The Clarion Group has identified four inputs that are critical to such transformations. Many businesses neglect one or more of these inputs, producing either outright failure or unnecessary delay in their evolution to the new strategy and structure. These roadblocks can be anticipated and avoided by deploying a systematic planning approach at the outset of the effort.

Opportunity and Challenge
The cross-industry trend toward tighter alignment with market segments is especially evident in the insurance business. Traditional insurance products have become commodities while new products are quickly and readily replicated by others. Constrained growth opportunities and squeezed margins have forced many insurance companies to consider new approaches to gaining market share and growing shareholder value.

One such approach is to differentiate on the basis of customer experience. In a commoditized product environment, such things as ease of access, customer friendly billing, and timeliness of commission payments become important levers in acquiring new customers and channel partners. Close strategic and structural alignment with specific market segments is the means to build those levers in the business. That focus also drives diversification of the total book, enabling the enterprise to absorb the business cycles that may vary by segment.

The challenge in all this is finding the right balance between offering a differentiated value proposition (by investing in internal competencies from product creation to pre-sale service to post-sale service to ongoing retention) and maintaining a cost-to-value equation that fits the markets being served. Finding that balance requires careful consideration of a broad set of variables. Companies that understand which variables are most critical to their own transition will be first to capitalize on the opportunities posed by a market-focused strategy and structure. That’s where the Migrating to Market Segments framework comes in.

Making the Move
In our work with insurance clients, we have encountered a number of efforts to migrate to a more market-focused strategy and structure. In most cases, the conversation among top executives focuses on one area or another of the total work that must be done. One company, as noted above, started with the notion of differentiating around the customer experience. Another started with the idea of restructuring business lines around the fastest-growing market segments.

Still another started with an internal focus; the executive team asked the question, “with which of our customer segments can we differentiate ourselves, given our internal resources and capabilities?”

Each of these companies has invested significant time and resources in becoming more customer and market focused. While none of them to date would describe themselves as “fully successful” in achieving their objectives, it is a relatively straightforward matter to predict which of them will most fully realize the goal of a market-segment focused strategy and structure. The key will be the extent to which they have considered and satisfied four essential inputs to the transformation. The four inputs include 1) Define the Segments 2) Design the Customer Experience 3) Create the Brand Army and 4) Create the Enabling Structures.

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