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Should AIG invest in innovation in technology in order to more effectively meet customer needs? Abigail Cropper 000058-0011Word Count: ………Session: May 2018 Research ProposalResearch Question: Should AIG invest in innovation in technology in order to more effectively meet customer needs? Rationale: American Insurance Group is a multinational corporation, founded in 1919, with headquarters currently based in New York City. Whilst having a very large customer base and a strong presence in the insurance industry, AIG has been facing increasing competition as a result of technological advances in recent years. As a result, AIG may benefit from advancing their utilization of technology to meet customer needs. An example of this would be mobile phone applications, aiding the consumers to get insurance coverage more quickly and easily, such as travel insurance, benefitting a wide number of customers. Many startups are utilizing this concept as a marketing point, acting as high competition for AIG. Research and development, as well as innovation are factors that strongly impact this discussion, leading one to ask if AIG should invest in technology innovation in order to more effectively meet customer needs?Areas to be covered within IB syllabus: Unit 4: Marketing 4.4 market research 4.5 the four Ps Unit 1: Business Organization and Environment 1.6 growth and evolution Unit 3: Finance and accounts3.1 Sources of finance3.2 Costs and revenuesUnit 5: Operations management5.6 Research and Development Methodology: Primary Sources 60%AIG Liz CropperGlobal Head of HR and Business Partner Life and Retirement. I will conduct an interview with herSources AIG is a public company so they publish all of their resources in annual reports. Tools Swot analysis Gantt Chart Ansoff MatrixSecondary Sources 40%The Economist The New York TimesThe Washington Post The Guardian ReutersInformation GainedPrimary sources information gained:From interview: Clear summary of company’s objectives, aims, and challenges Insight into company culture from first hand perspective Interviewee works in HR, so I will have a human resources angleAnother interview with another employee will also provide another insight, especially if they are from another department From annual report Clear, factual data Can interpret data myself Secondary sources information gained:Relevant information Alternative perspectives Global insight Anticipated difficulties: Trying to maintain a balanced report given that I am interviewing one or two employees, who may have a bias towards the company. Finding consumer opinions as it is a new objective of AIG, therefore not much market research will have been done Choosing the most valuable, specific data, as there are a lot of statistics. Action plan: Research Question 11th December 2017 Proposal 15th December 2017 Interview 8th January 2018 Secondary source research16th January 2018Rough draft 26th January 2018 Final draft 21st February 2018 Words: 444Acknowledgements: Thank you to Elizabeth Cropper for your assistance and cooperation in conducting an interview. Contents Page: Executive Summary ………………………………………………………………………… 8 Introduction ………………………………………………………………………………….. 9Research Question …………………………………………………………………………. 10Procedure ……………………………………………………………………………………….. 10 Main findings …………………………………………………………………………………… 11Analysis ………………………………………………………………………………………….. 12Conclusion and Recommendations ………………………………………………………… 15 Bibliography ……………………………………………………………………………………. 16Appendices …………………………………………………………………………………….. 17 A – SWOT Analysis …………………………………………………………………….. 17 B – Ansoff Matrix ………………………………………………………………………… 18 C – Interview ………………………………………………………………………………. 19 D – Gantt Chart ………………………………………………………………………….. 20Executive Summary: Abstract AIG is a multinational corporation in the insurance industry. This investigation aims to determine the role that technology plays in meeting AIG’s customer’s needs, and whether or not future investment in technology innovation would benefit the company. Primary and secondary sources are utilized in order to assess the research question – should AIG invest in innovation in technology in order to more effectively meet customer needs?. American Insurance Group is a public company, allowing the use of their data from their annual reports also aided this investigation, Additionally, an interview was conducted with the Human Resources Head to gain deeper insight into the company’s needs. Alongside a SWOT analysis, Ansoff Matrix and Gantt Chart, the results found suggest that AIG should invest in innovation in technology, as it would meet customer needs more efficiently and effectively, thus making the company itself more competitive within the insurance market. Introduction – 206 American Insurance Group is known as one of the largest corporations providing hundreds of products within the insurance industry, both for businesses and individuals. After having suffered huge losses in the 2008 financial crisis, losing $99.2 billion, AIG has been recovering, and survived only because of the $182 billion taxpayer loan that the company received. It wasn’t until September of 2017 that they were deemed ‘no longer too big to fail’, and were released from the strict federal control. However, during the years since 2008, AIG have regained their international status, with total revenues of $52,367,000,000 in 2016. Yet, their insurance policies maintain various limitations, causing more difficulty for consumers regarding ease in the process. In recent years, AIG has seen increased use of technology in their rivals. AIG’s customer dissatisfaction can be seen as a result of the slow, manual administrative process that occurs when insurance is needed. Therefore, in order to maintain their competitive edge, perhaps investment in technology innovation, specifically apps for mobile phones would benefit the company greatly, if not at least to see higher customer satisfaction. This led me to the question ‘should AIG invest in innovation in technology in order to more effectively meet customer needs?’ Research Question: Should AIG invest in innovation in technology in order to more effectively meet customer needs? Procedure – 227This investigation aims to determine to what extent investment in technology, including the creation of mobile applications would aid customer needs. In order to begin to answer the research question, primary and secondary research was taken. The primary research included an interview with Liz Cropper, the Global Head of HR and Business Partner Life and Retirement. The interview provided useful insight into the company and their needs. The information received was reliable because the interviewee holds an important role within the company and has experience with consumers. However, there may be some lack in the reliability because of possible biases towards the company. Further primary research included information from AIG’s annual report of 2016. Given that AIG isa public company, all their data is released onto an annual report, with 2016 being the most recent. This information is extremely valid, though not all valid to this investigation given the extent of the detail on the report. Secondary research consisted mainly of articles from highly reliable and well-known sources. Other methods employed were; a personal SWOT analysis of the company which provides a high standard insight into the actions of the company, an Ansoff Matrix to assess the goals of the company in terms of new markets and new products, and a Gantt Chart, which is perhaps less reliable as it was made by me and is hypothetical. Main Findings and Results – 205Firstly, from the interview (Appendix A), it is clear that there are some issues regarding meeting customer needs. Specifically, during processes within insurance, it is clear that there is a large amount of manual documentation required. This most likely reduces the customer’s ease when using AIG’s products. AIG do currently have an app ‘Why AIG’, however this functions more as an overview of AIG’s roles, rather than to actually aid insurance processes. A second app ‘AIG CyberEdge’ is designed to keep customers up to date with cyber risk and security, however has not been updated since early 2016. Looking at the Ansoff Matrix (Appendix B), it is clear that the company’s most reasonable option is product development, involving the introduction of new products into existing markets. Part of the business’s new focuses is on cyber security. Thus, it implies that innovation into technological advances for the company would further aid cyber security for its customers. To further support this idea, and according to the interview, it would take approximately 9 months to complete the process of creating an app, although this is not entirely accurate. The stages necessary for creation are shown on the Gantt Chart (Appendix D). Whilst creating an app is achievable, a large corporate company such as AIG would have to also sustain their image, therefore extending the process. Analysis: In analyzing the results and findings, the factors for and against the research question are evident. Firstly, although AIG does have some existing apps, they seem to be aimed at employees and shareholders. For this reason, some might argue that there is a lack of focus on the consumers themselves, suggesting that perhaps more apps would be beneficial. However, these existing apps do imply that the company is experienced in the production of apps for mobile phones. This would therefore suggest that AIG could use their knowledge of the success of past apps to better the quality of future applications. AIG could learn from what factors of their apps were most effective and which factors were not. Moreover, if the success of the applications was limited then perhaps other investments into technological advances for the company would be superior. For example artificial intelligence, which is seen in the marketing of many of the company’s competitors, especially newer companies as stated during the interview. The interview, whilst likely biased to some extent, did provide useful information about AIG as a company and what their aims are. As highlighted by the annual report of 2016, which stated that “investments to upgrade our technology and underwriting processes challenge our management of general operating expenses” further agree with the interviewee’s suggestion that AIG has a recent focus on technology innovation. However, despite the cyber insurance that AIG advertises, there seems to be a prominent lack of innovation in technology that they have actually achieved. This being said, there may be processes that are still underway and have not yet been revealed. This is likely given that it is such a large corporate company. This factor may also be influenced by the new CEO of the company, who has made recent changes to the organization, thus most likely also to the distribution of finances within AIG. The new CEO was one of the strengths shown in the SWOT analysis. Overall, the analysis shows that there are many drawbacks for the business, such as their poor history regarding the 2008 financial crisis, as well as their weaknesses when it comes to governmental regulations and local market fluctuations. However, this being said, American Insurance Group does have promising opportunities. For example the new CEO Brian Duperreault who joined in late 2017. His new suggestions for the organizational structure for the company suggest that they may be able to streamline operations and eventually have more money to invest in technology innovation. AIG does have many strengths and opportunities, an observation I would imagine is due to their effective manner of adapting to changes. Their previous CEO had many criticisms for his lack of experience, and AIG responded well to this. Other strengths of the company included the general factors of the large workforce consisting of 56,400 employees as of 2016, as well as the prominent brand visibility, highlighted by their many sponsorship roles. These ideals imply that the marketing of any new intelligence would be effectively marketed and accepted. The company also has a youtube channel which has regular posts, further supporting this point. The Ansoff Matrix used reveals that due to the brand’s strong existing customers and markets, it seems logical for them to look into product development. It also has a medium risk, meaning that as long as it is effectively planned, (although this may be more time consuming), the results would be positive. Diversification may also be