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Can We Disrupt Ourselves?

Brian Duperreault, CEO of Hamilton Insurance Group, delivered these remarks to the recent Global Insurance Forum, held by the International Insurance Society (IIS) in New York City.

It’s a real pleasure to be with you at what is arguably one of the most important annual events in our industry.

I was just 18 years old when the International Insurance Society had its first global meeting in Austin, Texas. I entered the industry in my 20s and joined the IIS in my 30s.

Since then, I’ve benefitted professionally and personally from the knowledge I’ve gained and the friends I’ve made at these annual meetings.

Today, I’m going to talk about an issue that represents a distinct threat to our industry. I might even go so far as to call it an existential threat.

But, like all threats, it also represents a great opportunity.

In it could lie the seeds of a legacy of meaningful change for each of us charged with leading our industry.

So I’m going to address the question: Can we disrupt ourselves?

I’m going to start by saying a few words about Twitter.

Bear with me. I do have a point to make that’s relevant to insurance. Twitter has one billion registered users so far… about one human out of every seven on Earth.

Only 6% of Twitter users are over the age of 45. More than 300 million active users—most of them under 45—join Twitter each month.

Twitter started as a platform for sharing personal moments. It’s morphed into an information delivery system that plays a major role in distributing news, marketing products and affecting the outcome of political and social developments.

And this instant, real-time communication comes with the restriction that you can only use 140 characters to get your message across.

Twitter’s simple idea completely disrupted the way we communicate. I used Twitter as an example of disruption last week when I spoke at the Young Professionals Global Forum in London. I called that speech “Risk in 140 Characters.”

Since then, the CEO of Twitter has stepped down amid charges that the platform isn’t evolving as quickly as it should, and there’s been a lot of soul searching about how this disruptive form of social media can keep current in this ever-changing, ever-evolving age of disruption.

In spite of Twitter’s challenges, I believe the metaphor is a good one. It’s time to select, analyze and price risk, faster and more efficiently – the equivalent of risk in 140 characters.

The young professionals I spoke to last week are all digital natives. As Don Tapscott, who studies the digital economy, says: They’ve been bathed in bits since they were born.

They embrace technology and use it to navigate their world, their relationships and their work swiftly and creatively.

These digital natives are mobile, wireless and connected with their peers all over the globe.

Meanwhile, in the other corner, I—and most of my friends here in this room—are digital immigrants. We’ve had to make a deliberate and conscious choice to adapt to digital ways of doing what we used to do on paper, over the telephone, or through other physical or, at best, analog, means.

Even though it was our generation who invented the Internet, many of us have the feeling of being strangers in a strange land. Using search engines and apps to navigate life and work doesn’t come naturally to us.

We digital immigrants tend to shun social media or dabble around the edges, still thinking Facebook, Twitter, SnapChat and Instagram are trendy chat rooms where younger people tell everybody what they’re up to a thousand times a day.

But the truth is that social media, which erupted onto the scene as a means of personal contact, has quickly morphed into a powerful engine of collaboration with profound ramifications for business development.

Digital natives know that. And because they know it, and use that knowledge to great effect, they are leaping ahead of the digital immigrants in our generation.

There’s a term for this: digital lapping. And this lapping of one generation by another is the basis for the disruption that’s blowing apart traditional business models. For digital natives, disruption is the new normal.

You know what I’m talking about. How many music stores saw iTunes coming? How many taxi dispatchers saw Uber coming? How many hotel chains saw Airbnb coming?

How many Blackberry execs even saw the iPhone coming? Well, maybe they saw the iPhone coming, but it’s an understatement to say their reaction was too little, too late.

Pick any industry, and you can see the pattern emerging.

The automotive industry is a telling example. Sergio Marchionne, CEO of Fiat Chrysler, recently said he’s “more determined than ever to pursue industry consolidation lest technology disrupters beat the auto industry at its own game.” Marchionne’s warning came after a meeting at Google and Tesla, and after spending almost an hour in a driverless car.

“The agenda needs to be moved,” he said, “or all these technology disrupters will come in and make our life incredibly uncomfortable.”

Clearly, all industries are facing massive disruptions because of technology. With new models of service delivery, new categories of products and restructured value chains, society and the customer expect far more than traditional businesses can offer.

These expectations represent a potentially bleak scenario for the insurance industry, because in many respects we are way behind the curve as far as technology is concerned.

And we are groping in the dark for an effective solution to attract digital natives to the industry.

Digital natives are the much-discussed, much-researched Millennials.

Born in the eighties and nineties, they’re the offspring of the Baby Boomers. They’re sometimes known as Echo Boomers or the App Generation.

Millennials are the most diverse generation we’ve ever had. In the US, 35% are non-white, and researchers who study generational differences say they are the most tolerant generation yet, believing everyone should be part of the community.

