For decades, software was developed according to the waterfall project management model. This model describes a linear, non-iterative process, organized in successive project phases.

Each phase has a predefined start and end point with clearly defined objectives, and in most cases, the model also describes individual activities that need to be carried out to achieve these objectives. Phase one results define the specifications for the following phases.

This kind of model is a great approach when the requirements, services and processes are more or less clear in the planning phase, and when the projects are not subject to much change.

The downside is that this process is time-consuming and it generally takes a long time to come to a presentable result – which is usually the final product the customer sees. As one can imagine, there is a high probability of failure.

However, the world has changed!

Customers these days know exactly what they want, and they want it in just a few clicks, such as they experience with companies like Apple, Amazon, Netflix etc. They expect a perfect customer experience in every way.

Furthermore, customers and companies are virtually always connected to the digital world. Everyday, Customers express their wishes and describe their needs using a variety of online devices and channels.

As a result, customers set the pace for our further development to a great extent. If they do not get what they want, they start to look elsewhere – and even in the insurance sector, there are a number of innovative start-ups that act as competitors.

It is obvious that the traditional waterfall model is no longer the appropriate approach, and we need a new paradigm for the management of software development projects. To meet new requirements, we need to embrace the startup working model, following the principle of build – measure – learn, in short and quick cycles.

Digitization has brought a shift in power – the power to influence markets has passed from companies to their customers. Through the use of social media, reviews, rating, etc., customers now have a huge influence on the success of a business.

Our customers’ wishes and needs, their feelings and opinions about our company, and our products and services are more important now than ever before. Our customer experience must fit customer expectations.

Consequently, customer experience is now key for our success. Simply put, the customer experience defines how customers think about our company across every touchpoint and every stage of the customer journey – from expressing basic interest to signing a contract.

The agile approach – our new paradigm for managing software developing projects –enables us to optimize the customer experience to the max; it allows us to involve customers from the very beginning to the end. To help us understand their needs, customers are able to provide feedback throughout the process, and this feedback is then taken into account in the further development steps.

To get results quickly, we embrace the lean working principles of digital startups. In short development cycles characterized by intensive internal communication and cooperation, we develop a so-called minimum viable product (MVP) – a product version with just enough features to satisfy early customers.

It is important to understand that the term "minimum viable product" does not mean lower quality. The development of an MVP is based on the quality standards common in software development – a MVP simply does not offer every conceivable feature.

Deliver the Minimum Viable Product (MVP)

In a very disciplined approach, a defined team of 1 product owner, 2-3 designers, and 5-6 developers gets 100 days to build a product shippable to end customers.

Based on this version, we receive feedback from real customers very early, which is immediately incorporated into the further development of the product. Prioritizing the customer feedback, this process is repeated over and over again until the product offers the optimal customer experience.

A major advantage of this agile method is that customers receive an operational version at an early stage – and as modern software applications run on the Web or in the cloud, updates no longer require any effort from the customer.

100-day financing rounds with strict KPIs

For some, the term "agile" gives the impression that the process could be difficult to control. On the contrary, agile methods benefit from clear, flexible structures that follow management best practices.

Of course, this also applies to financing. First, the teams have to convince the review board (similar to a venture capital board) of their 100-day idea; in essence, they have to pitch it.

Key performance indicators (KPIs), such as customer satisfaction values or app downloads, enables the measurement of the investment’s success.

Failure is part of the process

We just learned that agile methods follow management best practices and now we call for “failure as part of the process” – isn't that a contradiction?

Not at all! In the era of digital transformation, positive failure strategies are an important prerequisite for successful teams. People afraid to make mistakes will not dare to step out of their comfort zones, will not learn, and will not be very adaptable.

What we need is a culture of failure. It is not about blaming an individual or a team – it is about identifying an error, analyzing what happened, and then doing it better or following a completely new approach. This pragmatic way of thinking is the only way to optimize a product or solution quickly, while maintaining a fully customer-oriented approach.

Agile project management is based on a structured approach called Scrum, which makes the project controllable while maintaining the required flexibility and speed.

The Scrum approach derives from three important principles. The first is the clear allocation of roles. The Product Owner sets and prioritizes technical requirements, the Scrum Master manages the process and eliminates obstacles, and a team of designers and developers creates the product.

The second principle is breaking down the project into small, easy-to-handle units that are implemented at short intervals called Sprints.

The third principle is the clear definition of communication and collaboration in general weekly meetings, as well as more specific daily meetings. This enables the team to share accomplishments and lessons learned, as well as information about obstacles.

