It’s about 1:00 pm on a Friday as I step back into the office to the sound of foosball. Laughter is coming from the lunch room. Instructions to the latest board game are being explained, and friendly competitions are reignited. In the quest for success, as in life, it is important to stop and enjoy the moments along the way. We spend a lot of our lives at work. When we bring play into our day, it can energize us and encourage us to give more of ourselves to tasks. Having fun doesn’t just have to be designated for after hours; why not bring it into the workplace, too? A study by Bright Horizons revealed that 89% of employees with high levels of well-being reported high job satisfaction. Nearly two-thirds of those employees identified consistently putting in extra effort at work. This isn’t surprising. What is surprising is that more leadership is not capitalizing on the economic value of fun. Two years ago, we lost a key employee due to cancer. She was a wonderful person, who was not only good at her job but did much around the office for our staff, our culture and our morale. She grew vegetables for us, surprised us with catered lunches and took tea towels home to be washed. She was always there for us. Shortly after her passing, our corporate culture came off the tracks. It has taken a while to get our mojo back. Leadership listened to our staff for input and engagement. We have made some changes and adapted and tried to ensure that all employees are not only good at their job but are a good cultural fit for our team. We want collaborative and innovative colleagues that reflect our values, and we wanted to bring back the fun to increase productivity. See also: 3 Ways to Boost Agency Productivity   Here are a few ways you can bring more fun (and productivity) into the office: 1. Have lunch together Nothing bonds people like sharing a meal, no matter the circumstances. A 20-year-old design firm in Berlin called Studio 7.5 has a rule that all its employees must have a meal together every single work day. The meal is shared on a communal table. This is proven to bond even the greatest of strangers, who will always open up and relax over a meal or drink. If staff at my company aren’t playing a game, they’re often having lunch or stepping out for a walk. This goes a long way to balancing work and play as well as building relationships. 2. Decorate your office space Whether you are a startup entrepreneur or a big technology firm, find ways to decorate your office space to promote a positive, collaborative corporate culture. Use colors that represent your brand, and design meeting rooms that support creative ideas and brainstorming. Whiteboard walls, digital media and comfortable lounge chairs will facilitate coming together to share and create. If there is a holiday or event, get your team together and make decorating an activity. Take photos and share them on social media so that your team can celebrate the experiences they are making together outside of the daily grind. Baby and wedding showers, Christmas, Easter and even Valentine’s Day are opportunities to brighten up the office with decorations that everyone can enjoy. We have staff from all over the world and welcome celebrating their special holidays, too. 3. Hold staff events Having a unique culture that makes your office stand out will promote staff members feeling like they are part of something bigger than themselves. Plan team-building events such as escape room games, rock climbing or a cooking class where teams can rely on each other to reach success and have fun doing it – we do! Lunch-and-learns are another great way to have fun and advance knowledge of employees in areas they may not otherwise have access to. This shows employees you’re invested in their success, which can pay dividends in terms of employee loyalty. 4. Prioritize fun With tight deadlines and tasks competing for attention, it’s not always easy to prioritize fun. Get events on the schedule and build excitement with emails and at staff meetings. Have veteran staff speak up about how much fun everyone will have at office events. Invest in an air hockey table, lounge space or a weekly game lunch. Getting everyone to relax and enjoy a little downtime during the day will be team builders in themselves. See also: How to Make Insurance Fun So get out, have fun and make memories together. They will be the glue that bonds you together during challenging times and makes you more likely to become successful as a company and a team.

