The Affordable Care Act “pay or play” penalty under §4980 now, after a delay, takes effect for large companies in January 2015 and for smaller companies (with at least 50 employees) a year later. There is a great deal for all employers to do now to get ready. Here are the 13 steps you should take now: 1. Know Your Workforce and Proper Worker Classifications ACA decides what rules apply to which businesses or health plans based on the number of employees a business is considered to employ, their hours worked, their seasonal or other status and other relevant classification. Rules vary in the relevant number of employees that trigger applicability of the rule and how businesses must count workers to decide when a particular rule applies. While employers historically have collected and retained the names, place of residence, family relationships, Social Security number and other information about employees, these requirements will continue to expand dramatically.

An article in Business Insurance(http://www.businessinsurance.com/article/20140521/NEWS03/140529962?tags=334%7C342%7C58%7C339%7C257%7C74) describes how a speaker at a conference said productive gains justify company-sponsored wellness. He was quoted as saying, “Many employers have implemented disease management programs to try to control health care costs, but the big savings are elsewhere.”   His “elsewhere” is  productivty gains. Whenever I hear someone make a claim like that I ask one simple question: if an employer is having productivity gains, then are its wages as a percent of sales declining? I’ve asked that question dozens and dozens of times. Not one person has ever said they even looked at that most obvious measurement of true productivity gains…not one. When discussing productivity gains, the only valid measurement is declining payroll or wages as a percent of sales. After all, if employee productivity at a company is up, say, 10%, the employer should need 10% fewer workers

Since about 1980, healthcare “experts” have been getting a tremendous amount of attention with claims that patients need to be better educated about their health and more “engaged." Let’s review a little history and see how that plan has worked. Around 1975, healthcare spending and insurance premiums started surging about 12% 15% per year. Those spending increases spurred the development of health maintenance organizations (HMOs), preferred provider organizations (PPOs) and other forms of managed care. A common word to describe those spending increases was “skyrocketing.” “Experts” thought that better-educated consumers would help contain rising costs, so, starting about 1980, companies started flooding their employees with brochures, information packets of various levels of glossiness, paycheck stuffers, break-room posters, table tents, meetings, health fairs, etc. But employees didn’t get much use out of that education (read: ignored it), and it certainly was not effective in changing consumer speeding habits. Starting in the 1990s, companies additionally set up or “rented” websites, both intranet and Internet, where employees could access health information. Problem is: Employees rarely accessed them. In the 2000s, companies started setting up special Internet sites for employees, ones that included employees’ personal health information. Sounds terrific, right? Just what the doctor ordered, right? The problem was: Few employees used such sites. Some were very expensive, but one in a hundred workers -- or fewer -- ever used them. Even fewer used them more than once. The truth is that employees have never trusted their employers or its agents or insurers for health information. Where do they want to get health information? From their doctors, of course. Wellness became popular as a way to drive consumer education and “engagement” (whatever the term “engagement” means). When employers began to realize that was not working, they typically changed wellness vendors. When that failed (predictably), employers tried to provide incentives to employees to become educated and “engaged.” After more failure, employers moved to the latest iteration: coercive wellness and education programs. But if all the other iterations of wellness-style employee education worked so well, why coerce employees? My prediction: The end is near. Big penalties designed to improve employee “engagement”? Gimme a break. Coercion leads to more distrust, lampooning, disloyalty, unionization, etc. Look at the mess Penn State created, or CVS. What were they thinking?  Perhaps this: The beatings should continue until morale improves. Or, as Al Lewis and Vik Khanna say in Surviving Workplace Wellness, employers are going to make their employees happy whether they like it or not. Alas, lately I’m seeing a resurgence in 1) the notion of flogging employees until “engagement” improves and 2) a new concentration on more gimmicks to educate consumers/patients. Using coercion to improve employee engagement?  Have HR executives gone off the deep end? Hmm. Makes you wonder.

