April 2, 2015
How to Avoid Pitfalls in Insurance Innovation
Insurance innovation requires looking past the latest and greatest technologies -- "proof of value" must replace "proof of concept."
The words “disruption” and “innovation” are in everyday lexicon surrounding many concepts, products and services. At times, it seems almost impossible to navigate the full range of opportunities for insurance innovation. This makes it extremely difficult to make the right choice to adopt a specific technology or strategy to redefine or reinvent a business.
Certainly, budgets are not limitless, and time is scarce. How do we ensure that we invest in the right technologies at the right time and prioritize the investments in proper order? How do we make sure that the opportunity to adopt a new technology is not being overlooked or unintentionally delayed?
Many insurance carriers deployed innovation teams to stay on top of the technological landscape and drive forward-thinking decisions. These teams have done a marvelous job.
Yet, even with these teams in place, most organizations seem to drastically fall behind in adopting the technology early enough to make the most impact. With modern, cloud-based SaaS offerings that can be fielded without internal IT investments, with very little set-up requirements and with lean operations provided by young ventures that drive most of the innovative technologies to the front lines, why do we still find it difficult change?
In a recent article, Steve Blank, a serial entrepreneur recognized for customer development methodology that led to the Lean Startup movement, described two of the most common issues with deploying innovations teams to drive organizational change. The first: making it easy for innovation teams to drive the selection of the right business units to field the solutions as soon as possible. The second: ensuring that the organization separates the execution part of the business, which operates an existing business model, from the innovation business unit, which is modifying the existing model or creating one.
Beyond the Innovation Noise
The key to a successful continuous innovation cycle is looking beyond the hype and the related group think about innovations.
Technologies such as big data, analytics and Drones receive a lot of attention. However, getting full value from them is far from simple.
Big data, for example, interprets information with analytics tools. To derive value from it, however, it is important to identify what purpose is to be achieved, what data is important and where to acquire it — before using the analytics. Experts say the most critical, time-consuming and expensive part of adopting big data comes from the effort required to analyze the business and all of the data sources, so the upfront investment is quite high.
The spotlight on drones often seemingly ignores the limitations of the technology. In certain weather conditions, like wind, rain and fog, the control of the drone becomes challenging, and the video quality drops. In addition, use of drones is highly unscalable, as one operator can only control a single drone within the line of sight.
In addition, satellite imagery can be significantly more effective in collecting real-time aerial imagery of an area hit by a storm, if visibility allows. This is a possible threat as real-time satellite technology becomes more affordable to the masses.
Is there a future in drones? Absolutely, but it will take time to perfect this technology, as the industry is still exploring the right fit in the field. This is where looking outside the box provides the clues that prevent falling into a common innovation trap.
Think Outside the Box, Think ROI
Sometimes, looking too closely at a solution creates a commitment to a technology that has a much longer innovation and implementation cycle than expected. Playing with new technology is always fun, and there is value in being recognized as the first to explore new tools for the organization. However, the goal has to be generating a competitive advantage that provides the highest benefits – the best ROI.
Today’s most important technologies are the ones that can be implemented with very low up-front investments in IT support and employee training and the ones that can simplify or even eliminate the largest, most unscalable and expensive operations.
Technologies that deliver enhancements to existing business processes like mobile tools, real-time video communications, litigation document management solutions and field resource planning and dispatch platforms are easier to acquire and evaluate. These technologies are less expensive and cause less conflict with an existing part of the business. At the same time, they deliver substantial tactical improvements in operations and can be quickly deployed within the necessary workflow.
Larger-scope solutions such as claims management, policy management and billing systems typically require a significant modification or a complete replacement of existing systems. Implementation or upgrade of these systems is a high-risk exercise, while the projected ROI is mostly strategic — long-term efficiency, productivity and other future capabilities.
To assess the value of investment in a specific technology, most enterprises have adopted the Lean Startup model, piloting software before full adoption. There is, however, a significant difference between a proof-of-concept and a proof-of-value approach to identifying the right technologies. Proof of concept starts at the business problem and validates a solution using specific technologies, while proof of value begins by looking for a specific solution to a known business problem. The first validates that the technology works; the latter ensures the investment is worthwhile.
For any organization looking to continuously change and innovate, the right approach is in proof of value – being able to quickly assess and adopt solutions with the lowest barriers, fastest implementation and highest returns.