First, let me say that I don’t make a habit out of staying at Ritz-Carlton hotels. But I have had occasion perhaps a dozen or more times to stay at a Ritz while attending a conference. I’ll have to say that, not only did I never experience a problem, but, without exception, each stay was an exercise in indulgence. I’ve also experienced several outstanding displays of excellence in customer service. On one occasion, I was preparing for a workshop and realized that I had forgotten my overhead markers. Stepping into the hallway outside the meeting room, I asked a housekeeper who was dusting ashtrays (really) if she knew how I could get in touch with the A/V people. In many other hotels, I’ve been lucky to get a shrug or Freddie Prinze-ish, “That’s not my job, man.” Not at the Ritz. The lady insisted on tracking down the markers herself (my program was scheduled to begin in minutes) and, remarkably (no pun intended), she returned with a new, unopened pack of markers within five minutes. She had been taught that SHE “owns” any request by a hotel guest. On another occasion, I was convinced there was a shortcut to a meeting room on the second floor (where my sleeping room was located), so I wouldn't have to go down and through the lobby, then back up some stairs to the second floor again. I stopped and asked a guy who was painting some trimwork if he knew how to get to the room. It would have been easy for him to say he didn’t know, but this guy laid down his brushes and escorted me through a maze of corridors to the meeting room. What this gentleman did is the rule, not the exception, at a Ritz-Carlton hotel. If you’ve ever stayed at a Ritz-Carlton hotel, I’m betting that your experience was outstanding, too. (In an independent survey, 99% of Ritz-Carlton guests said they were satisfied with their experience, with more than 80% “extremely satisfied.”) How can they do it so much better than most hotel chains? Yes, you do pay a premium for their services, so we can attribute some of this to a larger budget. But, for the most part, the Ritz does it by creating a corporate culture almost solely devoted to serving the customer. If you spend the night at a Ritz, chances are the person making your bed received more training than you did getting licensed! EVERY Ritz-Carlton employee receives a minimum of 120 hours of customer service training. That’s THREE WEEKS or more of training devoted to one discipline. Most first-year employees receive 250-300 hours of total training. How many of your CSRs have received 120-300 hours of any kind of training? This type of commitment to service and training pays off by allowing the Ritz to charge significantly higher rates for rooms and facilities while developing a clientele that is fiercely loyal. Many people WILL pay more for greater quality and service…the kind of people most businesses would want as long-term customers. See also: How to Enhance Customer Service   The Ritz-Carlton, at the time this article was originally drafted, is the only hotel chain to receive the coveted Malcolm Baldrige National Quality Award and the only two-time winner (1992 and 1999) in the service category. In a study by Cornell and McGill universities, the Ritz was selected “Overall Best Practices Champion” from a field of 3,528 nominees. Let’s take a look at some of the foundational principles of the Ritz: The Ritz-Carlton Motto: “We Are Ladies and Gentlemen Serving Ladies and Gentlemen.” The Ritz-Carlton Three Steps of Service:

1. A warm and sincere greeting. Use the guest’s name, if and when possible.
2. Anticipation and compliance with guest needs.
3. Fond farewell. Give them a warm good-bye and use their names, if and when possible.

The Ritz-Carlton Credo: The Ritz-Carlton Hotel is a place where the genuine care and comfort of our guests is our highest mission. We pledge to provide the finest personal service and facilities for our guests, who will always enjoy a warm, relaxed yet refined ambiance. The Ritz-Carlton experience enlivens the senses, instills well-being and fulfills even the unexpressed wishes and needs of our guests. The Ritz-Carlton Basics:

1. The Credo will be known, owned and energized by all employees.
2. Our motto is: “We are Ladies and Gentlemen serving Ladies and Gentlemen.” Practice teamwork and “lateral service” to create a positive work environment.
3. The three steps of service shall be practiced by all employees.
4. All employees will successfully complete Training Certification to ensure they understand how to perform to The Ritz-Carlton standards in their position.
5. Each employee will understand their work area and Hotel goals as established in each strategic plan.
6. All employees will know the needs of their internal and external customers (guests and employees) so that we may deliver the products and services they expect. Use guest preference pads to record specific needs.
7. Each employee will continuously identify defects throughout the Hotel.
8. Any employee who receives a customer complaint “owns” the complaint.
9. Instant guest pacification will be ensured by all. React quickly to correct the problem immediately. Follow up with a telephone call within 20 minutes to verify the problem has been resolved to the customer’s satisfaction. Do everything you possibly can to never lose a guest.
10. Guest incident action forms are used to record and communicate every incident of guest dissatisfaction. Every employee is empowered to resolve the problem and to prevent a repeat occurrence.
11. Uncompromising levels of cleanliness are the responsibility of every employee.
12. “Smile – We are on stage.” Always maintain positive eye contact. Use the proper vocabulary with our guests (Use words like – “Good morning,” “Certainly,” “I’ll be happy to” and “My pleasure”).
13. Be an ambassador of your Hotel in and outside of the work place. Always talk positively. No negative comments.
14. Escort guests rather than pointing out directions to another area of the Hotel.
15. Be knowledgeable of Hotel information (hours of operation, etc.) to answer guest inquiries. Always recommend the Hotel’s retail and food and beverage outlets prior to outside facilities.
16. Use proper telephone etiquette. Answer within three rings and with a “smile.” When necessary, ask the caller, “May I place you on hold?” Do not screen calls. Eliminate all transfers when possible.
17. Uniforms are to be immaculate. Wear proper and safe footwear (clean and polished) and your correct name tag. Take pride and care in your personal appearance (adhering to all grooming standards).
18. Ensure all employees know their roles during emergency situations and are aware of fire and life safety response processes.
19. Notify your supervisor immediately of hazards, injuries, equipment or assistance that you need. Practice energy conservation and proper maintenance and repair of Hotel property and equipment.
20. Protecting the assets of a Ritz-Carlton Hotel is the responsibility of every employee.

