Being decisive, addressing culture and embracing digital were key to rebuilding Aviva after the 2008 financial crisis, explains CEO Mark Wilson.
It is some three years since I last visited Aviva’s headquarters in the heart of the City of London. Then, I was meeting outgoing chief HR officer, Christine Deputy, to hear about the FTSE100 insurance giant’s culture changing efforts and what this meant for its people strategy. The organisation had just been through a hefty reorganisation to steer it back to profit.
Today, I am here to meet CEO Mark Wilson, the man credited with implementing that change and subsequently rebuilding Aviva’s financial strength in the wake of the 2008 financial crisis. Under Wilson’s leadership, market capitalisation has soared from £11bn to more than £20bn. Now the largest insurer in the UK, and a UK Top 30 Company, Aviva operates in 16 countries with 33 million customers and £475bn in assets under management.
The insurance group was in the doldrums when Wilson took the helm in 2013, having experienced a tumultuous 2012, selling off multiple businesses to simplify its activities and boost shareholder returns. It had already undergone a major costcutting operation, prompted by the arrival of chairman John McFarlane, who “shook the foundations” of Aviva by making significant changes to the executive team.
As a seasoned 21st century CEO with a track record of rescuing a number of under-performing global companies, New Zealandborn Wilson was no stranger to restructures and keen to get stuck in. He quickly announced plans to eliminate 2,000 jobs, cut the dividend by 44%, freeze bonuses for 400 managers and sell off or reorganise various units.
For Wilson, having the courage to take bold decisions underpins any successful transformation.
“When you’re in a crisis situation, you have to make decisions,” he says. “Too many CEOs, globally, think they can go in and manage a business without making fundamental changes to the balance sheets and financials.
“You need absolute clarity of strategy and the ability to get into the detail on the execution. When in charge you have to take charge. Crisis and consensus just don’t go together.”
Post-financial crisis – and more specifically at the start of Wilson’s tenure – investors were unhappy, performance had dipped and there were questions over the capability of some of the executive team. So Wilson and his team deliberated over Aviva’s strategy – and its culture. “I believe culture eats strategy for breakfast and always has,” he quips.
This involved a controversial overhaul of the company values. “We decided early on that we wanted to identify just four values, and make them edgy and different,” he recalls.
While management initially rebelled against the four values – of ‘never rest; kill complexity; care more and create legacy’ – Wilson explains that they are now so embedded in the organisation there would be a revolt if they were changed.
“You don’t see our values on plastic boards around the company but we use them as a framework for decisions,” he says.
Culture, meanwhile, is a work in progress. “If anyone thinks the culture is right they probably need to get another job. But now it is fast-paced, challenging and edgy. It’s still quite technically based and we need to get more customer based; but we welcome change.”
Digital transformation
A key part of Wilson’s future planning for 322 year-old Aviva is around reframing the insurer as digitally focused. Historically, the insurance industry has been accused of lacking innovation and delivering poor customer experience, issues Wilson is keen to address.
“While we used to insure carts and horses, now we’re talking about cyber-insurance and autonomous vehicles, so the solutions and skill sets you need are totally different,” he argues.
However, this has taken some time to get off the ground. Despite investing some £80m in digital transformation in 2014, Wilson admits that when it came to analysing progress in terms of innovation and new customer acquisition, the investment had yielded “precisely nothing”.
He recalls his light-bulb moment: “I was judging a hackathon in Shoreditch, London, and there were all these young stars from small tech companies who had worked for 48 hours, non-stop, on these fintech developments. I realised then that we couldn’t do that sort of thing with our culture, and we couldn’t build our digital business from within.”
Since then, Aviva has launched its own ‘digital garage’ in Hoxton, a trendy area of East London. The office holds a few hundred staff, away from Aviva’s City of London HQ, and is home to its digital innovation and development teams.
Staff are data scientists, rather than actuaries, and former game developers. Wilson explains that the aim is for this office to “compete and cannibalise” the rest of the organisation.