All great performers are highly disciplined. Look no further than to Hall of Fame athletes, who often reflect on their careers and understand that self-discipline was an essential ingredient to their success. Improving your self-discipline will have a profound impact on maximizing your potential. Consider these 10 tips:

1. Set attainable goals: Start small and set yourself up for success.
2. Make them your priority: Design your daily life around taking steps toward achieving the goals you have set.
3. Reward yourself: When you meet a goal, treat yourself to something you love.
4. Involve others: Turn to those you trust and who care about your success. If you are now accountable to them, not just to yourself, you may find that you are more motivated to stay the course.
5. Come up with a phrase that will be your reminder when things get tough: Practice self-talk. Something like “keep going” or “yes, I can!” might work well.
6. Strengthen your inner focus: Spend some time each day or week on an activity that requires quiet focus.
7. Don’t stop because of setbacks: If you slip, don’t let that be an excuse to quit altogether.
8. Avoid distractions: Until you are in a stronger place with your self-discipline, avoid people or places that will derail your efforts.
9. Get on a routine: The power of a routine cannot be overemphasized. It creates a flow to your day that you will soon find yourself addicted to.
10. Eliminate excuses: Do not allow yourself to make an excuse for missing a single day in working toward achieving your goals.

“A commodity is any good, service or product that can be produced by any number of firms, and the only distinguishing feature between these firms is who can do it the cheapest. Having your service or product being turned into a commodity is no fun because it means your profit margins will become razor thin, you will have dozens of competitors and all you can do every day is make that product or service cheaper and sell more of it than the next guy, or die.” from Thomas Friedman’s book, The Lexus and the Olive Tree. How competitive is your business? What are you doing to separate yourself from the competition? Seth Godin talks a lot about being remarkable so that you stand out like a purple cow. What would happen if you saw a purple cow? You would stop and take notice, wouldn’t you? Are you asking the same questions your competition is asking? If so, you will never differentiate yourself. When you act and sound like your competition, the prospect or customer will always gravitate to the cheapest price. The best way to get to the core of your prospects thought process is by asking questions that allows them to think about their key issues differently. When prospects think about their key issues differently, the solutions become obvious. Stop telling your prospect or client what your product or service will do for them. Ask them! Let me share with you a couple of examples: Commercial Insurance: "What strategies have you implemented that will reduce your exposure to risks you may be unaware of?" Investment Adviser: "What steps have you taken that provide you with fiduciary risk protection?" HR Consultant: "What ideas or strategies do you have to reduce key employee turnover and increase employee satisfaction?" Asking this type of a question allows the prospect or client to come to his own conclusion. Stop telling. Stop doing a feature dump all over your prospects. Start asking what I call “opportunity questions." It is easy to create an “opportunity question." Take the problems that you solve or the pain you eliminate and create a question. With each one of the questions above I have identified a key problem and created a question. Recently, I was listening to The New Business Podcast by Chis Ducker. He talked about how, when he started out, there was a ton of competition. He wondered: How am I going to build this business with so much competition? Then he realized there was no one like him on the planet. That was his competitive edge. I have said this for years. You are the product. People buy from you. Yes, you may represent a company or brand, but, at the end of the day, if people didn’t like and trust you they would buy from you. It’s that simple. So the question then becomes… What can you do to be remarkable and stand out. It’s in the details. It’s the small things that you do in life that make the big difference and make you remarkable. Three Strategies You Can Implement Now Show up on time Example: I had an appointment last winter that depended on my being there. We were in the middle of a snowstorm. On a good day it would have been a 35-minute drive. I left an hour and 45 minutes early to make sure I wasn’t late. It took me about an hour. I was 45 minutes early. To many people, that seems like a waste of time, but I got caught up on email and got ready for the appointment. No matter where I go, I always have something with me to do. Follow through When you tell someone you are going to do something, follow through. Example: A while back, I got a call from a sales rep. What he was selling was very interesting and would help my online business. At the end of the conversation, I told him I was interested. Could he email me something and follow up. “Sure.” Last week, I received another call. No email. I checked junk mail. I checked everything because I was interested. “Please send again.” To this day, I have received nothing. Say thank you in style Send hand-written thank you notes. I know what you are thinking. I don’t have time. Email is faster. My handwriting is terrible. But you don’t have time not to send handwritten thank you notes. What would happen if you sent one thank you note a day Monday to Friday over the next 12 months? That would be 260. That would cost you a few hours a year, but wouldn't that make you look remarkable? Wouldn't handwritten notes make you stand out? In the 24/7 fast pace world that we live in…of course you would stand out. So, go the extra mile. Do more than you are paid for. As Zig Ziglar says, “There are no traffic jams when you go the extra mile.” Are you going the extra mile to stand apart from the competition?