After the financial crisis in the European Economic Area (EEA), life insurance business was significantly influenced by volatile market conditions, low interest rates, pressures from regulatory bodies, changing customer demographics and investment patterns. These undesired economic conditions caused a dramatic increase in the protection gap. The insurance protection gap or underinsurance shows us the difference between the amount of actual need for insurance coverage and the amount that is purchased. This significant gap reached $21 trillion in the U.S. 58% of American families would not be able to cover their expenses just a few months after a loved one from their families passed away. European Union countries are in a similar situation. Sadly, the coverage gap reached $17 trillion in the EEA. Moreover, inequality is widening faster than ever. Current social security systems are strained because people live longer lives and job security is not a given anymore. When we look at other contributors to the protection gap, we see the negative perception about life insurance among customers. Life insurance is found to be very complicated and requires very bureaucratic processes to acquire, and policy premiums are not affordable. So, simplifying life insurance, especially for the new generation of insurance buyers, will be crucial for insurers’ future. The key of success is definitely insurtech! See also: Where Will Unicorn of Insurtech Appear?   When we examine the classic life cycle of a life insurance product, we see five main steps. These are:

• New business and underwriting support
• Agency and distribution management
• Policy admin support
• Claims management
• Shared services

With insurtech, these steps will be converted to standardized, efficient and optimized processes. The necessity for new product introduction will be performed while maintaining consistency and maximum quality in customer services. With insurtech, buying a life insurance policy will be converted to a digital customer experience, and this is a brand new business model. With insurtech, life insurers will:

• create easy-to-understand and non-advisory life products,
• have customer-centricity for creating life products,
• have automated UW (underwriting) decision processes that enable instant decision,
• reach target customers via different distribution channels,
• use predictive analytics to transform business with measurable variables easily and
• provide a high level end-customer satisfaction.

See also: Insurtech Can Help Fix Drop in Life Insurance  Creating a straightforward and informative online journey for life customers, via insurtech, will be the unique solution for the penetration problem that life insurers face.

In almost every industry in the U.S., consumers can easily access price information to shop. There is one glaring exception to this rule: goods and services in our nation’s healthcare system. Why do we accept the concept that it’s OK that we have no idea what the costs will be until after we have received the service? As a result, there is no price elasticity that would normally reward vendors who don’t overcharge and reward innovators that reduce costs while improving quality. Because the market for healthcare is broken, disparate prices bear no relationship to cost and quality. Table 1 shows very common examples of how the same medical procedure can have wild price variations within short distances. Many believe there’s no fix without healthcare price legislation, and recently we have seen some regulations passed and additional measures discussed by our political leaders. But Americans already get consumer-based pricing models in nearly every other industry, and shopping comes naturally to most of us. See also: Is Transparency the Answer in Healthcare?   So why would anyone wait for the passage of special price transparency regulations before requiring their medical suppliers to support a normal shopping experience? According to the Peterson Center on Healthcare, U.S. residents paid over $352 billion in out-of-pocket healthcare costs—along with another $3 trillion in healthcare premiums and taxes—to pay for commercial and government healthcare programs last year. This represents a staggering 10x, or 1,000% more than, what parents paid when baby boomers were teenagers. Unlike in the mid-‘70s, most medical tests and procedures vary in cost by 5–10x within a short distance of home, but very few of us recognize this. When we consider we’re just as likely to get the best care at the lowest-cost facility, you might think that we’d all take a personal interest in how we choose the providers and locations we use to receive “shoppable” medical tests and procedures. Yet most of us don’t. The reason is that the continuing rhetoric among suppliers, legislators and payers—created by the combination of the quasi-regulated environment of healthcare with a third-party, indirect, payer system—interferes with normal market dynamics. Most legislation aiming to mandate some sort of price transparency has simply provided plausible excuses for the industry to say “we use industry best practices” and “we complied.” This provides cover so the industry isn't subjected to the same consumer protection laws that affect goods and services in every other market. What’s actually needed is less regulatory meddling and more free market principles to reward innovations that lead to higher-quality care at lower costs. Rhetoric around “personal mandates,” “lifetime caps,” “pre-existing conditions,” “market stabilization,” “Cadillac tax” and other things that relate only to who will pay for healthcare coverage create a smokescreen that ensures that we never talk about the most basic issue in delivering services to this mass-market – price of medical procedures. Unfortunately, severe unintended consequences were created when many of our state legislators created a set of rules known as Medical Loss Ratio (MLR) rules, and, more recently, these rules have been codified in federal law known as the 80/20 rule. The intended effect was to limit the amount a healthcare carrier could charge a customer in insurance premiums to no more than the actual medical charges plus a fixed percentage to operate the business and provide a reasonable return to shareholders. This type of rule or contract is often referred to as “cost plus.” The unintended consequence is that carriers have no incentive to reduce medical claims, and therefore premiums and out-of-pocket expenses. Regardless of the carrier’s wish to help you, as long as there are MLR rules (a.k.a. 80/20, "cost plus"), carriers have a financial disincentive that makes them likely unable to survive if the amount of spending on medical procedures and drugs dropped substantially. Because research has shown that medical price transparency alone (shopping) could knock more than 50% out of healthcare expense, you can see why some might want to slow the movement to consumerism by continuing to maintain secrecy on procedure prices, while beating the drums of healthcare rhetoric. This approach will keep us ignorant of the root cause of the outrageous cost of care in the U.S. – overpaying for medical procedures. See also: The Search For True Healthcare Transparency   The good news is that more and more individuals have high-deductible health insurance plans, with roughly 36% of all people under the age of 65 currently enrolled in an HDHP. Now there’s a grassroots movement, debunking lies and empowering patients and employers—not lobbyists—to take action. Intuitive decision support tools continue to be adopted by those who want to be able to compare their options for healthcare based on price, in addition to quality and convenience. Eventually, as price-elasticity is restored to our broken healthcare market, we will see a full reversal of the unsustainable cost trends we’ve experienced over the last decade.