We’ve been studying Millennials for quite a while, so we know a lot about them:

  • They want to be team players.
  • They want their careers to have purpose.
  • They want to build new things that matter.
  • They use social media to collaborate. They crowd-source everything from fundraising to business capital.
  • They fight for worthy causes by alerting each other to things that distress them.
  • They don’t see much difference between work and leisure, and don’t see the point of rigid work schedules and being tied to an office.
  • They see hierarchy as an obsolete impediment to team progress. They need to get things done, and waiting for permission doesn’t strike them as sensible.

Now, does that list describe how the typical insurance company operates? I don’t think so.That’s a red flag that we need to pay attention to. Consider this:

  • Almost half of insurance professionals in the U.S. are over the age of 45.
  • 25% of all the people working in our industry will be eligible to retire in just three years.
  • That means that, in just five years, there will be 400,000 open positions in the U.S. alone.

Five years ago, Accenture warned that it’s hard to attract Millennials to a career in insurance. Accenture noted that “the industry’s apprentice structure—with its long learning curve and slow promotions—in no way suits a Millennial’s expectation of getting rapid feedback, or working in a flat organization that offers dynamic career development.” Since then, more alarm bells have been rung.

Recently, a report found that only 5% of high school and college graduates thought a career in insurance was worth looking at. When asked why, they said they thought the industry was dull and conservative and doesn’t offer much of a chance to make a difference.

For someone whose whole career has been dedicated to an industry that promises to protect, that really hurts. At the very least, we’ve done a terrible job in helping people to understand the value in what we do.

With hundreds of thousands approaching retirement in an industry that’s dismissed as boring and static, and with disruption looming on the horizon, I believe we’re staring into the jaws of a crisis.

Millennials are not only our future workforce, they’re our future customer base. And our industry, quite simply, is not prepared to attract the numbers we need, with the skills we need, to take charge of the disruption we know is coming.

The men and women in this room have presided over some of the great developments in our industry: Catastrophe modeling, deregulation and globalization all happened on our watch.

We’re not strangers to bold moves. Innovation isn’t a foreign concept.

But collectively we don’t seem to know how to crack this nut: How do we attract hyper-connected, entrepreneurial digital natives into the generally old-school world that so desperately needs them?

I know there are pockets of energy devoted to finding a solution to this problem.

MyPath has been established by the Institutes and affiliates as an industry-led effort to raise awareness of insurance as a career, and to provide information about the industry as well as job opportunities. Hamilton USA, the US operations of Hamilton Insurance Group, is one of the industry partners participating in MyPath.

And there’s Tomorrow’s Talent Challenge, an awareness campaign established by Valen, which provides predictive analytic and modeling capabilities to the industry.

Valen is so concerned about the lack of interest the digital generation is showing in insurance that it created Tomorrow’s Talent Challenge “as a rallying cry for the insurance industry to band together to sell exciting, innovative careers in insurance to Millennials.”

These are laudable efforts – driven by the same sense of urgency that I’m outlining here.

But they’re not enough.

We need a focused, coordinated strategy embraced by some of the major players in our industry.

We need a collaborative commitment like the one announced a few months ago.

In January, as many of you know, a consortium of eight companies from our sector announced a far-reaching initiative to provide insurance to the underserved. My company is proud to be one of the partner companies.

We referred to the new entity as the Microinsurance Venture Incubator – or MVI. Quite a mouthful.

This morning, we announced that the venture has a much better name.

After inviting more than 100,000 employees in our partner companies to help us name the MVI, we chose Blue Marble Microinsurance. This is a great name. It really captures the spirit of our venture. It reminds us of how connected we all are – ever more so in this digital age.

Blue Marble Microinsurance takes a holistic view of our world, planning to extend protection to a broader portion of the population by providing insurance in a socially responsible and sustainable way.

It offers people on the wrong side of the digital divide the stability and potential for growth that insurance makes possible.

Blue Marble Microinsurance’s company partners know that the ability to manage and finance risk is critical to the development of society – any society, but most urgently to those struggling to gain a stable toehold in their pursuit of education, jobs and a prosperous future.

Research and development enabled by Blue Marble Microinsurance will bring affordable insurance products to the developing world.

Technology is at the base of this global project, using innovative apps to connect consumers and products on a micro level – but what drives it is our industry’s collaboration, our sense of purpose and our focus on the future.

What we learn from Blue Marble Microinsurance could truly shift the insurance paradigm.

Yes, it has the potential to reduce the cost of risk analysis and product distribution and delivery. And, through reverse innovation, the application of that knowledge in the developed world could be one of the most enduring legacies of this project.

I have to admit to a huge sense of satisfaction at watching this concept unfold. It was three years ago – almost to the day – that I addressed the annual IIS meeting in Rio and outlined a plan for a coordinated industry effort focused on microinsurance.

At the time, I said that this wasn’t the sort of project that could be tackled by one company. Many had tried, but none had succeeded.

I’m delighted that Joan Lamm-Tennant is now leading the development of Blue Marble Microinsurance.

Joan poured her heart and soul into taking an idea outlined in Rio in 2012 and making it a reality three years later.

This initiative is a shining, innovative example of what happens when we work together to find creative risk solutions.

So if we can find a way to offer coverage to literally billions in developing markets around the world, I know we can figure out how to redefine our work environments, our human resources policies and our recruiting programs in such a way that digital natives will be beating down the doors to join us.