At the end of each sprint, the team presents the implemented functionality to the Product Owner and other interested parties in the Sprint Review Meeting. It is presented live on the system – so-called "vapor ware", half completed work, or PowerPoint slides are not allowed. The feedback from the audience makes its way into the next Sprint, and the process starts all over.

This way of working ensures the required speed of development while at the same time adhering to the time, technical, and customer experience goals.

Every digital project requires a wide range of different professions and skills. This constant availability of know-how and talent is crucial for the successful and timely completion of a project.

This only works well if all parties involved are together in one place, with a cross-functional team setup. This is particularly important because we are not working on just one project – at the moment we manage no less than 600 projects.

The advantages are obvious: the opportunity to have frequent face-to-face meetings, no misunderstandings when agreeing on tasks, faster processes and problem-solving, and more.

We think that co-location (physically working together in the same office) is an indispensable prerequisite for Scum projects, especially when not all team members have extensive experience with this kind of project management. We have had positive experiences with co-location – the teams are pleased with the new working arrangements and the atmosphere is relaxed and creative.

So-called pair programming is another important method that can be implemented to improve teamwork, to optimize the know-how transfer and to significantly reduce errors. In this approach, two developers work on one machine equipped with two screens, keyboards and mice. Having two individuals working on one story point has three advantages: it results in more creative solutions, the developers learn from each other, and it improves the quality of the code.

The IT infrastructure needs to reflect the flexibility and speed requirements of agile development projects – it is an important ingredient for project success.

Elasticity is the ability of an IT infrastructure to quickly adapt capacity and services to changing requirements, without hindering or jeopardizing the infrastructure's stability, performance, security, governance or compliance.

An elastic infrastructure enables us to scale software more quickly and to implement new releases in days instead of months. It also allows test-driven development based on predefined software tests, which then run automatically. Both aspects contribute to developing and maintaining applications very efficiently.

Just three or four years ago, this would not have been possible for an enterprise business, but now all the necessary technologies are available and we make use of them.

We learned that developing digital products and services is completely different from our existing business, and follows a whole new set of rules. It is impossible to implement such a structure in an outdated, “legacy” environment.

That’s where so-called digital factories come in, enabling new ways of working based on new principles and a different mindset.

In Germany, we run such digital factories at several locations in Munich with about 150 colleagues, and in Stuttgart with 90 employees. These units are the engines for the customer-oriented digitization of the entire Allianz Germany.

The teams include experts from all disciplines: product specialists, designers, developers, and colleagues from sales, marketing and business organization.

In this new approach, the teams can completely focus on their current project. They work closely together and there are no phones. This ensures that colleagues from the day-to-day business cannot call and take colleagues off the team for real or perceived emergencies. Instead, communication is via email and business chat systems. This is important to ensure the required speed of development.

The success of this approach speaks for itself. It has set the course for the digital transformation of our company, it secures our digital competitiveness in the market, and it continuously furthers our growth.

The entire organization has recognized that this working methodology leads to much higher productivity and quality for each invested Euro, and there is a constantly growing demand to work in this manner.

In the digital factories, we work based on an elastic infrastructure using the leading and state of the art tools common in today’s digital development environments.

The teams can flexibly assemble the environment required for a specific project. They can set up in a few minutes and are immediately ready to run. This is not only the basis for the much-needed speed of development, it also enables them to respond quickly to changing requirements.

In the past, deploying new versions across different stages took several days, each backed up by manual testing. Today we are able to implement productive deployments within minutes, supported by incremental automated testing. That is agile development at its best.

With the central Global Digital Factory in Germany and the digital factories in Paris and Spain, we are, so to speak, developing the blueprint for the global digital business of Allianz.

Our goal is to scale the methods and solutions developed by the digital factories internationally. We aim to enable all Allianz companies to digitize and strengthen customer ties and to serve the diversity of our customers across the globe.

However, this is only possible if the development environment, tools and procedures are as standardized as possible. Bringing the lessons learned in the existing digital factories to the global world of Allianz will be the next decisive step in the digital transformation of our company.

Agile management and agile working principles are current buzzwords in the business world, and it is time to implement these methods to ensure our digital competitiveness.

It should not be overlooked, however, that the introduction of agile methods involves breaking up with legacy manner of working in a radical manner, and this turning point can be frightening.

