July 5, 2017
Innovation: ‘Where Do We Start?’
by Guy Fraker
Here is a framework that focuses on the key question: Which insurtechs will feed my strategy to grow ___ opportunities?
Before “insurtech” becomes the next over-used buzz-phrase to hate, let’s step back for a moment and consider the truly unprecedented scope of opportunity for growth facing those in the various risk management sectors who embrace the inevitable reinvention of this trillion-dollar industry.
As the whirlwind of start-ups and innovation occurring across insurance business models evolved into viral global gold rush, many existing insurers and VCs still struggle with how to participate. Many who understand the reality of disruption as a means of growth struggle even more with the most basic questions:
- Where do we start?
- Do we have the expertise?
- How can we pick the best among the thousands of startups and “smart-ups?”
Most of the established firms I coach are consistently surprised by two lessons learned that have been captured at some point after working through these key strategic questions.
First, they are surprised at the ease with which they were able to answer the one question that can be truly paralyzing: “Where do we start?” Second, they often voice relief at how easily the rest of the core, up-front answers seem to just fall into place. These experiences can be distilled down to a rather straightforward single question: “How do we get unstuck?”
See also: Insurtech and the Law of Large Numbers
Two timeless bits of wisdom can provide the first steps toward converting chaos into actionable clarity:
- A picture is worth a thousand words. Frameworks and models do help create clarity.
- A little education goes a long way. This is code for: check as many assumptions as possible at the door and ask, “What if..?”
Here are some pictures that can be useful:
Insurtech Landscape by AGC Partners
All three frameworks for understanding insurtechs are solid models by which an audience, subscriber group or client company can gain greater insights. But insurance companies, venture capitalists and regulators need to understand how to use them.
The insurtechs in these models represent but the center of a much larger landscape of forces requiring consideration if you want to be an insurer that defines the rules that all others will have to follow.
The reinvention of insurance is simultaneously happening from the inside-out (insurtechs) as well as from the outside-in (exponential technologies). In other words, insurtechs are revolutionizing HOW insurers will manage risk and consumers. Exponential technologies will fundamentally redefine the WHAT—i.e., the very risks that insurers manage.
Now, this raises an important question: How do we define these larger external forces? One organization influencing many of these breakthrough, or exponential, technologies is Singularity University in Sunnyvale, CA. Singularity U coined the phrase “10(9)” Opportunities.” These are opportunities to leverage a technological capability, or domain, to improve 1 billion lives (9 zeros) within a single decade.
Some may question whether this vernacular is more aspirational than attainable. But among the best-kept secrets in the insurance industry is the reality that exponential markets waiting to be discovered outnumber those currently being addressed by existing insurance product lines. So, here is a possible goal: “By year-end 2027, we will have grown by improving the lives of 1 billion or more people by creating products that leverage the technological application of___________________.”
Incumbent insurers must understand how these converging forces relate to discover clarity and scalable growth. A short list of essential questions leading to viral growth strategies needs to include: Which insurtechs will feed my strategy to grow _________ opportunities?
These types of questions can map the insurtechs within the industry and near term to the longer-term, much broader landscape of opportunities. Clarity of these exponential forces—then mapped back to the products, services, and new business models among insurtechs—will open the door to achieving four significant deliverables:
- Improve the solicitation, selection and vetting of new ideas generated internally and collaboratively;
- Improve the returns on early-stage investments;
- Improve the vision, focus and identification of M&A opportunities;
- Improve the expectations and returns on new products and services developed and launch by internal innovation teams.
The world outside of insurance looks into this industry with skepticism with respect to innovation. What is so often misunderstood is that three of the most significant societal shifts of the past 200-plus years were essentially enabled by insurance innovation: homeownership in the late 18th century, the viral adoption of the car and advances in medical treatments as an outgrowth of adoption of health insurance. The DNA for exponential innovation resides within this industry.
Seeing insurtechs as a means to fulfill a longer-term innovation strategy is where the opportunities are being discovered by those who will lead this industry for decades to comes.
To provide feedback, ask for additional information or learn how to apply these concepts, contact Guy Fraker, firstname.lastname@example.org.