Peter Drucker famously said that we can't manage what we can't measure. Now that so many of us are trying to innovate in a predictable and sustainable (in other words, manageable) way, what should we measure? What metrics will let us know whether we're on the right path, while there's still time to pick a different one?

Some smart people weighed in on the topic recently, and I'll summarize them here.

Michael Schrage and David Kiron published a study in MIT's Sloan Management Review that found that only 27% of executives felt that their key performance indicators (KPIs) drove their businesses toward their strategic goals—leaving a lot of room for improvement. The two said many KPIs, having been used for decades, are out of date in today's environment. The authors also said too many are like profitability and market share, which tell you if you met targets in the past but don't help you understand the future.

They suggested a heavy dose of machine learning, sifting through big data, to identify new KPIs that will really move the needle for a business. They speculated that Netflix had no idea that binge watching would become such a phenomenon but quickly spotted the trend and came up with ways to measure bingeing, which led to KPIs that drove efforts to continually make Netflix more addictive.  

Here is an interview with my old friend Michael, with a link to the full report.

Amy Radin also weighed in, in this article at ITL, based on her long experience leading innovation efforts at major corporations and on the work she did for her book, "The Change Maker's Playbook," coming out in September. (I'm such a fan, I wrote the Foreword.)

She notes that traditional financial planning can smother innovation efforts. How can an innovator be expected to produce the precise forecasts that you can insist on from someone running an existing business in a well-understood market? Why would you even ask for such a forecast, given that it provides the corporate antibodies—those that like the world just the way it is—a chance to discredit an innovative effort?

Instead, Amy suggests five questions, including:

• How big is the addressable market? And does it pass the 1% test? In other words, would we be happy if we got 1% of that market? (In my experience, nobody thinks about just getting 1% of a market. 10%, 25%, sure. I've even seen 60%. But not 1%.)
• What would have to be true for this idea to pan out for us?
• What are the main drivers (conceptually) for revenue and expenses? 

In a cynical moment, my frequent co-author Chunka Mui and I once wrote in a book that "marketing is how you lie to your customers; market research is how you lie to yourself." Market research—whatever the reason for its failings—simply can't be as far off as it is now if our innovation efforts are to succeed. Spending a bit of time with Michael's and Amy's work will, I'm confident, help you zero in better on the right questions and the right indicators. You'll measure your innovation work better, and you'll manage it better.

Have a great week.