In 2008, a state-of-the-art driverless car could go two blocks on its own on a closed course at 25mph. By 2012, the driverless car could operate in real-world conditions at 75mph. Such rapid progress offers great hope that the tremendous benefits in safety and savings I laid out in Part 1 of this series are attainable. The pace of progress also means that the disruptive ripple effects discussed in Part 2 might soon have strategic relevance for companies participating in the multi-trillion-dollar part of the economy that relates to cars. But we’re left with two crucial questions: How soon could the driverless car become a reality? When should incumbents, venture capitals and entrepreneurs start paying serious attention? The short answer to both questions is: sooner than most think. This article explains why. When estimating technology adoption, it is wise to remember Paul Saffo’s admonition to “never mistake a clear view for a short distance.” No matter how powerful a technology is, there are numerous factors that stand between technical viability and widespread adoption—cost, usability, customer acceptance, business models, entrenched interests, regulations and so on. In “Unleashing the Killer App,” Larry Downes and I described the crucial dynamic as the Law of Disruption. As illustrated in the figure, technology improves exponentially, but social, political and economic systems tend to change incrementally. Only when the differential between existing conditions and what is technically possible becomes large enough are human systems jolted into disruptive change. These jolts are the openings for “killer apps,” new goods or services that are so compelling that they catalyze a new generation of products. VisiCalc, the first spreadsheet, was the killer app for personal computers. Mosaic, the first browser, was the killer app for the World Wide Web. The iPad was the killer app for tablets. Let’s look at the adoption of the driverless car through the lens of the Law of Disruption, to see both how advanced the technology is and what social, political and economic systems might delay the “killer app” jolt. Technology is the easy part. There’s ample evidence that driverless technology from Google and others is already better than many drivers. For instance, here is a riveting video of a 95%-blind man “driving” a Google car. Keep in mind that the video is more than two years old. The car’s progress has continued at the exponential rate illustrated in Figure 1 and will even accelerate once significant numbers of cars reach the road. That’s because, while we humans learn almost entirely from our own experiences, every Google car can learn from the experiences of every other Google car. Blanketing the roads with Google cars will also provide incredibly detailed, up-to-the second information to the “cloud” about road conditions, traffic and travel times. Each car will draw on that information and know to be extra careful at dangerous intersections or know, say, that black ice was felt at a certain spot 15 minutes earlier. With progress so rapid, the technology in the Google car has miles and miles of open road in front of it. Even skeptics seem to believe that the question about the timing of the driverless car is less “if” than “when.” But the social, political and economic systems that could act as a limiting function on “when” are significant. Consider some of the commonly voiced hurdles: The car will cost too much. Estimates are that each Google research car costs more than $300,000. This means, as BusinessInsider noted, that it costs more than a Ferrari. Prices anywhere near these levels will keep the car out of reach for mass adoption. Customers won’t buy it. There is a widespread sense that most customers would never give up their spot in the driver’s seat, or trust a driverless car. One reader, @jackarmstrong, brilliantly captured this zeitgeist in his comment to Part 1 of this series:: For most American drivers, the car is our “iconic dream machine,” and our personal freedom and status statement. Americans dream about cars, and “no” able bodied person “dreams” to be  “driven,” by “robot cars,” no matter how persuasive the stats appear on paper. There’s too much liability. In our litigious society, car makers would never offer products that took the human out of the loop and thus shifted the liability for accidents to themselves. Legal liability for car makers could be huge if a malfunctioning car injured or killed people. The car violates current business models. As I laid out in Part2, the driverless car has enormous ripple effects across a number of industries—some of which are quite dire. It could be in car makers’, car dealers’, insurers’, taxicab associations, etc., best interests to delay driverless technology as long as possible. Reader @Jacob Haynes articulated this issue well: It is not Google that will sell this technology to consumers, it is auto manufacturers. Sadly, no auto manufacturer will sell a technology that will decrease the number of times cars are wrecked and that will make it easier to share cars. Also, in the short term, it might be more prudent for car makers to market driverless technology as expensive options to existing designs, rather than to take Google’s disruptive approach. The transition would take decades. The fleet of cars on the road turns over roughly every 10 to 15 years, so even if driverless cars were in production today it would be many years before they dominated our highways and started delivering the promised benefits. If the driverless car takes that long to matter, it might never happen, or at least not happen in our lifetimes. After all, we’re still waiting for our Jetsons-like flying cars. My sense is that even under incremental-change scenarios, some of these hurdles would dissolve rather quickly. Cost is the easiest to address. The components on which the driverless car depends are improving at the speed of Moore’s Law. Following Moore’s Law, a gigabyte of memory cost $300,000 in 1981 but less than $10,000 a decade later, less than $10 a decade after that and less than 10 cents today. From $300,000 to a dime in three decades: That’s the trajectory that the electronics in the driverless car are on. Cost will also decrease as developers optimize their designs for production, as opposed to building prototypes. Personal habits would surely slow adoption, but people could come to trust the cars as evidence of effectiveness