The devil is in the details of WellPoint’s push for a data-based payment system.

WellPoint’s effort to update its digital business model by changing the nature of its revenue structure is similar to many of the IT-enabled organizational transformations that we’ve studied. In this time of fast-growing enterprise digitization, companies are finding it necessary to build platforms and services to leverage the data they collect and then deliver it to customers if they are going to do business in new and different ways. Embedding data analytics into its workflow and creating actionable insights for doctors from that data is an ambitious goal for WellPoint, and its stumble on the path to it is not unusual; their recovery from that stumble, however, shows great organizational flexibility.

Three practices underlie WellPoint’s success in this new system: treating the revised project as a cultural change, creating incremental goals, and focusing on the customer. Moving to a Red status may have seemed like an admission of failure, but the executives at WellPoint used it as an opportunity to create new organizational capabilities.

Though a waterfall approach has long been used to spec and develop projects, especially in large enterprises, most companies find it difficult to create accurate specifications. Reasons include a lack of people who understand both the business and IT sides of the equation and a lack of history to draw from. For these reasons and others, over 50% of major IT projects fail. And even when they’re completed, we find companies are not generating the value that they expected. Agile development works for these projects for a number of reasons because it (1) allows the project to fail fast and for interventions to take place early as the team iterates, (2) creates an environment where business and IT must work together and makes project success a joint responsibility, and (3) focuses on the user. But moving to Agile is a huge cultural change.

It’s hard to change a culture. Everyone in the organization is affected and they all must buy in. WellPoint targeted ground-up cultural change by bringing in training, adding resources, and hiring people who had experience with the desired change. WellPoint executives committed their time to the project and created metrics that aligned with the desired changes. And progress was celebrated.

This leads to the second success factor. By moving to Agile, WellPoint leaders had perfect opportunity to put the focus on incremental goals and successes. Big goals (those BHAGs [big, hairy, audacious goals] we’ve all heard about) can be motivating in the short run because they signal out-of-the-ordinary targets. However, those kinds of goals can be quite demotivating in the long run, if there are no parallel incremental goals, because there is so much opportunity for failure and only one opportunity for success.

There are two places that WellPoint took an incremental approach. One was in their identification of a small number of must-have data types for the program to be initially successful. We’ve found that great, actionable data is rarely available from day one.

Instead, we see leaders demanding one or two data types and then making operational decisions based on that data. Once a certain type of data becomes a critical input to decisions (and incentives), we see a renewed focus on data improvement in the enterprise. And then it becomes easier to expand the efforts to capture and improve additional data streams.

The second place with incremental goals was in the revised development of the Enhanced Personal Care Program itself. Rather than waiting until the end of the development to assess the overall project, the focus became smaller, modular parts of the program. It’s much easier to diagnose and fix problems in contained modules.

The third practice that helped ensure program success at WellPoint was an effort to think about the problem from the point of view of the customer. We have found a hallmark of success in a digitized company is a relentless focus on the user. Putting customer experience at the center of product development makes good sense — in WellPoint’s case, that means providing timely, accurate, actionable information in an easy-to-use format for doctors. WellPoint knew that the success of the program rested on getting doctors engaged and using the system. Getting them data that was up-to-date and easily analyzable and interpretable was key to increasing that engagement. Once the program went to Red status, the user viewpoint moved front and center. We see developers thinking about users as they write code.

Where does WellPoint go from here? One direction is to involve doctors more in the updates. Leading firms are not just storyboarding products and services but are increasingly engaging their customers in the design to deliver new, innovative solutions. Doctors will be able to suggest new data types and analyses that may not occur to developers and others in WellPoint. A second direction is to expand the use of Agile methods to other IT projects and programs.

With this program, WellPoint made a huge cultural shift, bringing the IT and business together and changing the way people are working inside the company. It’s a good start.

For more about WellPoint's efforts, see the case study "Preparing Analytics For a Strategic Role," which looks at WellPoint's shift to a new provider payment system.