Project Management Institute

Harnessing electronic commerce in a state government environment

Kevin Brown, Project Manager, California Department of Insurance

Brian Gegan, Managing Director, PMP, KPMG Consulting

“The Internet waits for no one—no country, company or individual. The Internet has redefined traditional business models and is now beginning to reshape the political process. Our country is moving towards an E-Democracy in which technology empowers citizens to participate in the decisions that shape their future. I believe that the politicians who learn to harness the power of the Internet will emerge as our next generation of leaders.”—John Chambers, CEO, Cisco Systems Inc.


The 20th century has seen amazing innovations that have changed the lives of hundreds of millions of people across the globe. Many of these innovations have gradually become indispensable, such as the telephone or automobile.

Conversely, electronic commerce (e-commerce) is an innovation that is simultaneously overcoming and replacing many traditional rules of commerce that have existed for thousands of years, and it has accomplished this astonishing feat in less than six years. E-commerce has become such a powerful medium that many business analysts now view participation in e-commerce as critical for business survival.

However, as this new fast-paced, streamlined e-commerce world becomes entangled with the deliberate nature of government, a conflict arises. The rapid pace in the private sector is largely due to a fiercely competitive environment. State governments typically do not face competition; they are monopolies. Understanding this axiom is critical to successful paradigm modification and project management in transitioning government into the e-commerce environment.

E-commerce is fueling the acceleration of the delivery of services and higher expectations for quality and responsiveness in all sectors of society, including government and the California Department of Insurance (CDI). From a government regulator’s standpoint, e-commerce can offer similar benefits to that of private industry; providing efficiency, quality of service, and responsiveness that is measured in milliseconds rather than weeks, months or even years. E-commerce can provide a quality of service at a cost considerably less than conventional regulatory practices and has the potential to truly revolutionize the way government conducts business.

CDI is essentially a customer service branch of government, providing services to consumers and the insurance industry alike, including those residing outside of California. As a function of the State of California’s governmental structure, CDI is responsible for overseeing the approximately $85 billion per year California insurance industry and protecting the state’s insurance consumers; regulating, investigating and auditing insurance business to ensure that companies remain solvent and meet their obligations to policyholders. CDI also issues certificates of authority to insurance and title companies seeking admittance into the California market; and licenses agents, brokers, and others domiciled in the state.

These activities require continuous interaction with CDI’s “customers” regardless of whether they are insurance consumers or the insurance industry. As e-commerce practices become standardized in the private sector and demonstrate an ability to better satisfy the needs of consumers, pressure for CDI to raise its quality standards and value to its consumers becomes increasingly important.

CDI recognizes the mandate for change. Federal and state laws have begun to alter the insurance landscape by legally allowing electronic forms of signatures and contracts. Federal financial modernization laws have opened the marketplace to businesses that had previously been prohibited from selling insurance. The insurance industry itself is beginning to integrate e-commerce into its business practices. And, above all, CDI has an obligation to protect consumers of California during, and after, all of these changes take place. The root of all these changes is e-commerce and the empowerment of people through technology.


CDI recognized that e-commerce is ubiquitous and has the potential to substantially change many of the traditional methods of conducting insurance business in California. In response to the changing environment and marketplace, CDI has embraced project management to evaluate the effect of e-commerce on its regulatory responsibilities and the insurance industry, and to integrate technological solutions into CDI’s operations.

Exhibit 1. CDIE-Commerce Project Life Cycle

CDIE-Commerce Project Life Cycle

With these issues in mind, CDI defined a project scope that focuses on two general areas:

1. Electronic Regulation:

Methods by which the Internet and other electronic means of commerce can be used to increase efficiencies and effectiveness in the regulation of insurance; identify and analyze state laws, regulations and procedural requirements governing the insurance industry that may need to be updated; and, most importantly, to maintain or improve appropriate consumer protections.

2. Electronic Commerce:

Facilitate the use of beneficial e-commerce opportunities by insurers to promote reductions in the cost of insurance while expanding access to the marketplace and allow continuous improvement in the quality, delivery and administration of insurance products and services.

To be successful, CDI determined that the project must be a collaborative effort with the insurance industry. CDI’s project is designed to systematically perform a self-analysis, examine options and alternatives and perhaps reengineer its functions to be more customer-oriented and prepare itself for effective insurance regulation in the future. Implicitly, this means:

Integrating data collection and information sharing within CDI to allow cross-functional division staff to seamlessly communicate with all areas of CDI and provide efficient, accessible and accurate channeling of information.

Integrating a virtual contact/call center capability to provide interactive “around-the-clock” access to CDI by its customers.

Reducing the workload of “low value” tasks and replacing them with “higher order” activities by allowing the expertise of CDI staff to focus on more crucial regulatory obligations.