piled up. New drivers, immersed in computing technology since birth, might be more trusting than older drivers. After all, lots of people used to be scared witless about flying, but that issue has largely faded. There’s already evidence that young people are much less interested in driving than those of us of a certain age were. It seems that being able to connect via Tumblr and Facebook reduces the need to actually drive somewhere and meet a friend face-to-face. And it might be that aging baby boomers, raised with a love of cars and independence but faced with diminishing driving abilities, would embrace driverless cars as the best of the options available to them. The liability issue is trickier—computers are completely capable of flying planes, including takeoffs and landings, yet, for liability reasons, every commercial flight has two humans in pilot’s seats. A study by Rand Corp. concluded that existing liability case law “does not seem to present unusual liability concerns for owners or drivers of vehicles equipped with autonomous vehicle technologies.” Instead, the study predicted the decrease in the number of accidents and the associated lower insurance cost would encourage drivers and auto insurers to adopt the technology—unlike with airplanes, where deaths are rare, there are tens of thousands of preventable deaths in cars each year. The same study did predict that manufacturers’ product liability would likely increase and that this might slow the introduction of the technology. The Rand study suggested, though, that government might intervene and mandate self-driving cars if they prove to be half as safe as Google claims. After all, almost 370,000 people died on American roads between 2001 and 2009 and millions more were injured. I can think of three plausible scenarios that, based on the compelling societal benefits and business opportunities, might jumpstart adoption. (Please add your own in the comments section below.) 1. Google Fiber Redux. Google is the most likely player to put hundreds or thousands of driverless cars on the road to prove their effectiveness and clear away short-term hurdles. Google has a tradition of having its employees use its prototype technologies, a practice known as “eating your own dogfood.” Given recently passed legislation in California legalizing driverless cars (with backup drivers), Google might deploy hundreds of Google cars to chauffeur Googlers around the state. Google could quickly log millions of miles and accumulate mountains of evidence on the safety and benefits of the car. (According to various news reports, the Google car has thus far been hit twice by other drivers and once caused a minor accident—while under the control of a human driver.) Google could then move to pilot the technology at a larger scale, perhaps in Las Vegas, because Nevada has also approved the car. Google could use its deep pockets to invest in the necessary infrastructure, take the liabilities issues off the table (by essentially self-insuring) and make the cars available in Nevada at competitive prices. Such an effort would mirror the Google Fiber strategy in Kansas City to demonstrate the viability of high-speed fiber networks to the home. 2. The China Card. Although there are too many imponderables and cross-industry conflicts to imagine that the U.S. federal government would get involved any time soon, one can imagine scenarios where more interventionist governments, like China’s, might intervene. China has greater incentives to adopt driverless cars because its rates of accidents and fatalities per 100,000 vehicles are more than twice those of the U.S., and its vehicle counts and total fatalities are growing rapidly. In addition, the Chinese government could be motivated to accelerate the adoption of driverless cars because of the trillions of dollars that it would save by building fewer and narrower roads, by eliminating traffic lights and street lights and by reducing fuel consumption. And then there is the competitive dimension. A driverless car initiative would fit into several of the seven strategic industries that the government is supporting. Chinese researchers have already made significant progress in the arena. And, of course, if China perfects a driverless-car system, it could export that system to the rest of the world. 3. The Big Venture Play. In this scenario, a startup steps into the market to launch a large-scale, shared, driverless transportation system. While this might appear to be the most outlandish of the three scenarios, the outline of a profitable business case has already been developed. The business plan was designed by an impressive team led by Lawrence Burns, the director of the Program on Sustainability at Columbia University’s Earth Institute and former head of R&D at General Motors. The plan is based on expert technical and financial analysis and offers three sustainable market-entry strategies. For example, the team did a detailed analysis of Ann Arbor, MI, and concluded that a shared-driverless system could be fielded that offered customers about 90% savings compared with the cost of personal car ownership—while delivering better user experiences. Analysis of suburban areas and high-density urban centers, with Manhattan as the case study, also yielded significant savings potential and better service. Such dramatic results promise tremendous business opportunities for a “NewCo”: This is an extraordinary opportunity to realize superior margins, especially for first movers. In cities like Ann Arbor, for example, NewCo could price its personal mobility service at $7 per day (providing customers with a service comparable to car ownership with better utilization of their time) and still earn $5 per day off each subscriber. In Ann Arbor alone, 100,000 residents (1/3 of Ann Arbor’s population) using the service could result in a profit of $500,000 a day. Today, 240 million Americans own a car as a means of realizing personal mobility benefits. If NewCo realizes just a 1% market share (2.4 million customers) in the United States alone, its annual profit could be on the order of $4 billion. NewCo’s Business Plan explains how this idea can be realized quickly, efficiently and with effective risk management. There are, of course, many assumptions built into such plans, but my review leads me to believe that it is a robust platform for serious exploration: In some form, the driverless car is coming soon.

