Business Model
Early on in her career Ms. Giuffre became interested in metric-based
initiatives; in particular, developing models and methodologies for optimizing
an organization's financial performance, capital utilization, creating
shareholder value and creating competitive advantages. A paper that contained some of her early
models, “Measuring Business Performance
and Intellectual Capital: A Case Study of Evolving Practice and Theory"
was published in 2001 by McMaster World Congress - Management of Intellectual
Capital.The models were based upon a system approach and key
elements were evolved to become the premise of the GRS Group's business
models.
Our current society primarily operates
through generic linear or sequential thinking.
A system model harnesses the flexibility derived from the
interchangeability and cooperation of the system’s components. A systems model clearly acknowledges the same
segments, however the sequence does not require a pre-described format. Additionally the core competencies and
activities are not in restricted silos, allowing interchangeability among the
team. Execution of a system model is in contrast to
traditional business models wherein “overlap” causes silo meltdowns or wherein
segregation is used as a means of institutionalizing the business.
In the case of the GRS Group, the analytical and structuring capabilities are the hub for all of the companies.
The difference is most easily seen when comparing to a more traditional business model – such as the insurance industry. Insurance is primarily a bifurcated model (brokers and (re) insurance carriers, wherein:
– insurance
brokers do not have high value-add capabilities; and
– (Re) insurance carriers do not have direct market access / capabilities.
As Diagram 1 demonstrates, the traditional business model, much like a relay race, clearly defines each segment of the race, where a work / baton is passed sequentially and no one party (i.e. the insurance broker or carrier) has all of the core competencies to successfully execute risk transfer solutions.
DIAGRAM 1 (enlarged diagrams provided below)
Within the traditional insurance industry context:
- Insurance brokers:
– Market, but do not execute solutions
– Shuttle information / data between counterparties, but do not process risk related data
– Do not underwrite risk (i.e. assess, evaluate, and structure)
- Insurance carriers:
– Underwrite, but do not market the solutions
– Have an indirect relationship with protection buyers
- Neither Insurance brokers nor carriers evaluate the solution's economic value or the solution from the perspective of the protection-buyer or the associated stakeholders.
Per Diagram 2 below, the same components referenced above can also be contained within a system based model.
DIAGRAM 2 (enlarged diagrams provided below)
In some instances the activities within traditional broker and carrier
business models are further segregated; such as insurance brokers that
have different protection-buyer facing employees and insurance carrier
facing employees operating in different business units. While
the traditional insurance model can be effective at institutionalizing
the business and can appear to protect the various business segments, it
also inhibits the ability to "see the bigger picture", innovate, and
provide high-value and hard to replace products and services.
The GRS Group utilizes a system model which enables it to evaluate value from all stakeholders' perspectives. Per Diagram 3, the system based approach is utilized by the GRS Group incorporates the sourcing both sides of the marketplace (i.e. of protection-buyers and risk-takers).
DIAGRAM 3 (enlarged diagrams provided below)
The above model enables the GRS Group to understand, context, innovate, and provide high-value and hard to replace products and services. This is in stark contrast to the traditional insurance model wherein all of the brokers (e.g. Marsh, AON, Willis, etc.) sell the products of the same insurance carriers (e.g. AIG's products, Chubb's products, etc.), and wherein the insurance carriers sell the same type of products (e.g. E&O, D&O, EPLI, etc.). While one may be able to argue that the insurance products have value (or not), it is the replace-ability that primarily makes insurance a commodity business.
Diagram 4
The core of the system models discussed above is the "knowledge-base" of the business. To the extent that a particular person / party does not have sufficient first-hand knowledge they must be efficiently connected to the required competency / knowledge-base. While at Marsh, Ms Giuffre created a systemic-based global knowledge management environment that included "knowledge-connectors". The application of this knowledge management model and the results from using the model were explained in the paper published in 2001 by McMaster World Congress - Management of Intellectual Capital. The knowledge management model was first utilized within a financial products business unit and then was rolled out globally.
In 2005, primarily due to the investigations led by Elliot Spitzer, the insurance industry experienced a significant change that led to lay-off of many employees; and within Marsh, this also resulted in the dismantling of much of the knowledge-connecting model. The exodus of key "knowledge workers" combined with the inhibited ability to evaluate or innovate risk solutions, has created an opportunity for a new risk solution market. This is very similar to the financial institution exodus and the beginning of the hedge fund market.
The early stages of developing the GRS Group business model also included creating re-usable methodologies that enable rapid solution development and execution. This type of infrastructure approach provides the ability to take advantage of economies of scale. The combination of a system based model, providing high-value and hard-to replace products and services, and the approach to infrastructure efficiencies provide the GRS Group with a competitive advantage.
Enlarged versions of diagrams provided below.
