In my last post, I explored research that shows insurance to be in a “vulnerable” place when it comes to potential disruption
However, if you are with an existing or well-established company, your time in the sun may be fast approaching. Larger, incumbent companies are finally learning the rules of the disruption game, and are coming back stronger than ever.
That’s the conclusion of a new study from IBM Institute for Business Value, which finds momentum for established companies that are becoming disruptive forces in their own right. IBM surveyed 12,800 C-level executives from across a wide range of industries, and found lessons that will help insurance leaders adjust to this new era of technology-driven innovation. Overall, only 26% now think competitors outside their industry “pose a significant source of disruption,” compared to 54% two years ago.
So what’s changed? The IBM team took a close look at the practices of the group farthest ahead of the pack, which they call the “reinventors.” This leading group “report that they outperformed their peers in both revenue growth and profitability over the past three years, and led as well in innovation,” the study confirms. “They say that their IT strategy is in sync with their business strategy and they’ve optimized their business processes to support their strategic intentions. Their organizations aren’t locked in place. Having managed change successfully in the past, they’re confident in their capacity to continuously adapt. Moreover, they have a well-defined strategy to manage disruption.”
If that isn’t enough, the study’s authors observe that these savvy organizations have also “redirected their resources to achieve new sources of scale – broad networks of partners – and extract new value from ecosystems. They’re ahead of all others in co-creation and close collaboration with customers and partners. Moreover, they leverage the data and knowledge derived from close and continuous collaboration to orchestrate compelling customer experiences.”
Thus, as the study finds, two important elements of achieving success in disruption is personalization for customers, along with adopting a “platform” approach to technology-driven innovation. There are challenges to reaching the holy grail of personalization, which likely hit home to many insurance industry executives. “The elegant design of irresistible personalized experiences is of daunting complexity – and not just because it must be orchestrated across channels,” the report’s authors state. “The design of the experience requires deep understanding of what makes individuals human – the motivations, desires, temperament and in-the-moment moods of customers.”
Eight in 10 of the leading companies – again, the “reinventors” – report they’re very effective at uncovering new or unmet customer needs – 43%, versus 25% of trailing companies. “To personalize an experience in the context of the moment – to understand what makes a customer human – reinventors don’t just plumb lots of data, though they do that well,” the report states. “They’re design thinkers. They approach problems with a sense of empathy for their customers, which helps them explore and consider the right questions.” In addition, seven in ten also turn to their partners to better understand the customer experience; and seven in ten analyze their competitors’ responses to customers.
The platform business model – which encourages sharing of resources and co-creation of products – is also helping established companies to become disruptors in their own markers. On average, platform orchestrators grow revenues faster and generate higher profits than other business models, earning market valuations as high as eight times revenue, the IBM researchers find. “In every industry, an intrepid few are venturing onto platforms and, as they do, pulling others fast in the same direction.”
The study’s authors make eight recommendations to incumbent companies to stay on top of their games:
Remain on high alert and avoid complacency about past successes. “Actively scan the business landscape for disruptive change coming from industry incumbents, including those in adjacent industries. Be vigilant about new entrants attracting VC funding that might foreshadow threats.”
Design and play a new offense. “Boldly evaluate, experiment and engage with new business models, industry-shaping platforms and ecosystem strategies that you could adopt to significant advantage.”
Get ever closer. “Create opportunities for frequent and intense interactions with customers, partners and competitors. Test existing assumptions and drive totally new strategies. Commit with frequency.”
Invest for new growth. “Create market-shaping and capability-building investments that inject innovation, new talent and technologies into your enterprise. Acquire these if necessary; grow them organically if your enterprise is agile enough.”
Prioritize advocacy and co-creation over advertising. “Maximize investments that build customer trust and brand value. On digital platforms – which are inherently transparent – community-generated feedback, if heeded well, can boost brand value in unimaginable ways.”
Seek innovation over institutionalization. “Don’t solidify a competitive advantage; it’s likely fleeting. Expect it to be transitory and start working on the next audacious opportunity.”
Write new rules. To create a more open and collaborative culture, look for ways to challenge traditional norms. Put a body into orbit around new systems and try it out.”
Find energy in motion. “Create new motion through continuous innovation but don’t dismiss the potential to benefit from others’ ideas. Find opportunities to co-create with customers, partners and even competitors.”