Around the world, men of working age carry the burden of suicide. In the U.S., suicide is the second leading cause of death for men ages 25-54. Men take their own lives at four times the rate of women. Because just about all of these men are working, were recently working or have family members who are working, the workplace is a prime place to make suicide a health and safety priority. This week, as Men’s Health Week is celebrated internationally, here are some ways business leaders can help tie in messaging about mental health to help create a resilient workforce. Men's Health Week advocates that the best way to improve male health is to tackle the most important health issues relevant to men, and mental health plays a big role in men’s overall health. As workplace leaders, we should investigate how job stress and workplace environments contribute to or protect from mental health challenges. According to a groundbreaking and provocative book by internationally renowned clinical psychologist Dr. Thomas Joiner called Lonely at the Top, men appear to enjoy many advantages in society that should give them protection from mental health challenges, but often do not. On average, men of working age have greater incomes and more power and experience a greater degree of social freedom than women or than males at other times of the lifespan. However, many men pay a high price for the pursuit of all that success. Too often, men take family and friends for granted in the chase for top rank and ambitious goals and find themselves alone when hard times hit. As a result, many turn to maladaptive coping like prescription drug and alcohol abuse, affairs and other forms of self-destruction, which in turn can fuel cycles of increasing depression and anxiety. As one book reviewer states, “If there is one thing we know it’s that whatever society rewards is what you will see more of. Have you seen the Forbes list of the 500 foremost people who provide love, friendship, support and laughter in the world? Nope.” In the never-ending chase to bigger, better, more, business leaders often encourage this damaging pattern, and many top performers end up burning out or worse. Instead, by encouraging wellness and relationships, leaders can help their talent keep up the levels of productivity so necessary in the long term. Resources for men’s mental health are few, and many are ineffective because many men don’t find them relevant. Recently, an innovative resource has emerged that gives men an opportunity to understand their distress in new ways; self-assess for levels of depression, anxiety, substance abuse and anger; and create a blueprint for change. This tool, called Man Therapy, uses humor to cut through social barriers and get men talking, thinking and supporting each other when stress becomes unmanageable. What can workplaces do? Here are six things to do: -- Promote the Man Therapy program through newsletters, social media and more. Several compelling videos can help with this, and they can be found here. -- Train employees on how best to identify people in emerging distress and link them to qualified help before the situation becomes overwhelming. For more information, visit WorkingMinds.org. -- Host lunch-and-learn brown bag presentations on mental health topics as part of your overall wellness program. -- Audit policies to see if yours is a “mentally health workplace” – more here. -- Provide tools to help employees screen themselves (e.g., “Workplace Response”) for mental health conditions – more here. -- Find ways to reward emotional intelligence, mental wellness and community service to help create a sense of belonging and meaningful purpose at work. Take time to focus on men’s mental health during Men’s Health Week – it might not only improve morale and productivity at work; it might just save some lives.