“When I launched [the digital garage] I said the strategy is three words: compete and cannibalise,” Wilson explains. “I made it clear they don’t report to the rest of the business, and that if any of the management team tried to block their activities I would fire them. The next day I fired two people, who spoke out about how digital was wrong for the business. I was clear in my strategic expectations.”
Wilson says that separating the digital garage from the rest of the business is the best decision he made, and has enhanced talent attraction. “We started getting CVs from all sorts of industries, gaming, airline – people who wanted to disrupt within the framework of a corporate – it has differentiated us.”
Aviva now spends at least £100m a year on digital transformation internally and has set up a venture capital fund, Aviva Ventures, with £100m to invest by 2020. Wilson believes the “groundbreaking” steps Aviva is taking has contributed to the company’s recognition as having the most advanced digital business in the world of insurance.
From a skills perspective, Wilson is aware of the need to reskill employees to navigate this digital era; for example, retraining actuaries to become data scientists. “I’m desperate for that skill set but universities don’t train people in it. I’m willing to pay more for a data scientist than an actuary,” he reveals.
The digital revolution is also impacting customer expectations, but he acknowledges the need for a multi-faceted approach. “The world is complex and one of our roles is to try to simplify it. Not everyone has access to computers or the internet, and we still have to service them, but we do want to encourage people to use digital as it’s more efficient and cheaper for them. Some people fear change, but it’s inevitable, so the question is how you bring people along with it.”
Leading in 'the grey'
While 2017’s emphasis was on leadership training to ensure the right capabilities, such as judgement and freedom, were being developed within Aviva, 2018 is about narrowing the organisational focus. “I’m encouraging each person to identify three things they want to achieve this year that will make a difference to the business,” he says.
He believes that, in a disruptive, digital world, managing “in the grey”, without precedent or all the information, is one of the most important skills a leader needs today.
As he illustrates: “During the global financial crisis when I was at AIA, their parent company collapsed overnight. What do you do when you have hundreds of journalists outside your front door? You get smart people around you and work it out quickly. And you do it with small teams, in the knowledge that you won’t get it all right, but you’ll find out soon enough.
“If you are a CEO who cannot get to the detail, you are of no use. Leaders need to see around corners. You need creativity, adaptability and agility as the world becomes faster.”
Against a backdrop of change, Wilson is a key commentator on the role of business in society, known for his enlightened views on how companies must become “good ancestors”, creating sustainable legacies. “Unless business takes an active role in society, you don’t have business. It’s high time more business and commentators started seeing sustainability as good for business. It’s good as long as you embrace it,” he says.
Wilson believes part of Aviva’s role is to impact society for the better. And with $800bn of investment assets, Aviva has the capacity to make significant calls about the businesses it invests in. The group has decided to exit from tobacco, which Wilson puts down to a long-term, social perspective – it’s “problematic” for Aviva to be associated with a product that clearly states on its packaging that 70% of customers will die from using it. This approach also filters through the supply chain: “We challenge our suppliers; we want to know what they’re doing about things like reducing carbon footprint, paying the living wage, addressing pollution, whether they’re treating staff well.” He argues that it is incumbent on business to have a social purpose: “There hasn’t been one company in history that has survived with the sole purpose of making money. As a business you need a clear role and social use.”
Aviva’s social purpose is to “take the fear and uncertainty out of life. If financial services is done the right way, it’s the whole oil that makes society work,” argues Wilson.
How does this translate into results? “Staff see it first, followed by customers, and shareholders third as it takes a while to translate into profit,” he says.
Staff pride, buy in and belief in the organisation is at a “record high” he believes. While customer satisfaction is also increasing, he acknowledges that this too is a journey, but is confident that the products the insurer intends to launch in the next six months will “redefine our industry globally.” He is excited by the possibilities the future holds and acknowledges the role Aviva’s people play in creating success. “Change is inevitable, but the real question is how you bring people along with it,” he says. “We have a long way to go, but ‘never rest’ is one of our values.”