Episode 317: You Don’t Need More Tools - You Need Less Fragmentation

Welcome back to the Scale Your Insurance Agency Podcast, the show built for independent agency owners who are done being the bottleneck in their own business. I'm Daniel Metcalf, and every week I'm joined by my co-host, Mike Stromso, one of the most respected operators in the independent agency world. Between the two of us, we bring you the real levers that move a $3 to $20 million agency from successful but maxed out to systemized, scalable, and running without you holding it all together. Here's what we focus on. Mike brings the people side, leadership, team development, niche sales mastery, and a three-piece system that helps agencies build a business worth owning. I bring the machine side. AI, automation, and workflow design that frees your team from the operational drag, eating your margin, and your time. Together, we're building a framework that can grow an independent agency 4X to 9X without burning out your people or your checkbook. If you're an agency owner who's tired of growing by herring, who knows you have a capacity sitting on the table but can't figure out how to unlock it, this is the show for you and your weekly edge. Alright, Mike. This is a very interesting podcast this week. Getting started. We're gonna turn the we're gonna flip the script. Typically, I'm the host and I'm more spending more time interviewing you and all of your wonderful experience and expertise when it comes to running an independent insurance agency to a successful exit. And then all the other agencies that you've been helping do the same thing over the past uh uh five to ten years. Now we're flipping the script. Today you get to be the host, I get to be the guinea pig and to be the answer because our topic today is you don't need more tools, you need less fragmentation.

Fragmentation? Is that a problem? Yeah, no. Fragmentation, that's the cousin of bottleneck, isn't it?

Well, yes, yes. Very close cousin, yes, yes.

Hey, I'm excited for this episode because yeah, we're gonna turn the tables today, uh, and I'm going to attempt to pull truckloads of wisdom uh from Mr. Daniel Metcalf, and I know he's got it there. It's my job to pull it out of him. I mean, anybody heard of shiny objects? Of course. How much shelfware do you have? Have you read your PL lately to see how much shelfware you're paying for that you're not using in your agency? Uh, what about your team? They can't wait to start with the next new shiny object because they have nothing better to do. They haven't learned the last one. Sure, let's add another one and create some more chaos. Anybody have that going on? If you do, you're in the right place. Because we're gonna talk about today what is the true cost of all of this. So, Daniel, ready to go? Absolutely. So, what we want to know first, Daniel, there's a hidden tax. And I know it's only three letters, not four, but that's a nasty word. What's the hidden tax of fragmentation, Daniel? I mean, things like rework, missed handoffs, like try to hand off the baton, but it gets dropped and you lose the race. And where is all of this based on your work with independent insurance agencies?

Yeah, in many instances, because we uh I have the fancy couple letters behind my title is uh AI as those fancy titles. Everyone wants to know about AI and all the cool tools, and they feel like they are missing out on something if they aren't using artificial intelligence to its maximum value. And even myself being in it, I can fully admit that I too uh was just having a conversation with my my business partner about man, I feel like so many people are so much farther ahead in artificial intelligence than I am. Like that, you know, all these other game changer things. And um, so I understand the feeling, right? But the biggest area, especially from a technology standpoint, of where fragmentation creates this hidden task is in the switching. Switching is the biggest tax, and with that switching means that is where it isn't just a one-for-one minute switch, right? So if I have to go, let's give you an example. So if I am, if I have three really cool tools, but each one of those cool tools only does one thing. The idea of having to switch from one to the other to the other to do that each of its one thing causes over an hour and sometimes two hours of switching tax in order to get something done. Then that in many instances means I have to rework something or I have to start over from scratch, and how did I what did I do with that? Like that, those are the that's where the tax comes in from the switching part of it. Also, if I have to think about what the next step in in that process is without looking at a checklist or looking at a workflow or working at a process, that time it takes to remember what the next step is. And if I miss one of those steps, then it starts what's called a backlog. There's a backlog of work that's going to be sitting there. So now I have this tax on the hey, uh switching, backlog. Missed a step, backlog. That is where the pain comes in for each one of your employees. Doesn't matter what role they have within the agency. That backlog and that mental backlog, too, of I'm never getting it done, I'm not this, it just keeps piling up, I'm never gonna get to it. That's the next hidden task. That tax is overwork, burnout, um, missed opportunities, negligence. That's where a lot of times we see a lot of our, I'm in the cybersecurity world too, that's where we see a lot of the hacks come from, is from that backlog, that worry, that that burnout, that I just don't have, you know, it's just going really fast and I just have to get this all done, and I didn't have time to think about or didn't have time to investigate it. That is the tax that you're gonna, if we aren't using consistent workflows, writing them all down, and then finding tools that can create an entire workflow, right? Manage an entire process rather than having to use two or three different tools to get it done. And that's where that is uh um our job within the organization, with an agency, is to help them identify those workflows, figure out how we can use one tool to get it all done, um, or you know, God forbid two, but if we need to at least have two, at least they work together in tandem without a human in the loop, having to move it from one piece to the other.