Paul Carroll
Editor-in-Chief

Across industries, digital transformation and cloud migration are forces to be reckoned with. Insurance is no exception. As an industry accustomed to operating on legacy technology, insurers should approach the cloud migration process judiciously. But they should also know that moving all workloads to the cloud – even if incrementally – is necessary to keep up with evolving customer expectations. The industry at large is receiving this message. Nearly 70% of insurers report they are somewhere along the journey to digitally transform their infrastructure, according to a report from Ensono and Forrester. But the jump from mainframe to cloud shouldn’t take place overnight. By taking a methodical approach and prioritizing the right workloads, insurance technology teams can achieve a hybrid IT infrastructure that allows for improved operations at manageable costs. Here are three guidelines to follow as your insurance organization adopts a hybrid cloud strategy: Prioritize which applications to move first 46% of insurers surveyed in the Ensono/Forrester study cited improving application performance as the most important IT change their company could make to augment customer engagement. But according to IBM, nine out of 10 of the world’s largest insurance companies still run on mainframes. Leaning on legacy technology alone makes it challenging to keep pace with application upgrades and customer expectations for speed and experience. Organizations that remain within a stand-alone legacy environment will have to rely on workarounds to keep upgrading their app performance, and these workarounds will only become more frequent and costly. See also: Digital Transformation: How the CEO Thinks However, moving all operations to the cloud and scaling up overnight isn’t a realistic ask of traditional insurers, either. The transition is expensive and takes months of planning and testing. Instead, insurance organizations should take things slower by prioritizing the applications that require the highest levels of performance as well as most external and third-party connectivity. The basic rule of thumb: Apps that are customer-facing should be at the top of your list. Set yourself up with premium analytics Quality data is central to understanding the needs of agents and customers, but legacy technology doesn’t allow for the best insights. Turning to a cloud or hybrid strategy increases an insurer’s ability to access top-notch, real-time data and analytics, as well as expand into emerging cloud offerings. According to Ensono and Forrester, almost half of insurance decision makers use cloud platforms for advanced data analytics, and about 40% believe it’s important to expand their use of emerging cloud technologies like mobile or internet of things (IoT) and increase reliance on public cloud platforms for systems of engagement. Those systems of engagement need to connect seamless to systems of record. Find the right partners Data analytics clearly play a huge role in the benefits insurers can reap from a hybrid cloud strategy. But a full 100% of insurers admitted to facing data-related security issues, according to Ensono’s study. Whether this is due to outdated IT infrastructure or a lack of expertise, it’s unacceptable to put any data at risk, especially customer data. The right partners can help keep your organization’s data secure while optimizing the right applications for cloud. Mainframes – a true foundation of the insurance business – aren't going away in this process, but they won’t bear the whole burden any more, either. Legacy systems do have their perks, such as security and expense, but ultimately insurers need to ensure they have access to the expertise needed to help their businesses thrive in the cloud. See also: 4 Rules for Digital Transformation The transition to a hybrid IT environment requires re-engineered IT infrastructure, the use of real-time data and insights and the right talent – the kind that can create a flexible and competent IT strategy with a custom balance of legacy platforms and cloud environment. Partners like managed service providers (MSPs), migration services and consultants can make the process much smoother. Accessing third-party support also allows your organization to skip the stressful experience of hiring for internal tech experts in a talent economy suffering from an IT skills gap. The push from customers for faster, better service in insurance continues. But dated infrastructure and an IT talent shortage is holding the insurance industry back. Digital transformation is the only way to achieve growing expectations, cloud migration being the core driver behind the progress. Insurers must thoughtfully design an infrastructure migration plan associated with their application strategy and seek the needed resources to help carry it out, thus ensuring a stabler as well as growing customer-backed future.

According to the Gartner 2018 CEO and Senior Business Executive Survey, respondents who believe their company is an “innovation pioneer” reached a high last year of 41%, up from 27% in 2013. Responders are taking some measure of credit for moving their organizations ahead of competitors in the race for growth and relevance. The Gartner survey findings further reveal that the priorities ranked two through five – including new partnerships and M&A (part of corporate development), new technologies, workforce capabilities and the customer – all presumably enable the No. 1 priority on the C-suite list, which is, no surprise, growth. Add to the priority to-dos an additional leverage point that may be too buried to get well-deserved attention: to develop innovation metrics that monitor and accelerate the conversion of insights and ideas to sources of value for all stakeholders. Neither attempts at defining surgically precise metrics nor peering into one’s crystal ball will lead to helpful innovation metrics. Using legacy performance measures to assess concepts that may have little resemblance to established products and services, or treating innovation as an immeasurable, both turn out to undermine potential opportunities. Only the C-suite is empowered to assign new metrics that can nurture these investments and judge them appropriately, and that may not conform to the standards the entire organization has been taught are right. Choices should have rigor, be reasonable for the evaluation of potentially unprecedented products and services, and be able to hold their own even in zero-sum resource allocation processes. See also: Innovation — or Just Innovative Thinking?   Early in my career, an executive gave me valuable advice, more recently reinforced in conversations with corporate leaders, startup founders and investors as I undertook the research for my book, The Change Maker’s Playbook. Back then, my team and I were seeking seed funding for a new concept. In a presentation to this particular executive, we shared copious financial analyses, including five years’ worth of P&Ls carried out to the penny. He waved aside our spreadsheets and told us, “Don’t seek a level of precision that cannot be possible when you are looking at something so new.” Growth opportunities are put at risk when overly precise and backward-looking metrics, from old business models, are applied to gauge potential impact and measure their worthiness to be moved forward. Instead, executive teams can adopt common-sense approaches to ensure discipline – the right kind of discipline — for evaluating emerging business models. For an early-stage, new-to-market concept, what is most important is to ask the right questions, rely on judgment where facts simply do not exist, seek metaphors from other sectors or markets and accept good enough data that can be refined along the way. Smart questions answered in fast test-and-learn cycles can lead to relevant metrics and keep innovation projects moving closer to success or the set-aside file. Here are five suggested questions to find the right metrics for your innovation initiatives:

