Should innovation be disruptive or incremental? Yes


Twenty years ago, during the initial internet boom, innovators argued loudly that the game was all about disruption, that incremental improvement was for wimps. "Faster, better, cheaper" was for those not bright or bold enough to seize the future.

Over time, the idea that digital would completely replace commerce in the physical world moderated, and the hybrid notion of "clicks and mortar" emerged. People also realized that it wasn't just those who came up with breakthrough business models that merited attention. There was also a class of "arms merchants," including Sun Microsystems and Cisco, that made gobs of money by outfitting the pioneers—in fact, more than almost all the pioneers.

The analogy was: If you try to name a miner who won big in the Gold Rush of 1849, good luck. But you know many of the outfitters, including Levi Strauss, who supplied blue jeans to miners, and Leland Stanford, who made his fortune mostly on the railroad that connected the miners to the rest of the country, before founding his eponymous university.

In insurance, we seem to be revisiting the disruption vs. incrementalism debate, as Lemonade, Trov, Slice and some other truly new business models stretch our thinking and throw shade on those merely looking for "faster, better, cheaper."

Having watched the initial internet cycle at close range and having lived through some other innovation cycles, both before and since, I side in this debate with ... both groups.

The Lemonades of the world will be the most important and will transform insurance. In time. If they work. (Some will, but, if history is any guide, many others will fall by the wayside.) 

In the meantime, there is an awful lot to be gained through incremental improvement. Insurance is such a paper-heavy, process-based, inefficient industry that the potential efficiencies from digital improvement exceed those in perhaps any other industry.

The two forms of innovation go hand in hand: Companies need to generate as many productivity gains as they can to finance efforts at disruptive innovation. As our chief innovation officer, Guy Fraker, will tell you: Every company needs a portfolio of innovation projects, ranging from the simple and short-term all the way out to "moon shots" that, while speculative, could change your whole company and maybe the industry. Managed as a whole, that portfolio only needs some seed money and then can be self-financing. 

The pressure is certainly on. Marsh reports that global insurance prices have, on average, now declined for 17 consecutive quarters, and you certainly aren't going to make up the difference based on investment income these days. Meanwhile, many insurers say they worry that they could lose as a significant chunk of their revenue to startups—a call both to protect customers from competitors and to become wildly more productive. 

As you search for those efficiencies, you need to track the "arms merchants" that could help you—perhaps through a subscription to our Innovator's Edge, which tracks nearly 2,000 insurtechs and a network of almost 60,000 related companies. You will find a host of companies that can help: Pypestream, which provides chatbots that slash costs in call centers; WeGoLook, which provides a network of more than 30,000 "Lookers" that can make the claims process more efficient; RiskGenius, which uses AI to compare language in policies and provide nearly instant analysis; and many, many more. 

(Much) faster, (much) better, (much) cheaper is a worthy goal. In fact, it is an imperative.


Paul Carroll,

Paul Carroll

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Paul Carroll

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

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

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