Safeco’s Alignment Strategy

Two years ago, like the weather in its hometown of Seattle, the prospects for Safeco Corp. were grim. Earnings during the first quarter of 2000 had plunged 88 percent, to $9.5 million, and the insurance company finished the year with just $115 million in net income, down by more than half from the previous year and a far cry from the $430 million it had earned in 1997. Its property and casualty line, the lion’s share of Safeco’s business, posted an $11 million loss that year on $4.7 billion in revenues, its first loss in recent memory. Meanwhile, the company’s share price, which had risen steadily throughout the 1990s to a high of $55 a share in early 1998, had fallen to below $20 by early 2000.

As a result, at the end of 2000, Safeco CEO Roger Eigsti resigned under pressure, followed by most of his top lieutenants. In January 2001, Mike McGavick, a corporate turnaround specialist, was brought in as president and CEO from CNA Financial Corp., where he had successfully resuscitated its ailing commercial insurance division. McGavick set in motion the revamping of Safeco’s strategy. In an unusual twist, the process was to be driven by a new CIO, Yom Senegor, who would also serve as the company’s chief strategist. “The most strategic opportunity in business today lies in technology,” McGavick says, “because of what it enables our work force to do and how it helps us learn about our customers’ needs and issues.”

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