1. How big is the addressable market? As soon as the team can characterize the potential audience for an innovation, it becomes possible to estimate how many users and buyers exist. How big is the audience, in your geography, of people who represent the demographics, have purchasing ability and are reachable by your brand? Once you have this estimate, take the 1% test, i.e., would a good result be to earn 1% of the market?
2. What would you have to believe? In the absence of a rearview mirror’s worth of history, better to look forward and envision market, customer, operational and other basics that would need to exist for a concept to appear reasonable. A useful answer to this question assumes the team’s ability to avoid clouding the future view of what is possible with too much knowledge of past precedents that may now be irrelevant. What does the intensity of user reaction to prototypes reveal: Are you solving a functional problem, or are you also hitting an emotional chord with your audience, suggesting a willingness to buy? What breakthroughs can you discern by examining what is happening in other markets or sectors?
3. What are the key drivers of revenue and expenses? In early iterations, set aside the spreadsheets and calculators. Think conceptually about your preliminary assumptions regarding the business model. What appears to be the primary revenue driver? And what do your assumptions suggest about potential expense drivers? Perhaps early on each of these will only be assigned “high” “medium” or “low” designations to indicate importance, but not be any more quantifiable.
4. Can you figure out the unit profit model? Factor in early tests, as you refine your prototype and begin to engage potential users, gathering insight to determine the unit profit model and how comfortable the team is that it can be delivered.
5. What is the potential to scale? With the confidence that you understand unit-level profitability dynamics, test for the path to scale. What will it take to attract each new customer or dollar of sales, for example, and how steep will the growth curve be?

See also: Digital Innovation: Down to Business   “Reframing” is a popular innovation concept. Reframing is simply the ability to set aside beliefs and see concepts with a fresh eye. Executives who are able to reframe metrics stand to increase their organizations’ innovation effectiveness. They will energize members of the organization who are drawn to creating the future because the right metrics can themselves be powerful motivators and enablers.

As the pace of change accelerates, the chances that incumbent businesses will be affected or displaced grows. According to a recent CB Insights report, insurance is one of the top five industries facing disruption risk; 85% of surveyed corporate strategists believe that innovation is critical for their organizations. Yet the vast majority are focused on incremental changes. In other words, while the insurance industry is in the business of mitigating risk, too many insurance companies aren’t taking advantage of innovation to address disruption. A number of innovation myths foster complacency among market leaders. While the myths aren’t unique to the insurance vertical, our industry may have embraced them more fully than others. These myths can be grouped into three main areas: strategic complacency, financial concerns and misperceptions of the innovation process. Over the course of three articles, we will explore each of these areas in detail, starting with strategic complacency. Strategic Complacency Great Changes The insurance industry is at a crossroads. A number of significant trends are converging to change our customers:

• Their behavior,
• The risks they experience,
• The technologies they use,
• And, most importantly, their expectations.