Wow, that's awesome. I I've got so much to ask you about here, but I also know that I I've learned that when somebody gets interrupted because of this backlog or uncertainty or you know, fragmentation, etc. Sometimes it takes as much as 23 minutes to get back to the same mind place that you were. So, Daniel, in the AI technology and automation world, uh, you know, backlog and and and all of the things that you were just describing, brilliant, by the way. Is drag part of that conversation or is that something separate?

That's something separate, but let's talk about where what the promise versus the reality is, right? We're getting there. The promise that we can have multiple agents all working at the same time, right? They can actually multitask much better than humans can because of the way that software and computers work, right? So they're not gonna have that same type of switching cost that we do as humans. But it also is only gonna do garbage in, garbage out still, right? And what it's been taught and what it learns how to do. And so we have to be very careful on the fact that as it starts to do more processes, there is going to be a drag, right, in their context, the memory, the amount of tokens, there's all these things that are gonna be that are gonna be in present that is also going to slow down if we don't have a solid workflow, a solid process. Um, some of you know, one of the favorite people you and I both like to study was Elon Musk, right? Start removing everything until something breaks. That is a really good process, even when it comes to your technology, uh even from the human process, right? What can we continue to re to remove from this process until it breaks? And then that's where we know this is as simplest as we can get it, and that's exactly where we're going to keep it, right? And then we're just gonna use that. Uh I use flywheel too much, but flywheel over and over again of this process is simplified. And then maybe by the next year, do it again because you don't know what the what has changed in the world of technology or resources or whatever that might look like. But that that is the process that I would I would start to look at.

Great stuff, great stuff. You mentioned agents a couple of minutes ago, not independent insurance agents, but the ones that can multi-task well. Yes. You can't human beings can't uh they can multitask, but they can't multi-focus. Sure. But the agents you referred to are actually automation agents, right?

Yes, they are they are artificial intelligence agents. That's what we call them, yes, or agents, AI systems.

If you haven't heard that previously, know that. Well, Daniel just said, these artificial intelligence agents, okay, they can multifocus. We don't expect the human beings, we expect them to build relationships. And the other thing, just to add something on, in the scaling world, you can't scale complexity. You can only scale simplicity. So that's why everything that Daniel's saying is so vitally important, so we can get you to scale. And the other thing that's in the way in the experts, um, the experts of scaling that we study mutually as well, they talk about the crux. Okay. And we're looking to get away from that to get back to simplicity. Daniel, let's talk about tech stacks for a minute. Okay. Text acts actually fail? Huh. Uh, you've in our conversations, you say tech stacks fail because there's no process ownership and no adoption plan. Tell us more.