In today’s world, technology is making everything easier, more efficient, and less expensive. Unfortunately, one area where technology efficiency has not impacted the insurance industry is in the active use of electronic signatures for applications and other forms. This is unfortunate, as significant productivity gains and expense reductions can be achieved by the widespread use of electronic signatures for most insurance transactions. While many agents and brokers have heard of electronic signatures, some questions still remain. Is a digital signature truly legal? Will it hold up in court? Are cloud-based digital signatures secure? What choices do I have for e-signing documents? Workflow improvement Consider how a simple insurance agency workflow—getting an application signed—could be improved with an electronic signature process. The basic workflow steps currently look like this:

1. Agency staff inputs application information into the agency management system.
2. The ACORD application is generated by the system and is probably printed as an electronic PDF file.
3. The electronic application is sent as an email attachment to the client for signature.
4. The client physically prints out a copy of the applications and signs with a pen. They then scan the application and email it back to the agency.
5. Agency staff receives the signed application, forwards it to the insurance company for processing, and attaches the document to the client file.

Consider how much easier this process would be, and how much time and expense would be saved, if an electronic signature process was involved:

1. Agency staff inputs application information into the agency management system.
2. The ACORD application is generated by the system, attached to an email, and sent to the policyholder for their signature.
3. The client receives the email and opens the document. They electronically sign the document and immediately send it back to the agency.
4. Agency staff receives the electronically signed application, forwards it to the insurance company for processing, and stores the document in the client file.

When you add up the time savings and multiply that by the number of documents sent daily that require a signature, significant productivity and expense reduction can be achieved. Are electronic signatures legal? It all started in the 1980s when many companies began sending documents via fax machines. Although the real signature was on the paper, the signature’s image was transmitted electronically. Courts in different jurisdictions made a decision that electronic signatures can be enforced. This way, agreements can be performed with the use of email. President Clinton signed the ESIGN Act into law in 2000. ESIGN, short for the Electronic Signatures in Global and National Commerce Act, legalized the validity of digital signatures on contracts and other legal documents. The law says that a contract signed in digital form cannot be legally denied simply because it is in digital form. Basically, ESIGN says your electronic signature is just as valid as a paper signature. While some states have their own laws when it comes to digital signatures, the Federal law governs interstate commerce. In addition, many states have adopted The Uniform Electronic Transactions Act (UETA) proposed by the National Conference of Commissioners on Uniform State Laws (NCCUSL). Forty-seven states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands have adopted it into their own laws. Its overarching purpose is to bring into line the differing state laws over such areas as retention of paper records (checks in particular), and the validity of electronic signatures, thereby supporting the validity of electronic contracts as a viable medium of agreement. UETA allows e-signatures to be covered in legal documents in all states but New York, Washington state, and Illinois, in which UETA is not yet acknowledged. No matter your state, however, electronic signatures are becoming much more commonplace. UETA has its own requirements, some of which include:

• The signature must be logically associated with the document.
• Both parties must have agreed to conduct the transaction via electronic means.
• If the sender inhibits the receiver’s ability to either store or print the record, the document is not enforceable against that recipient.

UETA also specifies that if a law exists that requires a signature, an electronic signature will satisfy that requirement. This gives signers the confidence of knowing a digitally signed document is as legally valid as a document signed with a pen the old-fashioned way. ACORD has published a white paper—New Strategic Analysis Sheds Light on eSignature and Insurance—that may help move your organization to quickly adopt electronic signatures for all transactions. Don't Wait The insurance industry should be a leader in the adoption of e-signatures. Agents are now equipped with laptops and tablet computers so it is easy to process intricate application forms. The e-signature method makes everything much simpler. E-signatures are coming. It’s time for agents to begin experiencing the benefits of increased efficiency, reduced staff workload, and improved client satisfaction. Agents and Broker can no longer wait for others in the industry to embrace this change. Take the lead and begin experimenting with using electronic signatures in your organization today. Has your organization adopted electronic signatures? If not, why not? If yes, what electronic signature process do you use? Leave your comments below.