Add to those challenges the changes in underwriting, pricing and service delivery allowed by new technologies and analytic capabilities. Both the opportunities and the challenges presented by the intersection of these trends are significant for senior leadership in all segments of our industry. Yet, too often, the insurance industry hides behind our perception that “insurance is different,” or that “we’re regulated” or that “it’s complicated.” Other industries have faced similar situations, and things haven't always gone well for the established companies, even in a complicated industry computers and software or a heavily regulated one like automotive manufacturing. Some market leaders such as IBM are often written off as roadkill, but they reinvent themselves time and again. Others like Blockbuster mistakenly believe that their position provides them with unassailable advantages and end up either dramatically changed or out of business. In Blockbuster’s case, the high water mark in their valuation was in 1996, the year before Netflix was launched. In 1998, their valuation was 50% of what it had been two years prior. They mistakenly believed that breadth of location and depth of inventory were walls that couldn’t be scaled by the competitive hordes. One thing is certain: The client views his or her needs and wants as primary. That client neither understands nor cares how difficult transformation is, what the backroom challenges are or whether we’re addressing the issues as fast as we can. See also: Innovation Imperatives in the Digital Age    Clients just want to solve their problems now. If the incumbent can’t or won’t provide what the client requests, then the client goes elsewhere. In times of great change, strategic complacency kills. Customer Intimacy Ask any insurer about its strengths, and one knee-jerk response will be, “We take great care of our customers.” If that is the case, why does such a significant portion of our customers respond negatively to the industry and our efforts? Explore customer experience with insurance industry leaders a bit further, and the responses will be more nuanced, perhaps to the point of admitting the poor job the industry actually does. The good news is that some of the problem isn’t our fault. Our industry provides irreplaceable products and services of which we can be rightly proud. We regularly step into the breach in some of the most trying times our customers will ever face. But, thankfully, those events are rare or even nonexistent for the average customer, and many insureds don’t recognize that a valuable service was provided by risk transfer even during a period when they experienced no losses. Insurers’ job is to see the big picture, and to connect disparate facts. We have increasing amounts of data about those customers, which provide insights into behaviors and opportunities. These factors lead many organizations to profess that they deeply understand their customers, and that, when the customer is looking for additional products or services, the insurer will immediately know and develop the appropriate response. Dig a bit deeper, and another story emerges. Perhaps we don’t have the intimate relationship that would inspire those insights. Unfortunately, in many corporate cultures, it is hard to be a dissenting voice on customer intimacy and experience when others are professing the “common wisdom,” no matter how misguided. Finally, both improved customer experience and more intimate customer relationships are difficult, multifaceted problems and easy to put off. Carriers rightly see the relationship as one insurer to many insureds. On the other hand, customers see the relationship as one to one. While insurers think in terms of spread of risk across a pool of clients, customers are only interested in what’s in it for them. In many instances, because of these differing perspectives, the carrier-customer bond is weak. A recent Bain & Co. report said that, worldwide, only half of insureds have been in contact with their insurer for any reason in the past 12 months. The result is that customers don’t have any real relationship with their carrier and are likely to focus on price. Rarely will they share their needs and wants with a services provider with whom they have a tenuous relationship. Strategic complacency can appear when shorthand expressions of customer intimacy and experience prohibit open dialogue on customer priorities, or efforts designed to address problems are short-circuited because of their complexity. Even though insurers have gigabytes of data on their insureds, the data doesn’t translate into information and insight. Lack of Urgency Another myth among insurers is that there is no great urgency to change. Organizations survey the competitive landscape and don’t see any discernible threats on the horizon. There are two primary reasons. First, most innovation efforts are quiet, so insurers don’t necessarily see what potential competitors are doing until a product or service hits the market. Second, many lauded innovation efforts are taking place in lines or niches that don’t appear to be a threat to incumbents. So what if one new insurer is writing usage-based insurance for the gig economy, or another specializes in coverage for renters? Either those aren’t lines of business that “real” insurance companies want to write, or they aren’t a key component of the carrier’s book. See also: Digital Innovation: Down to Business   The insurance innovation landscape is large and convoluted. Most early innovation efforts are small, and the “signal” is easily mis-categorized as noise. Because of this, potential competitors and collaborators are easy to miss. But the lack of urgency is a key factor in Harvard Professor Clayton Christensen’s seminal work on industry disruption. His model states that innovators find a segment of unserved or underserved consumers that represent low profit potential. These startups then offer an inferior product or service to these consumers. It doesn’t have to be perfect because these consumers aren’t being appropriately served prior to the innovator’s arrival. The crude nature of the solution is derided by incumbents, because their customers “wouldn’t want to purchase something that limited.” Because the unserved or underserved segment is low-profit, and may have other undesirable characteristics, the market leaders have no urgency to respond. But while the existing players ignore or disparage the newcomers, the disruptors refine their offerings. Once innovators win the low-profit segment, they move upstream by repeating the process with more profitable and desirable customers. Often, by the time established industry players figure out that they are under threat, it is too late to reverse their fortunes. Guy Fraker, chief innovation officer at Innovator’s Edge, says, “Ignore this innovation activity, whether from incumbents or new entities, at your peril.” This lack of urgency, and the willingness to either accept as fact, or blithely repeat, mistaken beliefs and put off difficult, needed changes to address customer problems contribute to strategic complacency. Recognizing these problems and opening dialog within your organization is a key to formulating a strategic response to the onslaught of changes affecting the insurance industry. The next post will further explore common myths with a focus on financial concerns surrounding innovation.