Yeah, the old adage is that you can't solve problems by throwing more people at it or throwing more technology at it. You can only solve problems by getting to the root of what is the workflow necessary to solve that task or that problem. And so where tech stacks fail is first of all, um, there's no ownership of the tech stack. A lot of the agencies that we started working with right away is oh, yeah. Okay, so who's in charge of the tech stack? Well, what do you mean? Who's ultimately responsible for the output of the technology within the agency? Well, sometimes it's parts of it as the agency owner, sometimes it's in the producer group, sometimes it's in operation, sometimes it's in back office, sometimes we see it in the HR department. It just depends, you know, all these different things, but someone has a part of this technology and someone has this technology. My advice to you is find an owner whose whole responsibility is the processes and the technology that supports the processes. One of one of the things we work on the hardest is the greatest way to get results is to combine technology and people together, not to solely rely on technology and solely rely on people, get them working together. That is where you're gonna, but someone has to own it. And when you start looking at your tech stack, making it simple, someone has to come up with an adoption plan if you're gonna add new technology or change one out. You have to have an adoption plan. So, what does that mean by that? A lot of people like to sign up because you know, um the software world and the technology world has done a fantastic job making it super easy for you to buy their licenses or to buy their tools, right? You throw in a credit card, you get to choose monthly or annually, and all of a sudden now you have a piece of technology that you added to your tech stack. That means that there's a big cost to what we call shelfware or no adoption, or yes, I paid for it, but now it just sits here because there wasn't a plan before we purchased it, right? No one says that you're gonna not get the discount if you wait a couple days to come up with how are we gonna adopt it, who's gonna adopt it, what are our expectations about what this is going to do. And if these expectations aren't met, then what? If the expectations are greater than what met, then what? By putting those all together, that is how you're going to get the maximum value out of your tech stack. And always be looking at it, always be doing audits around what's our tech stack, what's this getting used for, are we getting what we want out of it? We call it technology Fridays. I started moving over to AI Fridays, right? What are we doing on a Friday basis? Pencils down, let's look at our tech. And like every week, well, okay, fine, make it once a month, once a quarter, whatever you have the capacity to do, you will find so much gains by putting technology in the forefront of your conversations instead of an afterthought.

Brilliant. Uh yeah, in today's world, I think quarterly is a stretch. You know, if you can't handle a weekly, definitely monthly at the most. But, you know, what when I came to my mind thinking about my own agency, somebody's got to own every important strategy, period. Somebody's got to own it because it's less to remember, right? Daniel owns it. Great. Report to us what's going on. So something you said early on when you're talking about no ownership and no adoption plan, you talked about a single operating rhythm or something similar to that. And it's so important. I mean, that's what just gets me out of bed right now is one operating system, one team, etc. So, Daniel, single operating rhythm, what does that look like across sales versus service versus operations, et cetera?

Yeah, let's use sales. We'll start with sales. So uh we talk about the revenue flywheel. What is the single operating rhythm that we go through to get from starting a sale to where they send us the check? One operating rhythm. That way you can measure the results of every single step if everyone's always using one single operating rhythm. We had a recent conversation with an agency. We're like, yeah, our conversion rate is this, right? Where you see the numbers, we have it all on the dashboard. It's a conversion rate. And I'm like, but something seems off. Like we saw in another area, but we don't see any of the leads going in that come from a text message or from a phone call or from like it doesn't appear that if it didn't come in from one of the forms, how are we entering that information so that we can measure what happens to those? Because I feel there's more volume here in the in what's coming into the agency from your lead sources than what's getting recorded. And so when someone has a different process, if you will, outside of the outside of the single operating rhythm, you can't actually, first of all, count it. And then second, you can't fix it if there's if there's a way to make it better, or you can't multiply it if it's one of the best ones. Like we saw with another agency in their sales process, they did a really good job. They've got their gates. They use an an agent, uh a CRM that has these different pipeline gates and different tasks that come out depending on the where they are on the gates of the pipeline. And one producer was doing 37, I think, percent better than all of its counterparts using this one lead source, right? So the best lead source that they have, they kept telling us that the leads were were were oh, they're not that great of leads. Because when they looked at it as from a whole, each one of the producers, yeah, the the conversion rate and the lifetime value of those leads was was small. But when we broke it down even further, we're like, well, let's see where it breaks down in the gates, right? Because they already had it set up. Well, we identified that only one producer was actually using all the gates. And if you looked at the results, that would mean these are the best leads within the organization compared to all the other ones. And it just was the other producers weren't following this all the gates. They were bypassing the operating system because they didn't want to do it. Even though it meant more money in their pocket. That's the part that, you know, the tech guy, right? Boggles or mine's like, if that needs more money in your pocket, why wouldn't you just keep hitting the buttons until the money stops falling out? Right. Um, for my old e-commerce days. Now that's what I'm saying is like, well, let's just try to make sure everybody follows us all the way through and let's see what happens. Well, Mike, I'm gonna ask back to you, what do you think happened once we had everybody follow the process for those leads?

