Capitalizing on Data by Building Organizational Capabilities

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

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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 [

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