For service businesses of nearly every stripe, particularly in North America and Europe, manufacturing provides a glimpse into the future. Under unrelenting competitive pressure, they are reexamining the role of operations in creating competitive advantage and asking themselves which clearly differentiated services they can provide and how they can deliver those services to customers as efficiently as possible—and more effectively than their rivals do. Today's leading industrial companies asked and answered similar questions two decades ago, and many executives of service companies now believe that they can adopt the methodologies and tools that have already transformed manufacturers.

Insurance companies are in the thick of this transformation. To be sure, for many years their investments generated revenues that shored up their profits, so they experienced less pressure than manufacturers did to overhaul every aspect of their operations. But when the boom in equity markets cooled off, insurers had to earn their profits by selling products and serving customers—in other words, by running their businesses more effectively. A number of global insurance giants are thus overhauling their service and operating strategies. A few, including Paris-based AXA, are adopting tools and practices pioneered by manufacturers to help them improve the way they deliver...