Revenue and profits increased.

For how many of the four producers?

For the ones that executed it in every way.

Exactly. One more producer, because I was the only one willing to follow the entire process. Those other two don't work there anymore. So that is what another reason why we want a single operating rhythm. Now, do we want other do you know they chose to leave the agency, right? It wasn't right from that standpoint. But you talk about it all the time, a players, right? So sometimes we have to lose players to get a players, right? I talked about the universe hates holes, right? It can't stand holes, right? So they always have to be filled. So you lose you get two holes within your produced production group, that just leaves more space for another A player to fill those holes. So that's but but again, without having that single operating rhythm, we would have never known about it. They'd been keep paying these people salaries, they would have keep, you know, they would have cut off their best lead source. They literally would have stopped paying for their best lead source, right? And then what would happen to their numbers? So that's that's what a single operating system rhythm. Let's talk about the service side. I can't tell you how frustrating it has to be to be a service person that comes in that morning at 8 a.m. and just starts firefighting all day long, right? Like watching this service inbox continually get filled up with service requests to right coming in from this email and coming from this form and coming in from this phone call and this text message and from this agent and from this, from this person, from this carrier, all these different things that are, and you're just firefighting all day long if you didn't go to firefighting school. Like if that's not what your what your passion is. But if your passion is for service and helping people, wouldn't it be beautiful if you came in at eight o'clock in the morning and all of your tasks were batched for you? So within 8 to 9 a.m., you can just get all the tasks that were already looked like firefighting, they're all lined up for you, know exactly what you need to do and get it all done. And even maybe, maybe artificial intelligence took care of all the tasks that doesn't need to have a human do it anyways, right? Just something simple for them to do. How much more excited would your service team member, how much more time would they have to think about ways to protect the clients or or to come up with ways to be able to um better provide more value to the clients or even find risky places within that client, right? Hey, you might we we miss this. Like, look at the risk that's here. We should talk to them about it. Think about what that would mean for your agency. That is by having one single operating system when it comes to service one or two tools, you can, and and now with artificial intelligence, you can set up your service the same way.

When people finally get to do the work of humans, what a wonderful place to be. I mean, that's and that's happening in some agencies right now that are taking the right steps. Is that accurate?

Yeah, absolutely. And you and um think of one of the the the conversations with a mutual agency friend of ours that uh I got an opportunity to interview, right? Interview the service team when it came to kind of their processes and we're trying to figure out ways that we can create a single operating system. And when I just randomly asked the question, because we know our teammate Natty is way better than I am at asking these questions, but it just came to mind and said, tell me what would make this process like, tell me what your expectations would be. What would make this the best process ever? And all she said was if that meant I could go home at five o'clock every night and not worry about it the next day. I was just like, that's the only expectation is that you can close your computer at five o'clock and not have to think about it again until eight o'clock the next morning without worry, right? But excitement. That was a challenge that you know me tipping at, you know, I I that is a challenge that I want to take on for every service person that ever says that.

100%. We don't want to live our lives to support our business. So great stuff. And that's why I'm so excited. One of the early things that we position agencies to have is what we call freedom wins. Great stuff. But Daniel, back to you know, fragmentation and everything we've been talking about. Let's talk about tool consolidation and integration.

