Why make the same mistakes that others have been making for years? Why not learn from those mistakes and avoid them?
That may seem like an obvious point, but the vast majority of business literature focuses on success stories. It seems people like reading about successes more than they like reading about failures. People certainly like talking about their successes more than they like focusing on their failures.
But, being a contrary sort, I've focused on lessons to be learned from failures for going on 20 years now, in conjunction with Chunka Mui. He and I have written one book, "Billion Dollar Lessons," based on voluminous research into corporate failures and have published two others that build on those lessons.
Drawing from those books and his consulting work, Chunka recently wrote a piece on seven key lessons to be learned from others' failures on innovation efforts. I'll share those here, along with some commentary from me to tailor those lessons to what's happening in insurance.
What's happening in insurance is real progress, as far as I can see -- and I'm seeing a lot through the application process for the Global Innovation Awards, which ITL and the International Insurance Society hand out annually. (Yes, that's a plug for you to consider applying for an award, which you can do here.)
But mistakes still get made, of course, and generative AI creates loads of opportunities for companies to either succeed big or to let those same old, same old mistakes creep in.
Let's have a look at how Chunka phrases the key mistakes to avoid.
Chunka's essay on LinkedIn lists these seven admonitions:
--Don't think like a venture capitalist.
--Don't aim low.
--Don't put all your eggs in one basket.
--Don't spread your leadership too thin.
--Don't underestimate the corporate antibodies.
--Don't quit too early.
--Don't get too invested in an idea.
1. Don’t think like a venture capitalist.
I watched IBM try to be a venture capitalist in the '80s and '90s and Intel try in the '90s and aughts. The companies thought their insights into computers and processors would let them identify winners. They thought the investments would provide cachet to the startups, too, and incorporated their products and services into the portfolios of the IBM and Intel sales forces.
Didn't work. IBM and Intel didn't pick many winners, and their attempts to help tended to smother the start-ups.
Chunka explains why venture capital isn't even the right game to be playing for innovators.
"Despite the allure of Silicon Valley," he writes, "don’t conflate corporate innovation with venture capital. There are major differences. Large company innovators are not financiers. Their primary objective should not be to maximize return by investing in a large portfolio of start-up companies."
Even a successful venture capital portfolio won't move the needle much for a major insurer, and a VC effort could very well distract companies from what really matters: innovating (alone or with startup partners) in ways that will make a difference across the enterprise.
I haven't seen many insurers making the VC mistake in recent years, but the temptation will be there with generative AI, especially as some startups go public and valuations pop.
2. Don’t aim low.
Chunka writes, "Meaningful innovation and true business model reinvention can only arise from aspirations of the kind that took Amazon from books to AWS cloud services, and Apple from Macs to iPhones."
That claim may not resonate so much in insurance, where companies like Lemonade that tried to reinvent the industry haven't been faring so well. But companies still need to think big, even if they're just exploring how, say, generative AI can be used in distribution, underwriting or claims. You can start off imagining reinventing the agency, having continuous underwriting or moving to straight-through processing of claims, even if you know you won't get there overnight and know you won't be reinventing the business model of the whole company.
3. Don’t put all your eggs in one basket.
When the CEO or even the head of a unit has an idea for innovation, it tends to become THE idea. Everyone working for the CEO or unit head tends to quash any objections and does their utmost to make the idea pan out. But even a really good idea -- and many ideas aren't that great -- often fails, so it's important to have a portfolio of potential innovations.
"Given the uncertainty of technological change, it doesn’t make sense to have only one alternative," Chunka writes.
4. Don’t spread your leadership too thin.
But, but, but... don't have too many alternatives percolating at any one time.
As Chunka says, "In corporate innovation, the constraining resource is management attention, not capital. There’s only so much of it available. No one can keep track of one or two dozen nascent businesses while still running a company day to day. The head of the business can’t delegate the work, either," for any project that could have a transformative effect. "It's impossible to neutralize naysayers, build the necessary alignment, or guide the organization through the necessary transitions. Our experience is that the right number of killer options is usually three or four, and no more than five."
5. Don’t underestimate the corporate antibodies.
"Almost every organizational bias favors protecting the status quo," Chunka writes. "People are going to find every possible way to make a radically new idea fail. They’ll try to steal the money or poach the people. They’ll throw up technological obstacles.... So, perhaps corporate innovators’ most difficult but important job is to block the antibodies long enough that [innovations] get every means to prove themselves. Having a manageable number of options and the right level of CEO support is critical."
6. Don’t give up too early.
I've written many times that our mantra about innovation is Think Big, Start Small, Learn Fast, and I may seem to be contradicting our admonition to kill ideas the very moment you know they won't work. But this point of Chunka's is different. It's about being willing to make an investment and stick with it -- barring those clear signs of failure -- even if your bet is a long shot.
Chunka explains: "Take a lesson from the concept of pot odds in poker. The notion is that you don’t just figure out whether you have a better-than-even chance of winning a pot. You calculate what it will cost you, now and possibly after future cards, to compete for a pot. You compare that number with the size of the pot, then compare that ratio to what you think your odds of winning are. If you have to bet $1,000 to have a shot at a $10,000 pot, even a 20% chance of success might justify the risk. In other words, evaluate the size of the additional investment against the size of the potential market as you evaluate whether to renew" an innovation effort.
7. Don’t get too invested in an idea.
This is one of the hardest issues to sort out. When do you fish, and when do you cut bait?
The best way we've come up with is to set the rules ahead of time. Otherwise, proponents and opponents of an idea will arguing about the rules and complicating the discussion while you're trying to make an important decision.
As Chunka puts it, "Set up regular reviews, agreed to ahead of time, [to decide] whether to continue funding. The analysis has to be done afresh each time, so you don’t get carried away by the amount of money already invested. The question has to be: How much additional money will we need to invest, and might the bet be worthwhile? When a bet no longer looks good, set it aside, regardless of how much financial and emotional capital has been poured in."
******
Innovation is tricky, but you can at least increase your chances of success if you absorb the mistakes that others have made before you.
Cheers,
Paul