At Allianz Germany, the lean startup concept is making its mark on the enterprise. To support the process, we have set up "Agile Training Centers" (ATC) in Stuttgart and Munich as part of Allianz Germany's Digital Factory initiative. Our IT is operating there with agile training methods and is establishing this new manner of working step-by-step in the company.

In the following video, Dr. Andreas Nolte, CIO of Allianz Germany, guides you through the Agile Training Center in Stuttgart.

It seems to be inherent – IT projects have the tendency to fail. The Standish Group's annual Chaos Report for 2017 has shown that only 29% of all IT projects are successfully completed, and 19% are considered a complete failure.

Among the reasons for failure, technical issues play a minor role – most projects fail because of unrealistic planning and problems in the collaboration of the departments involved.

As you see in the diagram below, another issue is that IT projects are very diverse. In large companies like ours, international scaling plays an important role, and also drives complexity. When we implemented ABS in France, for instance, we learned that it is not a French-only project. It was also necessary to collaborate with our colleagues in Austria and India.

The bottom line is that no project resembles another – there is no general cookbook you can just work through and expect a positive outcome.

It is important to understand that these problems are not only characteristic of our company - they affect all companies whose IT has grown over many years.

Nevertheless, we have to tackle these issues quickly and effectively. We must not ignore the fact that there are a number of insurance startups that can implement their digital business models without any legacy (carryover of outdated practices).

The quality of any interpersonal relationship is based on the mutual understanding of the parties involved and the communication between them. This also applies to the interaction between different departments in companies.

It is almost cliché that business executives in companies complain about the efficiency and cost of IT. The IT department on the other hand laments that the business side often poses requirements categorically without consideration of feasibility and cost. This stereotype makes clear that with the business and IT parties, two different cultures collide.

However, the times when IT was just a provider taking care of servers, workstations and applications are over. The digital transformation requires close cooperation between business and IT in order to achieve the necessary results.

The existing separation between business and IT is the opposite to what is required today – namely, an agile development environment that enables the rapid implementation of new business models and processes.

We're not talking about multi-year development and implementation of new solutions (the so-called big-bang implementation), but an iterative approach that implements new versions of a solution every month or even every two weeks.

In view of the many challenges to be faced, such as the high demand for innovation and increasing complexity, it is essential to take the relationship between business and IT to a completely new level. Both are required to stop finding fault with each other and instead start to co-construct and execute the roadmap of their project.

In the beginning, it is usually a challenge to establish this kind of cooperation– but there is simply no work-around and the effort pays off in many ways.

Today, the IT department is the technology partner of the business departments, actively supporting them in the planning and implementation of their business projects.

The advantage of this approach lies not only in the development and dynamics of new solutions but also in the achievement of fast and continuous successes, which in turn strengthen team motivation.

In addition to the lack of collaboration across departments, inadequately formulated requirements and objectives, as well as unrealistic expectations are key reasons for the failure of IT projects.

As mentioned previously, a roadmap, jointly developed and agreed upon by business and IT departments working together, is an important basis for the successful completion of IT projects. For the business side in particular contribution is a must– after all, it involves the development and implementation of the systems which enable them to be successful in their everyday business.

Defining a new system enabling the execution of a new business model must take one essential aspect into account – simplification. Systems and processes that have evolved over many years offer tremendous scope for simplification, helping us to make our business more secure and profitable.

Another important aspect is flexibility. Today's business world is changing fast, and so is the insurance industry. If we define a roadmap today, it may require adjustments in a few months or weeks due to changing market conditions.

Estimating project cost is always hard. It seems that the only time you know exactly how long it takes to complete a project, is when the project is finished.

Depending on the approach you use – top-down or bottom-up, in other words, by the management or the teams involved, you will see a huge difference. For most of us, this is no surprise. Management aims to work as inexpensively as possible, and project teams aim to increase their budget to best position themselves for a positive outcome. A controlled bottom-up approach should be the method of choice, as the top-down approach usually lacks detailed analysis.

In coming up with a meaningful cost estimate, the agreed upon roadmap and project description is a good place to start, as the estimation process demands a common understanding of the project requirements and deliverable solutions.

Another tip is to be clear on what exactly you are estimating. Involving the people who are actually doing the work helps – this is another scenario where business and IT departments need to collaborate.

Finally, if it hasn’t yet been done, the project should be broken down into smaller components. This allows one to estimate each task individually, and to compare cost estimates that those of similar projects. Most importantly – be skeptical of predictions and ask questions when in doubt.