effective for the company as they may be able to more effectively advertise new products immediately into new markets, however this is a high risk, and AIG cannot afford to make financial losses. Finally, the Gantt Chart was used to display the potential timeline of the production of one or more apps. This media is less useful because it only relates to an app, rather than other forms of technology, however the different stages may be applicable to other new products. Using information provided by the interview, it is estimated that it would take approximately 9 – 10 months for the production of the app. This would be extended due to the necessity of maintaining a positive brand for the company and avoiding any possible damaging issues. This is a relatively long time, and the marketing of the app may require even more time, however if enough people were to use the app it has the possibility to prove to be very effective in terms of meeting customer needs. What’s more, with rising competition, it seems likely that this is necessary for American Insurance Group to remain a leading brand. Conclusion and RecommendationsOverall, using the information collected from primary and secondary research, I would personally advise AIG to invest into innovation in technology to meet customer needs more effectively. This is because AIG has a strong company name, suggesting that implementing this change would be relatively easy to market. However, there are some drawbacks, including that their current apps are not incredibly successful. This may suggest that an app would not be appreciated by their clients. Yet, looking at the apps, there are no clear indicators of their purpose and how they would benefit customers in their ease. The main factor that encourages the suggestion to agree with the research question is that technology is unavoidably becoming more prominent in people’s lives, therefore allowing technology to aid customers will clearly make customers, especially new customers, more attracted to the company. BibliographyBarlyn;, Suzanne. “AIG to Include Cyber Coverage to Commercial Casualty Insurance.” Reuters, Thomson Reuters, 26 Oct. 2017, www.reuters.com/article/us-aig-cyber/aig-to-include-cyber-coverage-to-commercial-casualty-insurance-idUSKBN1CV2XE.Lomin, Loykie, et al. Business Management: Course Companion. Oxford University Press, 2014.Merle, Renae. “AIG Is No Longer ‘Too Big to Fail,’ Regulators Say.” The Washington Post, WP Company, 29 Sept. 2017, www.washingtonpost.com/news/business/wp/2017/09/29/aig-is-no-longer-too-big-to-fail-regulators-say/?utm_term=.a73bea1ff9e2.Subba, Nikhil, et al. “AIG to Buy Reinsurer Validus for $5.56 Billion.” Reuters, Thomson Reuters, 22 Jan. 2018, www.reuters.com/article/us-validus-m-a-aig/aig-to-buy-reinsurer-validus-for-5-56-billion-idUSKBN1FB1FP.”Technology.” Technology Sector Insurance | AIG US, www.aig.com/business/industry/technology.http://www.aig.com/content/dam/aig/america-canada/us/documents/investor-relations/2017/aig-2016-annual-report.pdfAppendicesSWOT Analysis of AIGStrengths:Large workforce – 56,400 employees Powerful and well known name Brand visibility Large number of services that they provide to their customers Lots of sponsorship and strong role in corporate advertising  Weaknesses: Financial opportunities depend on markets, therefore their revenues can fluctuateRecently retired CEO may cause dilemmas in organizational fluency and structure Poor history of large losses, specifically during the financial crisis of 2008 Opportunities: They have the opportunity to enter their products into more countries because of their global statusThey could make more investments into Newly Industrialized countries such as China, because business is expanding very rapidly in these areas. Recently got more freedom after 9 years They have a new CEO, Brian Duperreault, who has introduced a new organizational structure, hopefully benefiting the company. However his changes have been new and therefore it is hard to tell the consequences of his ideas as of yet. AIG purchased one of their rival companies ‘Validus’ in late January 2018, hopefully allowing them to better their reinsurance business. Threats:Financial crises and economic recessions can impact their activity, even though now they are under less control. Difficult regulations and policies from federal agencies and governments Fear of natural disasters can impact their activity, for example the Houston floods of 2017, even though they responded well to this. Ansoff MatrixExisting products New products Existing marketsMarket penetration AIG are very successful in their current markets, and therefore it is of low risk for them to remain with the same products in the same markets. However, the changing environments, especially with technology, mean that market penetration may make AIG less competitive. Product development  Development of apps would aim to replace existing products that are less useful. There is only a medium risk as they could stay within their existing markets. For example, if they created an app for travel insurance. New markets Market development AIG already has a large customer base and exists in many countries. Even though they may benefit from expanding to more countries, this does not focus on AIG’s needs in regards to technology innovation. DiversificationThis is a high risk growth strategy, and therefore not suggested. AIG may benefit from testing the results of the the new product of apps in their existing markets before immediately expanding to new markets also. The interview questionsThe AIG website states that “AIG is a global leader in the technology insurance sector, providing comprehensive and customizable solutions that address the unique coverage and risk management needs of individuals and organizations that create, distribute, or work with technology.”  What role does technology currently play in connecting AIG with you consumers? Do you have any apps, if so what do they do and who are they aimed at? Is there anything missing from the technology in your company that could better the communication with your customers?Do you think that creating an app would aid the consumers? Is technological innovation a big part in the strategies of your competitors?Gantt Chart

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