Every major change in the world began with a single creative thought. The New Product Development Reference Guide was developed as a tool to be used by any company wishing to create a corporate structure for the development of new (from the slightly enhanced to the new to the market) products. It is written as if the reader is a profit center leader or a company executive who is interested in furthering the successful development and launch of new products in his/her company or division. This guide is not meant to be a set of fixed rules but rather provide a road map for customization by a particular company based on its own culture, history and policies. More documents helpful to the innovation process can be found at http://www.innovationinsurnacegroup.com/innovation.html. CHAPTER 1: Summary of Chapters This guide is divided into the following chapters: Chapter 1: This chapter summary. Chapter 2: Principles of Innovation – Provides a philosophical look at the underpinnings of innovation and how organizations successfully integrate innovation into their growth strategies. Chapter 3: Creating and Working with a Centralized Product Development Department – Provides details on what is a centralized product development department, if and how it should be created. This chapter also includes an examination of innovation tracking and management, as well as a new product intranet and internet site. Chapter 4: Roadmap to Creativity – Provides the key steps necessary to ingrain a culture of creativity into a profit center. This chapter outlines the basic mechanisms for new product responsibility and accountability – a “New Product Director, New Product Council, New Product Champions, New Product Award Program and Specific New Product Goals.” Chapter 5: Generating Ideas – Provides the types of new products and the areas of change from which most new product ideas emerge. This chapter also identifies the resources, both internal and external, that might be useful sources for new product ideas. Chapter 6: Evaluating Ideas – Outlines how to evaluate whether a new product idea has the three components of a successful insurance product – demand, underwriting and distribution. This chapter also walks the reader through the Preliminary Analysis Conclusion Memorandum template that allows the reader to document a product’s demand, underwriting and distribution assessment for initial executive approval. Chapter 7: Developing the Product Idea – Outlines all the steps of preliminary planning that need to be considered before the actual design of the product begins. These steps include forming a development team, developing a project plan, drafting a policy form summary, O&S planning, regulatory assessment, reinsurance assessment and third-party agreements. Chapter 8: Designing the Product – Provides important development tips for all of the components of a new product. These tips include the policy form, the rating tool, application, underwriting guidelines, five-year proforma financials and quote and binder letters. Chapter 9: Idea and Product Validation – Provides useful information on the methods and tools that can be employed to validate both the product idea and final policy design. Chapter 10: Operations/Systems Planning – Provides an overview of the operation and system issues that should be consider when determining which underwriting platform will be utilized for the new product. Chapter 11: Marketing Your Product – Provides an overview of all the marketing issues that should be considered during the product design stage. These issues include branding your product, IP protection, marketing campaign plan and budget, distribution plan and training. Chapter 12: Compliance and Approval – Provides a New Product Development Checklist that can be used to document each stage of a new product development process and a listing of the most common approvals that a profit center may want to consider when developing of a new product approval process. Chapter 13: Launching Your Product – Provides information about the regulatory filing, training, educational seminars and launch events that should be a part of a new product offering. Chapter 14: Monitoring Your Product’s Success – The final chapter emphasizes the importance of accurate premium tracking, monitoring of a new product’s sales and marketing execution. The information in these chapters contains all of the recommended detailed tasks, research and analysis that are performed at each stage of the comprehensive, end-to-end new product development process. Included in this guide is a series of useful templates (Exhibits A-O) that are referenced within the chapters. CHAPTER 2 PRINCIPLES OF INNOVATION Definition: Innovation – the process of bringing new value to the marketplace sustainably and more successfully than the competition. 2.1 Why Innovate? The only Credible Response to Commoditization, Margin Pressure and Growth. Change is transforming the business world at a velocity never before seen because of the convergence of many forces: economic, political, technological and environmental. Attributes that in the past may have afforded sufficient competitive advantage, such as superior service, highly rated capacity and global reach, lose their distinctiveness as competitors expand or new entrants join the market with different business models and sometimes with no or lower legacy costs or infrastructure. The battle against commoditization never ends; neither does margin pressure. Constant innovation is the only path to securing and defending competitive advantage and realizing new revenue opportunities that are needed for sustained profitable growth. 2.2 When? Before Necessitated by Crisis or Decline Innovation undertaken by organizations in crisis or decline does not surprise us. Desperation may be the mother of invention, but, the data indicate, rarely a good mother. The desperate measures called for by desperate times more often fail than succeed. Managers nevertheless are instinctively reluctant to question a winning formula. “If it ain’t broke, don’t fix it.” This sentiment goes to the heart of one of the most commonly asked questions regarding innovation in large, successful organizations. Why now? If an organization is growing profitably, is an industry-leader and has a well-established track record, then it clearly “ain’t broke” and has no reason to change. In fact, the contrary is true. The optimum time to question accomplishments and to effect change is from a position of strength and success. This is precisely when an organization is best-positioned to unite as a community behind a shared vision and supporting values, not when fraught by economic, brand, morale or other issues. 