The benefits of these kinds of initiatives are limitless as ideas and discoveries unearth new potential. Time and cost savings could be staggering as reams of paper and the need to handle that paper are greatly reduced or even eliminated, but more importantly they create an environment within CDI that strives for operational excellence by being easy to use, functionally rich, reliable and integrated. For CDI, e-commerce is the fusion of business processes, enterprise applications and organizational structure that simultaneously serves the needs of its customers while fulfilling its obligations as a governmental regulator.

CDI faces major challenges. State government is typically risk-averse, staid, and conservative in its approach to adopting new technologies. The incentives to change must be compelling enough to overcome significant impediments including:

Extensive oversight agencies’ rules, regulations and procurement restrictions that are outside of CDI’s control.

Political pressures and excessive scrutiny that is always present in a department, such as CDI, led by a constitutionally elected officer.

Cultural resistance to changes in the workplace for management and staff whose functions may be impacted.

The last challenge, cultural resistance, is closely related to the change management component that every project faces and CDI recognizes that this hurdle may be the most difficult to cross. In spite of these challenges, CDI recognizes that e-commerce holds enormous potential for satisfying the needs of industry, consumer and regulator alike. What was once only capable in a dream, technology is making possible, and ultimately, a necessity.

The Project

To be successful in the complex migration to e-commerce, CDI is embracing project management to assist in the design and development of a comprehensive, enterprise-wide e-commerce strategy and then evaluate how technology can implement this strategy. This must be done, and then implemented, without disrupting normal business operations. Like virtually every other existing enterprise, CDI can’t suddenly stop regulating insurance while it re-engineers itself for e-commerce. The project must be integrated while CDI’s operations remain fully functional.

The first step in this migration is for all of CDI’s management and staff to start seeing things from a new perspective; i.e. transitioning from a process-oriented organization to a customer-oriented organization. The Internet has challenged the private sector to reevaluate the way business is conducted and the same challenge now confronts government.

Without accepting this paradigm shift it is difficult, if not impossible, for CDI to develop an e-commerce project plan. A vision of what CDI is embarking upon determines where CDI is going, how it will get there, where it is coming from, and how it will know when it succeeds in reaching its desired destination. To begin transforming vision into action and ultimately success, CDI adopted an overall E-Commerce Project Lifecycle consisting of both a strategic and tactical phase. The strategic phase involves those efforts that can be broadly classified as Awareness, Assessment and Confirmation activities. This phase involves close interaction with CDI’s executive management and other selected management and staff members to crystallize the vision and define an appropriate path. The tactical phase represents those activities that relate to specific project selection and implementation and are broadly characterized by activities that fall under Plan, Execute, Measure (and Adjust), and ultimately Accomplish.


CDI recognized that e-commerce represented both an opportunity and a challenge to the organization, its staff, and its regulatory functions. CDI also recognized the speed at which the external environment was changing and understood a sense of urgency to adapt and evolve to this changing environment. In the past, CDI had successfully applied traditional project management practices to other efforts, such as its Year 2000 Remediation Project, and considered the transition to an e-commerce environment to be a collection of inter-related projects that needed direction, coordination and integration.

Even though some of CDI’s management and staff embraced the potential of the Internet, CDI recognized that the organization at all levels, needed information and exposure to understand the impact, prioritize efforts, and sequence its e-commerce initiatives. CDI enhanced organizational awareness through:

Formation of the Uniform Electronic Transactions Act (UETA) Project Team to examine the opportunities and challenges afforded by legislation enacted by the Governor of California on September 16, 1999.

Creation of a CDI E-Commerce Policy Committee made up of executives, management and staff to guide CDI’s efforts.

Designation of an E-Commerce Executive Sponsor and Program Manager.

Participation in a variety of conferences, seminars and presentations that were hosted by State of California control agencies, such as the Department of Information Technology (DOIT), and demonstrations by consultants and software vendors.

Planned a series of internal, off-site meetings and presentations to inform management and staff, throughout the organization, of the scope, scale and direction of CDI’s e-commerce initiatives.

An executive visit to Cisco Systems, Inc. by the Insurance Commissioner and Deputy Insurance Commissioners to attend a presentation by Cisco’s CEO, John Chambers.

From an organizational perspective, the visit to Cisco signified a major milestone and served to energize CDI’s efforts. Cisco CEO John Chambers was able to persuasively communicate the opportunities available to better serve customers, streamline internal operations, and elevate the abilities of CDI’s workforce if CDI truly embraced the potential of the Internet. In the same breath, he mentioned the danger that faced organizations if there wasn’t a conscious commitment to educate and train staff to participate in an Internet-enabled world.


