Process Improvement at Volvo and AIG

In his engaging podcast with The Process Excellence Network, Volvo Group process improvement leader Berndt Forssell explores a critical issue at the heart of every big transformation: how can I resolve the tension between standardization and local requirements? “Keep it as global as possible and as local as necessary,” he says. He cautions listeners, however, that it is “easier said than done…How can we standardize our processes and still utilize our different competencies?”

Too often, I think people see standardization and customization as two opposing forces to be balanced and traded off. But it doesn’t have to be that way.

You CAN have your cake and eat it, too.

Take AIG, the big insurer. They handle some 90 types of insurance in over 100 countries in 40 languages, but they found a way to transform their 90+ claims handling systems from a federated to a global function model. In the words of Eric Martinez, EVP Global Claims Operations and Services, “We were very big, but lacked scale! You can be big, like AIG, but not have scale because you run a federated model. How do you get the scale, the process discipline, and still give the entrepreneurship at the country level so they can be successful to compete with the native insurance companies?”

AIG solved this problem using a layered process architecture, where standard policies and procedures are shared across product lines, geographies, and functions. Then local policies and procedures are layered in, but only representing the differences from the standard processes.

With this approach, AIG gets the benefits of standardized processes (control, efficiency, visibility, consistency) but still has the flexibility needed to meet local requirements and to make changes fast.

Especially in today’s markets, which put a premium on personalized customer engagement, it’s more important than ever to embrace the particular needs of different markets, regions, and product lines when seeking economies of scale through standardization. Companies like AIG which see global and local requirements as two sides of the same coin can turn that trend to into a strategic competitive advantage.