2.3 Who? The Leader, Working Visibly and Explicitly Innovation strategies need to be led from the top. Challenging the status quo is difficult – intellectually, operationally culturally, and often emotionally. It is, therefore, up to leaders to invite others to embark on a journey of reinvention or exploration that may appear inherently risky. To succeed, an innovation strategy needs to be articulated and visibly supported at the highest level so there can be no doubt of the organization’s collective commitment. The role of senior leadership and a highly visible and vocal communication of the innovation agenda cannot be overemphasized. In addition to communicating the vision with, if necessary, a sense of urgency, senior leaders must also model the way. Change, even when strategically sanctioned, is challenging and naturally provokes a chain of reactions from fear, uncertainty and doubt. What does this mean to me? What do I risk losing? Will we succeed? It is because of this natural human response that the organization’s commitment needs to be unwavering and a genuine sense of empowerment widespread. Thus, if the goal is to create a culture in which innovation not only thrives but is repeatable and systemic, then it cannot be left to disconnected individual efforts but needs to be woven broadly and deeply into the fabric of the organization. 2.4 How? Start with Innovation Strategic Agenda, “Smart Failure” Innovation strategy, like any strategy, involves choices. The key is to design an innovation agenda that best corresponds with the overall strategic direction of an organization and incorporates the unique characteristics of the company, division or group. Terms such as “disruptive,” “breakthrough” and “incremental” are used by different authors and commentators in distinct ways. The essential inference to be drawn from any of the qualities used to describe innovation goals is that they indicate degrees on a continuum of small to large innovations. Simplistically speaking, the greater the innovation, the higher the risk of failure. The higher the risk, the greater the rewards if the innovation succeeds. Innovation agendas, especially at large companies, prioritize product and service innovation; however, the greatest return on product and service innovation occurs when these are combined with process innovations. Process innovations often deliver exceptional value. At the top of the scale, business model innovation brings the highest returns but is the most difficult to accomplish. In drawing up an organization’s strategic innovation agenda, the portfolio mix of near-term, mid-term and long-term initiatives and the distribution of high- to low-risk initiatives should reflect the capabilities, appetite and objectives of the firm at a point in time. Portfolio mixes should evolve over time as internal and external conditions change. This means making the choices that inform the innovation agenda consciously and constantly reviewing them. A static iinnovation strategy, in addition to being oxymoronic, will quickly become misaligned with overall strategy. Whatever the degree and scope of innovation, it is, by its very nature, an iterative rather than linear process. Failure is part of that process. Consequently, the organization’s ability to learn from “smart failure” is critical. Smart failure embraces variance and unexpected outcomes as learning opportunities that quickly prompt reflection, correction and redirection and openly call for input in problem-solving. When failure is viewed as integral to the process, it is not error but exploration. As such, it can be -- in fact, needs to be -- visible and shared. Only then is it a learning tool. The political and economic risk of failure need to both be, and perceived to be, organizational, not personal. 2.5 How? Aligned Resources, Processes and Values Innovation needs to be a core, coherent and consistent component of strategy design and planning. So how then does an organization implement strategic innovation as a process, outcome and ultimately a systemic part of strategy operations and culture? The day-to-day implementation of innovation falls to managers and their teams. Management innovation capability is crucial because it is here that obstacles are overcome and opportunities identified. Training is vital and may involve journeying into unfamiliar territories related to trend analysis, insight gathering, customer and channel orientation, collaborative work models and fostering creativity. Afterward, talents and skills must be recognized and rewarded. With leadership aligned and vocal about innovation as a core competence and strategic imperative, empowered management and the right training and motivators for the employee community, the process becomes the stage directions that bring the entire show to life. In innovation projects, the process is as much art as science and often requires the mental agility to be at ease with ambiguity. Process needs to be rigorous to shepherd business activities on the journey from insight to commercial deliverable in a timely way. Simultaneously, successful innovation journeys follow an iterative course and must be flexible. Above all, the process should be transparent so that interaction and course direction are perceived and acted upon as steps in the process and learning opportunities. The learning organization embraces both success and “smart failure.” 2.6 The Result: Measurements Ultimately, success must be measured. The measurement techniques may vary in accordance with the quality of the innovation, the degree of risk inherent in it and the stage of development. As innovation initiatives evolve, the density and reliability of assessments, forecasts and business plans evolve in line with the maturation of the projects. Innovation projects that are competing against non-consumption rather than competitors, creating new markets rather than competing in them and working to meet unmet needs with solutions that do not yet exist, necessarily require both complex metrics and skilled judgment. 2.7 Conclusion Innovation embodies multiple layers of creativity, requires an understanding of the heart and voice of our customers and is a component of insightful decision-making across business disciplines. The best practices that help shape innovation activities serve as a critical tool with respect to product development. Creating value within products is not random; it cannot be left to chance. Strategic and tactical plans articulated by management to pursue competitive advantage, sustainable organic growth and profitability must be supported by clearly stated guidelines for innovation and the sourcing of high-quality new product ideas.