Okay.

You know, when each of it, when does it make sense? And when, you know, talk about when it makes sense along the journey because I mean, you guys do such great work. You have a full two-year AI and automation roadmap that you install in independent insurance agencies. So talk about all that.

Certainly. So what we look at is what where are their abilities for tools to what's called integrate, right? So an integration means that they they immediately talk to each other, work with each other without having to use a human in the loop in order to make that process work, right? So think of um think of a uh a tool that can intake data and automatically put data, that data into another tool that provides the response on the other end. Like a tool like um Canopy Connect as an example, gathering all the information, then automatically uploading it into a rater so that it can help start to put rates together for a sales proposal as an example. And they have an integration, right? It doesn't take somebody having to take whatever's a canopy connect. And then do some action to go into the radar in order to get it on the other side. So if it's going to be a part of your single operating system and we can look at it where it just talks to each other instead of having to use a human to make it talk to each other, we're gonna we're going to prioritize that versus consolidation. What I mean by consolidation, consolidation is getting one tool to do everything, right? So right, let's just pick one tool that can do all these different things. One tool owns. Say that again, Mike. One tool owns. Yes. Yes. One tool owns all the processes. That from my humble opinion, as you know, fractional chief technology officer, is I don't want to be single-threaded with one tool. I right, and that's what you're seeing in the stock market right now. That's what you're seeing in a lot of these, is that the SaaS model is getting kind of beaten up a little bit, right? SaaS apocalypse. Because with this artificial intelligence, you can start to build your own tools based on what you need it to do rather than waiting for somebody else to make that feature or that benefit or whatever from that tool. And so does that mean that we don't consolidate anything? No, that's not necessarily true, right? If it can do what we need it to do, and we still have a way to be able to downside our risk when it comes to if they were ever going to business or if they're ever to change a process or change pricing or whatever it is, we can still we can still pivot. But we look at integration before we look at consolidation in many in many instances. Um and we also have to be a little careful because a lot of people have been replying relying on APIs, right? Those API connections, that is going to be the new barrier to growth, is gonna be APIs. What do you mean this is supposed to make a great? Well, companies have started to figure out software. Companies have started figuring out that how valuable these APIs are to be able to do integrations and to be able to do to do more with less. That means they're gonna put a tax on that connection because that's the only way they can make themselves sticky, right? That's the only way. So they're gonna put a big tax on it and uh on that API connection, or they might, you know, because of security risks or whatever it is, they might start to limit any type of API connections. And you have to just, if you're gonna use their tool, you have to consolidate down to all the things that they do within that tool. So that's those are other things that we want to make sure that you that you are looking out for within your agency when you're talking about tools.

Yeah, and I know you were working with uh an independent insurance agency a few months ago, and the agency management system they they allowed limited access, but it didn't allow you to do what you needed to do to help that agency in the greatest way. So that's that's why you know you have to have an expert on your side who knows exactly what the landscape looks like. So let's jump to the next topic on this ex you know, everything happens for a reason, right? There are no accidents. Daniel, let's talk about the one rule, the O N E, one rule. Automate only what's standardized. And I remember uh an event in the industry where we were teaching down in the great state of Texas, and it was a couple years ago, and and an agent stood up and says, I got it, I got it. And we're like, what do you got? He said, I'm gonna automate everything possible in the agency, but that might not be a good idea. Automate only what's standardized. What does that mean?

Yeah, and there's two different items that we that I want to cover on this part of it. So, first of all, you can automate anything, right? But just because you can doesn't mean you should. So I always point it to if it's already a crappy process and you automate it, all you're gonna get is a lot more crap, right? So yeah, you're gonna get more chaos and more crap. So, first of all, if it's not a standard practice already that you can do manually, there's no reason, right? That you can do manually all the way through without any uh negative implications. There's no re no reason to standardize it until we can do it manually, first of all. Second, secondly, is and my my good friend and your good friend Matt Donovan says it to me all the time. We want to focus on just in time, not just in case. So we want to standardize things that are just in time right in front of us, not try to automate something that's a one-off that just in case this ever happens again.