If you want to know why insurance companies need electronic signatures and document management, you must first look at the regulatory landscape. In the past 10 years, this climate has changed considerably, and most insurance companies are struggling to do one of two things to handle these changes: 1) make internal policies to comply with these changes without sacrificing profitability; and 2) find creative ways to outpace competitors looking for the same solutions to these problems. Neither is an easy feat. The National Association of Insurance Commissioners (NAIC) has even devoted a large portion of its industry report to addressing one of the myriad ways insurance companies are striving to transcend regulatory difficulties—through the efficiency of the internet. This is a major reason why insurance companies need both electronic signatures and document management. Used separately, they are ineffective at delivering that the solutions insurance companies need. Together, their interplay makes navigating regulatory changes easy, especially those administered and upheld by the Federal Insurance Office (FIO) and NAIC. Understanding E-Commerce and Insurance Sales Problems Most states in the U.S. require those applying for insurance services over the internet to complete an electronic signature, whether it is used as a standalone technology or integrates with document management technologies. Although the approach may seem like common sense, its advent does away with the use of a witness or notary and brings into question the legitimacy of signatures. See also: The Most Valuable Document That Money Can Buy   Despite digital signatures being more efficient (after all, if e-signatures existed in 1776, all 56 U.S. delegates could’ve signed the document on the day our nation was founded; instead, it took roughly a month to collect all the signatures), they require additional authentications. This can be automated by document management tools. Legitimizing Electronic Insurance Applications ACORD, the Association for Cooperative Operations Research and Development, achieved this automation by making digital forms available on its domain. Application of electronic signature technology situated in document management solutions just needs to be applied during the final stages of the process. Why the Need Is Paramount Above all else, these are the features that create an effective interplay between document management technologies and electronic signatures. Authentication Procedures Inclusion of a KBA challenge question helps authenticate the digital signature process. This ensures that the party attempting to sign a document is who he or she says he or she is. IP Address Verification IP address verification is an extra layer that can bolster the legitimacy of a signed document if a legal dispute over its authenticity ever arises. Form Fill Automation There are new and exciting ways to automate the form fill process for recurring client-based and document related processes. Zonal OCR makes this possible, eliminating manual processes and reducing document workload to a bare minimum. See also: E-Signatures: an Easy Tech Win   Bar Code Authentication Although a bar code authentication in an electronic signature should never be a standalone backup, it does add a layer of legitimacy. A bar code is a stamp of individuality that reveals its purpose and origins quite clearly. Ensuring Data in Documents is Unaltered It becomes obvious that electronic signatures are more useful if applied through document management technologies, as these technologies ensure documentation is not altered. What’s more, the role-based user permissions of a document management system can trace who changed what within a system, ensuring that those who alter data without authorization can be held accountable for their actions.

Anyone who thinks innovation is about an "aha" idea, the best partners or great talent should take a look at this article on the history of General Magic. 

It had the best idea, essentially designing an iPhone 6 in the early 1990s. It had the best partners: Founded by Apple, the company had all the major telecommunications companies as investors, from AT&T on down. The talent was off the charts. General Magic was run by the stars of the original Macintosh team and included others who went on to develop the iPod, iPhone and the Android and, as if that weren't enough, to found Nest and even eBay.

Yet the company sold only 3,000 units to what executives acknowledged were friends and family and burned a $100 million hole in the ground. 

Students of Silicon Valley history will note that this epic bust occurred during the interregnum at Apple, after Steve Jobs was forced out in 1985 and before he returned in 1997. But the genius theory of innovation doesn't explain the problems at General Magic, either. In fact, the problem was that there were too many geniuses at the company.  

Guy Fraker, our chief innovation officer, says people often think that innovation means thinking outside the box. In fact, he says, innovation efforts need a box, to focus people on the right customer need, the right technologies, the right costs and so on. The trick is to frame the box the best way possible.

"A disparate innovation collection lacking a clear mandate, shared focus and unifying goals," Guy says, "results in a more chaotic, minimally effective launch and problems with scaling."

And the General Magic effort was as disparate a collection as could be. At a time when WiFi didn't exist, when the Internet was still in its formative stages, when few people were even using email -- and were using faxes that had to somehow be integrated with the mobile phone being designed -- General Magic was trying to do everything at once.

There was no box in sight. In fact, many of the later innovations by team members at General Magic occurred because someone put a box around a particular problem and solved it. The iPod, for instance, occurred because Jobs wondered whether he could put 1,000 songs in someone's pocket. 

I still love the General Magic name. It drew on the Arthur C. Clarke quote that "any sufficiently advanced technology is indistinguishable from magic," combined with the belief that in the tradition of General Electric and General Motors there was now room for a General Magic. 

But it's a harrowing example of how not to innovate.

Cheers,

Paul Carroll
Editor-in-Chief