Many in the insurance industry, no doubt, are anxious to close out 2008, and not look back on what has been one of the most turbulent and, therefore, challenging years for commerce in our lifetimes.
For the majority of our readers, the new year holds something of a paradox: increased turbulence often leads to excessive caution. And for risk-averse insurers, this is especially true. In fact, one of the most difficult decisions an insurer can make is whether to remain focused on wringing full potential from its core customers or instead, focus on courting sources of new potential in new markets. According to Boston-based consulting firm Bain & Co. Inc., the former holds less risk than the latter.
According to Bain's analysis of change within the ranks of the Fortune 500 over the last two decades, 153 of the top 500 either ended up in bankruptcy or were acquired and integrated into another company. Only one in 10 companies achieved sustainable growth over a 10-year period. Bain predicts that over the next decade, 25% of the companies that exist today will disappear, either because they will merge with others or go bankrupt. Regardless of the "why" behind this movement, we already are witness to the spate of insurer and vendor M&A activities, as well as calls for bailouts that have reached global proportions. The odds for new business success are not too favorable in this climate, so it's no wonder that carriers are focused more on survival than on sustained growth.
Yet, the picture for 2009 and beyond isn't necessarily a bleak one-investments in strategies that allow companies to "redefine" themselves improve those odds, reports the consultancy. In fact, Bain found that 85% to 90% of companies that successfully redefined themselves were able to increase the odds of success by a factor of 5 to 10. A core part of this redefinition entails rescuing hidden, undervalued assets. These assets include growth platforms (an orphan product line that has been neglected over time), underutilized capabilities buried within the business (expertise in core products that can be spun out to new products) and customer assets (undervalued segments, untapped influence over the customer and underexploited customer insight). Determining which of these to pursue first and to whom to pitch them comes down to business analytics. In fact, says Bain, more than 80% of the best ideas come from drilling down into the needs of the core customer rather than looking outside for ideas.
Even in the rockiest of economies, the leaders in our industry have done a good job modeling sustained-growth, not just by maintaining a healthy risk portfolio, but by employing a format that taps its core to find success in new markets, new channels or new geographies. Are you ready to redefine yourself?
(c) 2008 Insurance Networking News and SourceMedia, Inc. All Rights Reserved.
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