The Four Stages of Innovation

With a hat tip to Elisabeth Kubler-Ross and her five stages of grief, I've decided that technology disrupts an industry in four stages.


This week, I get a real treat. That's because we at ITL are hosting our third Shaping the Future symposium, which will gather nearly 30 insurance company CEOs on the Google campus for a day and a half that will surely challenge us and make us all smarter about the transformation of the insurance industry. 

I can't know exactly what will transpire -- the magic doesn't happen until we get all that experience and brainpower in one room and start challenging people with insights about game-changing technologies and about how to turn them into disruptive innovations -- but I'll share a bit of recent thinking that will provide a framework for part of the discussion.

With a hat tip to Elisabeth Kubler-Ross and her five stages of grief, I've decided that technology disrupts an industry in four stages. After three decades of watching technology-based transformation, I believe those stages are:

--Denial. This pretty much matches Kubler-Ross' first stage. People think that things will keep going the way they always have just because, well, they always have. Some, at least sub-consciously, may realize that disruption is coming but believe it won't hit until after they retire, so they can avoid facing up to the problem. 

Insurance may not spend as long as other industries in the denial phase simply because so many other industries have come before. It's hard to look at Kodak and Blockbuster and retailers and newspapers and music and... and remain convinced that disruption won't happen.

--Shiny things. Once it becomes clear that disruption is happening, all kinds of things suddenly look like genius ideas. Possibility is everywhere. Too much money chases too few good ideas because it's hard to separate the mundane from the revolutionary. That's how we wound up with and its sock puppet Super Bowl ad back in 2000, even though shipping heavy bags of dog food to homes wasn't going to revolutionize anything.

Insurance seems to me to be mostly in the "shiny things" phase. Just about everyone realizes that change is coming, but most of the insurtech ideas at this point are first-order innovation -- doing some existing thing better than it's been done before, rather than taking a wholly new approach. Yet investors are pledging to throw billions of dollars at the mostly less-than-revolutionary ideas out there.

--Winnowing. Companies often start by generating dozens of ideas, perhaps through a hack-a-thon, and congratulate themselves on their innovation. Or they engage in what I think of as innovation tourism, having senior people spend a week in Silicon Valley and deciding they've done enough to learn about new technologies and trends. Eventually, though, companies realize that no transformation can happen without the CEO's blessing and that the CEO has limited bandwidth. The innovative possibilities have to be winnowed to three to five, with the CEO allocating a set amount of time and funds to nurture and evaluate these possibilities. (If the time and funds for innovation aren't sacrosanct, existing businesses will steal them.)

--Lather, rinse, repeat. Once they realize that they have to winnow the list, companies eventually come to understand that the winnowing is continual. You start to build out the ideas that have promise, but you also have to kill or table the ones that aren't going anywhere. The focus actually has to be on the tabling and killing, because they aren't natural or pleasant, while the building out is, and it's possible to waste an awful lot of money on zombie innovations.

Both my brothers were once professional poker players, and the best advice they gave me before I started playing in a neighborhood game was to look at my down cards realistically (in Texas Hold 'Em) and fold frequently rather than hold out hope for a miracle. It was years before I ever had a losing night, in a group of very smart Silicon Valley executives, just based on that one bit of advice.

Those ideas about the four stages will surely be challenged and fleshed out later this week, and I'll report back to you on what I learned (within the bounds of the confidentiality we've promised participants). 


Paul Carroll,

Paul Carroll

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Paul Carroll

Paul Carroll is the editor-in-chief of Insurance Thought Leadership.

He is also co-author of A Brief History of a Perfect Future: Inventing the Future We Can Proudly Leave Our Kids by 2050 and Billion Dollar Lessons: What You Can Learn From the Most Inexcusable Business Failures of the Last 25 Years and the author of a best-seller on IBM, published in 1993.

Carroll spent 17 years at the Wall Street Journal as an editor and reporter; he was nominated twice for the Pulitzer Prize. He later was a finalist for a National Magazine Award.


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