Concurrent with the above efforts, CDI also initiated a series of assessment activities in multiple areas to determine CDI’s needs and requirements. CDI applied an enterprise-wide perspective to examine oversight and regulatory functions, internal operations and processes, and technology infrastructure requirements. It was recognized that the transition to an e-commerce environment would involve multiple stakeholders, both internal and external, and cut within and across organizational lines and layers. Some of the significant assessment activities include:

Formation of four different Task Forces to examine opportunities for Internal Innovations, CDI to Consumer interactions, CDI to Industry regulation, and Industry to Consumer interactions.

Examination of CDI’s internal organizational structure to determine roles, functions and reporting relationships required to direct internal and contracted e-commerce efforts.

Analysis of other e-commerce efforts within the State of California government structure that include the Governor’s Office and various State of California control agencies, especially the Departments of Finance, Information Technology, and General Services.

Assessment of the legislation recently enacted by the federal government, and in particular, the Financial Services Modernization Act (S.900), which requires significant change on the part of regulatory agencies, such as CDI, within the next 24–36 months.

Evaluation of the insurance and financial services industries that are currently experiencing consolidation and restructuring as evidenced by Citicorp’s acquisition of Travelers Insurance Corporation.

Insurance companies within California and the rest of the world are rapidly migrating to selling insurance products and services over the Internet that will require a fundamentally different approach to oversight and regulation on the part of CDI and other regulators. CDI had operated for years in a “physical world” where letters, faxes, field offices and service counters were part of the environment. Overseeing a “virtual world” where applications, policies and other transactions could be processed through the Internet pose different challenges to the organizational structure, workflow and processes, staff functions, and technological infrastructure of CDI.


As CDI moves down the e-commerce path, it recognizes that informed decisions need to be made regarding the prioritization of initiatives, assignment of projects both internally and externally, and commitment and sequencing of personnel and financial resources. Within 60 days of the launch of the project, the various Task Forces identified over 50 related efforts that could be undertaken, from simply enhancing e-mail operations to integrating CDI’s databases. Recognizing that these inter-related initiatives need to be carefully coordinated, CDI committed to:

Implementing a project nomination process to collect, identify, evaluate and prioritize initiatives proposed by the individual E-Commerce Task Forces (see Project Nomination Form—Exhibit 2).

Developing, documenting and communicating an enterprise-wide E-Commerce Vision, Strategy and Project Plan.

Estimating the financial and staff resources required and available to commit to key initiatives and related projects.

Convening a team of executive management to confirm and prioritize key e-commerce initiatives.

Exhibit 2. Project Nomination Form

Project Nomination Form

Committing to Communications and Organizational Change Management strategies to reach throughout the organization to educate and prepare all management and staff to accept, understand, and eventually own new processes and technologies.

Evaluating the required management infrastructure, such as the E-Commerce Office (ECO) and Information Technology Project Management Office (ITPMO), to manage project efforts.

Equally important, CDI affirmed the need and the value to implement a project management approach with relevant guidelines from the Project Management Institute (PMI®) and DOIT. This phase represented a commitment to move forward, organize its internal project management structure, and assign resources to enter the world of digital business.

Next Steps

As of the submission of this paper, CDI is undertaking the next steps to authorize and launch its e-commerce projects. As mentioned earlier, CDI is entering the tactical phase of the E-Commerce Project Lifecycle where it will focus on an integrated sequence of projects that will enable it to transition into the digital business world.

Activities that are expected to be under way within the next 30–60 days include:

Documentation, delivery and communication of CDI’s E-Commerce Vision, Strategy and Objectives throughout the organization.

Developing and implementing the Project Management Infrastructure (E-Commerce Charter and Program Office, roles and responsibilities, standardized project management processes as well as tools and functions).

Establishing and implementing E-Commerce Change Management and Communications Plans to enhance communications and information flow across the project efforts and throughout the organization.

Scheduling a series of external activities (conferences, outreach efforts, presentations and seminars) to ensure that CDI understands the needs of industry and consumers as well as other government stakeholders.

Examining the enterprise training needs and identifying innovative ways to train CDI personnel on e-commerce fundamentals such as business-to-consumer and business-to-business e-commerce interactions, basic legal considerations, information security, etc. CDI may explore online, web-enabled courses to prepare management and staff for the digital transition.

Due to the size, scale and scope of these efforts, CDI is currently considering the enterprise-wide implications for transitioning to an e-commerce environment. It is anticipated that CDI will commit itself to an enterprise project management office (EPMO) approach and structure to coordinate, direct and integrate the wide variety of projects that will shortly be launched. As the organization gains additional information and applies structure to the project organization and processes, project management practices and approaches will become embedded within the organization for future endeavors.

At the Project Management Institute Seminars and Symposium in Houston (PMI 2000), we will communicate the progress of CDI’s efforts to transition to the digital world as well as its success in implementing effective project management practices.

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.

Proceedings of the Project Management Institute Annual Seminars & Symposium
September 7–16, 2000 • Houston, Texas, USA



Related Content