively easy. However, these costs are likely to recur or lead to issues such as a poor customer experience. These strategies will not change how your business will scale when the economic environment recovers. They essentially allow you to stand still, which means you are likely to lose ground to others.

Instead, the focus should be on structural improvements in the way of working, often made possible by technology. Examples include:

  • Convert paper-based manual work into digital, automated workflows to improve cost structure.
  • Use customer service technology to answer questions quickly, save time and improve costs.
  • Break down silos in your company that are more a product of history than customer preference to leverage synergies and improve customer experience and cost structure.

There are clear long-term trends in our industry: customer expectations are rising and moving towards digital, and a combination of technology and data analysis opens up new possibilities. These long-term trends are not going away because of short-term challenges – some are even accelerating because of the recession.

You should consider whether your mindset (and strategies) position you for the future environment. Are you still taking steps in that direction or are you standing still for a while? Do you see an opportunity to accelerate your efforts? Are you still successful in the long term based on your current direction, your speed and your investment level?

Mindset 3: Review your predictions and assumptions

Developing a strategy requires predictions and assumptions. What will resonate with customers and partners? How will the competitors react? However, some of these assumptions have persisted for so long that you may not even recognize them as “assumptions.”

In the past few years, some of these ingrained beliefs have been challenged. For example, the complexity of our product offerings, the value of human agents / brokers, the pricing construct for policies and the role of our industry in risk prevention.

It is good practice (and an established innovation technique) to emerge and question these beliefs during strategy formulation, but it is even more critical in times of uncertainty.

I am not suggesting that you think all about your current strategy or plans. Instead, you should test their resilience. What are the few most meaningful predictions or assumptions that make up your plans? How is your business fair going if these are off target? What if you have to move to a different environment than you assumed? Do your plans give you the flexibility to make this twist?

Emerging from previous recessions, there have been clear winners and losers, as the following graph shows.

Click / tap to view a larger image

The winners had a clear, objective perspective on their business’s position and made conscious improvements and investments based on their predictions and assumptions. Right now, especially when the future is so difficult to predict, is a good time to take some time to review and question your most important assumptions.

Mindset 4: Lead with confidence

With so much confusion during a recession, leadership teams can feel unsure of their way forward. This uncertainty can manifest as an unclear strategy with changing or conflicting priorities that wastes time and creates fear as teams try to decipher leadership’s intentions. Not only can this reduce productivity, but it can also lead to unintended actions.

In turbulent times, the teams will look for signals from management as to how the company is really positioned and, to be honest, whether there is a plan at all.

The previous 3 mindsets won’t help you much if you don’t act, communicate, and lead with confidence.

To be clear, there is no such thing as a success formula. Every company will be different and have different needs and concerns. The important detail to remember is having a balanced approach and knowing how to let your reaction drive your reaction, not fear.

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Disclaimer: This document is for general informational purposes only and does not take into account the particular circumstances of the reader and may not reflect the latest developments. To the fullest extent permitted by applicable law, Accenture disclaims all liability for the accuracy and completeness of the information in this presentation, or for any acts or omissions that may have been made based on this information. Accenture does not provide legal, regulatory, auditing, or tax advice. It is the responsibility of the readers to obtain such advice from their own legal counsel or other licensed professional.
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