A distraction.

It's just another distraction, it's just gonna take you time away from better trying to better operate processes that are already standardized, right? Or make them simpler, whatever it is. And then when that one-off comes up, maybe it is a pain and maybe it's but what is the chances it's ever gonna happen again in the next year or next quarter or whatever it is? Is it really gonna create chaos again? Or can we just maybe put a process together? If this ever happens together, again, this is how we're gonna handle it, or eliminate it, or delegate it, or delete whatever. But by that is our one rule is that you only automate what's standardized because you don't want to just automate for automation's sake because you're gonna find yourself with more chaos. You're not going to get the return on investment you're looking for, you're not gonna get the efficiencies you're looking for, you're just gonna get more work, right? And that is the surge versus the reality that's going in in artificial intelligence right now. Less than 10%, Mike, less than 10% of independent insurance agencies right now are actually seeing a return on investment in what they've invested in artificial intelligence right now. And the reason why is they found productivity gains, right? Like, hey, I write an email, it's writing an email faster, it helps me. Um I can write more emails, you know, uh than I could before, respond to them. I can review policies faster than ever before. And that's all great because it's a couple hours of your time. But real return on investment is how much time and effort did I put to setting this up, the money that I'm spending on it, the tokens that I'm purchasing, all this, and what kind of return am I getting on that investment? So you have to put time, energy, and resources together in our ROI, not just time and not just money all together. So the reason why they're only realizing that 10% of return on investment is because they just started automating and using artificial intelligence on one piece of a standardized process, right? Or one thing. Now look at it from a holistic standpoint of the entire workflow. And if you were to use that, then can you get from 2x to 4x to 6x to 10x, right? Because my future view of artificial intelligence isn't being able to do the same with less or do a little bit more with the same, but it's investing a little bit more to get a lot more. And that is what wakes me gets me up every single day to start working with independent insurance agencies who want the same dream because it is possible, right? How can I invest a little bit more to get a lot more to make myself a lot more sticky, to make myself a lot more valuable, to make my um my agency worth that much more multiple because I'm willing to invest just a little bit. That's and that's what the promise is gonna turn into the reality when it comes to artificial intelligence. Everybody right now is going through the whole same with less. We'll let them all do that. But I can't wait to start working with agencies where we're gonna just do invest a little bit more to get a lot more.

There are no accidents. The agency that we're just starting to work with saw that. And I can't wait to make that reality in their agency so good, Daniel. So much good stuff, gold nuggets. And I hope everybody's taking notes. Time, energy, and resources. That's why it's critically, critically important to have that partner on your team, like Daniel and his team from the AI technology and automation standpoint. When you're trying to figure out should we automate it, should we not automate it? When should we automate it? Is it part of the plan? Is it not part of the plan? Is it gonna be a bunch of noise, aka a distraction, or is it a signal on the way to taking those exponential leaps into the future? Daniel, so much good stuff, man. Thank you so much. I'll I'll give the baton back to you, sir.

Yeah, no problem. So if Mike and I love talking about this every single day. So if you found anything today that you feel would be something that you want to talk about, reach out to us. Find us on LinkedIn, find us on our websites, whatever it is. We love talking about. And if you want to know something about your specific agency in which you want just a couple of gold nuggets of how you can look at your fragmentation and your tools and get the most out of it, please feel free to reach out. Um, also share this podcast, help subscribe, download, do everything you can, rate and review us because the more we can get out to the community, the more we can have good operators meeting with good operators, the more we can all help each other out. And that's what Mike and I are here for every single day. We want to help every single independent insurance agency get more freedom, get more revenue, and get more profit every single day. So I appreciate everybody's time. Thank you so much, Mike, again, for letting us flip the script a little bit. It's kind of fun. Uh changing a little bit. But um, I really appreciate it and I look forward to seeing you next week.

No, you did a great job. Thank you so much.