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Facing Disaster, Trustmark Launched a Renaissance

On a sunny day in June 2006, David McDonough, chief executive of Trustmark Insurance, was roaming Chicago's Navy Pier, talking to strangers. "We needed to understand what made people tick," says McDonough of the exercise, which was part of a two-day workshop designed to get his executive team to look beyond actuarial tables and stimulate thinking about the company's future.

After chatting up tourists at the lakefront amusement park, Trustmark's top six leaders boarded a bus for a tour led by a team from Play, a creativity and innovation consultancy based in Richmond, Va. (It has since been acquired by the San Francisco-based Prophet.) The bus stopped at CompUSA, Apple (AAPL), and American Girl (MAT) stores along Michigan Avenue before taking them to the Museum of Science & Industry, where they walked through an exhibit of Leornardo Da Vinci's journals, drawings, and models. "When they got back on the bus someone said, 'I think we're a company that is more like CompUSA. But what if we could be more like Apple,'" says Barry Saunders, the Play consultant who led the 18-month project.

The executive workshop was the first step in McDonough's attempt to introduce Trustmark—a 95-year-old Lake Forest (Ill.) health and life insurance companythat embodied its traditionally conservative, risk-sensitive industry—to innovation. And it provided the inspiration for the internal branding that the 2,300-employee company would ultimately use: the Trustmark Renaissance.

A Turnaround Situation Today, Trustmark is a company where fresh thinking is encouraged, whether it's a novel product or service, a new sales channel, or even a simple gesture to show appreciation to a co-worker. Play's Saunders says that after the official project ended, he still got calls from Trustmark employees excited to tell him that they had moved a team meeting from the conference room to a public spot where they could walk around and talk to people, or that they had created an idea-generating game.

The story behind the initiative begins before McDonough's 2002 arrival. In 1999, the company lost $12 million, as a result of settling several large claims in its group and individual medical businesses and overall consolidation within the health insurance market that was squeezing margins for midsize players like Trustmark. (The company has $1.7 billion in assets today. By comparison, Aetna (AET) reported almost $36 billion in assets in 2008.)

Worse yet, in 2005, after significant losses in its worker's compensation reinsurance business, Trustmark's financial strength rating was downgraded from A- to B+, a change that threatened its so-called voluntary business—options such as long-term disability or life insurance that employees can buy as part of their benefits package.

Revamping Conservative Thinking From 1999 until 2005, the company focused on getting its financial house in order. Trustmark sold off businesses such as InfoTrust, a health-care software services business; stopped selling individual medical insurance; and invested its limited resources in streamling operations and improving its balance sheet. By late 2007, the company had earned back an A- credit rating. "But the dynamics of the industry hadn't changed," says McDonough. So with an ample cash cushion, McDonough decided to pause and figure out how Trustmark—and its employees—might evolve.

"We are a health insurance company. It tends to draw people who are rather conservative, and they are paid to think conservatively," notes McDonough, 56 , who knows the type well after 30 years in the industry. Realizing that he would need help getting some employees to think about creativity rather than risk management, he interviewed consultants, ultimately choosing Play over more traditional players.

Play, founded in 1990, has brought its philosophy that sustainable innovation begins with inspired employees to clients such as General Electric (GE), General Mills (GIS), and Procter & Gamble (PG). The Play team repeated the executive's downtown tour for Trustmark's top 25 managers, and, later, another 250 managers. (Neither party will say how much Play was paid.)

In the Da Vinci Den While McDonough says it is hard to trace a new product or process back to any single thing, the company's medical group has since moved into the health-care advice space, and introduced Care Champion, a Genius Bar-like service to answer members health or benefits questions 24/7.

In addition to the creativity workshop, Trustmark created six internal teams to review issues such as rewards and recognition and the physical office environment that would play an important role in the company's Renaissance initiative. Each was given a starting budget to implement their ideas, and "they could come back and ask for more," says McDonough, who will only say that the company ultimately spent hundreds of thousands.

The Environment team created the "Da Vinci Den," a comfortable space filled with tinker toys and magnetic word boards to spark thinking and encourage collaboration—a radical change for a company Play's Saunders described as "cubeville." The Idea Architecture team created a "think tank" on the corporate Web site where employees can post and discuss ideas and even submit them to management, while the Idea Generation team came up with a board game called "Ask, What If?"

Lots of Innovation New ideas are vetted by McDonough and his strategy team, and he says seven new products or services have been introduced as a result of the Renaissance initiative. He points to a new accident insurance product developed by the voluntary division and a health and wellness outreach program from CoreSource, the company's third-party administrator. Year-over-year sales in those two businesses jumped 18% and 16%, respectively, in 2008.

In addition to new products, McDonough points to innovations in distribution channels and compensation practices. As a mutual company like State Farm, Trustmark doesn't have publicly traded stock. So over the past two years, it has created phantom stock that estimated the value of the company as a whole—which is approaching $1 billion, says McDonough—as well as each of its seven divisions. Beginning in 2009, executive compensation is tied to how well the phantom stock performs.

The company's overall financial picture suggests that Renaissance has yet to lift the top line: Trustmark reported total operating revenues of $830 million in 2008, down from $889 million the year before. Though to be fair, it was a hard year, and even industry titans Aetna and Cigna (CI) saw earnings fall. "This little thing called the economy came in the middle of all of this, but I think we'll see an uptick next year," says Kate Martiné, senior vice-president of human resources, corporate communications, and administration.

On a Journey But new products, new and expanded lines of distribution, and new lines of business accounted for 38% of new revenue for 2009, according to Trustmark, which won't release 2009 financial results until after yearend. Martiné adds: "This is a journey."
Scanlon is a Bloomberg Businessweek contributor.

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