The staffing of project teams needs a lot of attention. Business and IT interdisciplinary teams need to use “simplification” as a rule of thumb. As the recruitment market has been thinned out, especially in the IT sector, it is helpful to raise awareness among employees through appropriate tools, such as trainings.

We discussed various reasons why digital transformation initiatives fail , and here is yet another: a lack of buy-in by the management.

Management needs to understand the urgent need for digital transformation and act accordingly. Each week without a decision can and will cost us a lot of money as personnel and other resources are blocked. We have calculated this for a project, ending up in an estimate of 150,000 euros per week. Furthermore, the project might be delayed.

It is perfectly understandable that risky decisions – the big bet decisions – can take longer. But often times decisions of lesser scope are also delayed.

One way to unravel decision making is to categorize the decisions in order of importance to increase efficiency. This classification must be made clear to management and teams in order to be able to make decisions at the right levels and to involve all relevant individuals. Aspects of categorization include, for example, the risks associated with the decision, the urgency with which the decision needs to be taken, etc.

New, previously unimagined business models are emerging all over the world as a result of progressive digitization. These business models often also place new demands on the insurance industry.

Take GoJek in Indonesia as an example: Roughly 200,000 two-wheelers are orchestrated in an Uber-like model. GoJek’s drivers are in need of specialized insurance on a daily basis – policies they can activate and deactivate on demand (we might see similar dynamics in other emerging countries).

Can anyone imagine how this can be done with traditional processes in the insurance industry – in other words, manually (what we are currently doing more or less)? Many new business opportunities require a digital environment for frictionless and efficient distribution and handling.

Digital transformation requires we work better and faster with our IT departments. For those on the business side, it can be painful to watch untapped value escape our reach simply because the IT systems and processes are not able to meet the requirements of the modern insurance industry.

In many parts of our business, forms are still being filled in by hand, sent around and keyed-in manually. Not really connected, and not really digital—that is a reality of our past. Our future can no longer support this manner of work. Manual processes are error-prone and complex, offer limited scalability, and it is difficult and costly to adopt new applications.

The good news is – once you realize that your current mode of operations is unsustainable, it is easier to be open to change. Given what we’ve learned about the necessity of enabling digital business models, we are now more comfortable thinking about and implementing new systems that support modern business.

We know what is necessary in order to significantly improve the customer experience, to offer much better sales support, and to achieve frictionless operations. And we are already building a “new IT world” that not only enables us to work much more efficiently, but also facilitates the implementation of new business models.

When you look at successful digital companies you will realize that their business is usually based on one unified platform. In aiming to become the natural partner for digital companies, the key goal was quite obvious to us – one unified regional platform whose development is business led.

It was clear to us that we needed to digitize our processes for maximum efficiency. As a result, we decided to throw all legacy overboard and to start with a clean greenfield approach.

In digitization projects, customization is always a major topic. Digital transformation literally lives from standardization, otherwise you cannot fully exploit its efficiency potentials. We follow the 80/20 rule – 80% are made up by a standardized core, 20% are the leeway to customize the system to meet special requirements. For the core we selected the existing ABS, further increasing the efficiency across the group.

When it comes to the implementation of IT systems and processes, a well-defined delivery approach really matters. It should take into account aspects such as speed-to-value, risk reduction and optimal cost. Our mantra is to maintain affordability without compromising business and customer value.

Customization management is also vital in order to meet this target. Consequently, we have minimized country-specific requirements, simplifying the implementation of the system across our three entities in Asia.

In today's business world, it is no longer the big who eat the small, but rather the fast who kill the slow. In the digital age the business world is more competitive than ever before, and we need to address that.

We have created a highly agile and interactive development approach, enabling us to build the new system in a very efficient manner. We took the ABS core, defined the process and product architecture, as well as input and output management needed for digital communication.

First we created our motor product in a minimally viable way, reaching a maturity level of about 65%. Does it mean compromising the daily business? Not at all!

We simply left out what we do not need at the moment, such as a tariff engines (tariffs are very simple or regulated in these markets) or reinsurance offerings.

With this, 65% the business can already be run, which enables us to instantly increase our footprint and make life more difficult for the competition.

The implementation of such a comprehensive new system is like open-heart surgery. There are so many hurdles and obstacles to overcome – not only with regard to technology, but also in the emotional area: humans are creatures of habit and routine.

It is clear that change management is much more than simply managing the installation and configuration of a new system. The key aim is to convince everyone involved that the coming change is positive. People who do not understand the new world may not accept it or, even worse, torpedo it.

As a result, change management must include finance, human resources, support, marketing, sales, customers and partners.