Last week, I challenged the leaders of tomorrow to take charge of their destiny and find ways to attract Millennials into the insurance industry.

Today, I’m inviting you, as today’s leaders, to work together to develop a strategy for our disruption, leveraging the talent and skills of the digital generation.

As I said last week, insurance should be catnip to a Millennial looking for a purpose-driven career.

Let’s invite these digital natives in, make them feel welcome and give them the benefit of our considerable experience and expertise.

Then, let’s step aside and let them lead the way.

We have one of those rare opportunities to leave a lasting, collective legacy – one that ensures the insurance industry stays relevant and innovative and becomes the No. 1 career choice for any young person who wants to make a difference, be part of a team, keep the world working – for generations and generations to come.

Blue Marble Microinsurance is proof that, when we collaborate, exciting things happen. Let’s take a disruptive step to the future – together.

What the Apple Watch Says About Innovation

Now that the dust has settled on the long-anticipated unveiling of the Apple Watch, a major obstacle to its success is coming into view: the iPhone.

The Apple Watch has been the subject of breathless anticipation for years because, as Tim Cook said at its introduction, it represents “the next chapter in Apple’s story.” Conceived three years ago, shortly after Steve Jobs’ passing, the Watch is the embodiment of multiple dramatic arcs and aspirations.

It is the first major product developed under Tim Cook and Jony Ive outside of Jobs’ shadow—and thus has huge personal and legacy implications for both men.

The Watch is also Apple’s attempt to catalyze and dominate the wearables category. Given the intense competition in the smartphone market and the widespread view that new killer products, platforms and ecosystems will emerge somewhere at the intersection of the Internet of Things and wearable computing, the Watch is central to Apple’s post-iPhone strategy.

It might seem that the iPhone should be the Apple Watch’s greatest asset. Apple is positioning the Watch as a jaw-dropping, must-have peripheral to the iPhone. Millions of iPhone-toting Apple fans are sure to queue up upon the Watch’s 2015 launch to buy it. But do not mistake early adopters for market validation. For billions of other potential customers, the Watch’s close linkage and tethering to the iPhone could be a fundamental weakness.

In the short term, Apple must convince existing customers that they need a Watch in addition to their iPhone. Apple, however, has yet to offer a convincing case for this.

Long-rumored groundbreaking health apps built on Watch-mounted sensors have not materialized—disappointing many healthcare watchers (including me). That leaves Apple competing against more narrowly focused wearable devices like the Fitbit and Pebble—but at multiple times the price and fractions of the battery life.

Apple is also touting Apple Pay as a killer app that will attract consumers to the Watch. But, while Apple Pay is an intriguing service-oriented strategy for Apple, there is no need for consumers to buy an Apple Watch to use it. Apple Pay will work fine with just the iPhone.

For now, it seems that Apple has higher hopes for the Watch as a fashion accessory than as a category-defining killer app. But even that highbrow aspiration has ample skeptics who question the Watch’s fashion chops and business potential.

In the long term, when and if compelling apps emerge for the Watch, Apple will have to convince Watch enthusiasts that they need an iPhone in addition to the Watch.

This might not seem like a limiting factor given that there are more than 300 million active iPhone users. But imagine if the iPhone were just a peripheral to the Mac, thereby limiting its addressable market to Mac owners. Or imagine if the iPhone had to be tethered to the iPod. Do not such scenarios, in retrospect, sound implausibly shortsighted?

Both the Mac and the iPod were great products with loyal followings at the iPhone’s introduction. Apple, however, did not limit the iPhone to its predecessors’ market niches. As shown in Figure 1, the result was a blockbuster that lifted Apple far beyond those earlier products. The iPhone has grown to represent more than half of Apple’s revenues and perhaps even more of its profits.

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Figure 1 — Apple Device Sales

Now the iPhone has a loyal following but a small share of the smartphone market. Will Tim Cook limit the Apple Watch’s success to iPhone owners, or will Cook free it to dominate the potentially larger wearable devices space?

Freeing the Watch is a strategic imperative.

History tells us that market-leading technology products like the iPhone inevitably fade. The companies that depend on them must innovate into the succeeding categories or fade as well. Kodak, Polaroid, IBM, DEC, Nokia, Motorola, Blackberry, Intel, Sony, Dell and Microsoft are among those fading or faded companies.

All of those other companies underutilized disruptive advances in information technology for (at best) incremental enhancements to their dominant products. By doing so, they missed out on new killer products, business models and industries that coalesced around the new platforms enabled by those technology advances.

Thus, Kodak wasted decades trying to deploy digital photography (which it invented) as an enhancer to its dominant film-driven businesses. Microsoft was slow to the web and the cloud and killed its early e-reader and tablet devices because of internecine struggles over how those new categories related to its Windows and Office businesses. The list goes on: IBM did not lead in minicomputers. DEC and every other leading minicomputer maker missed out on personal computers. Motorola and Nokia were killed by smartphones, and Blackberry is near death.

Limiting the Watch to a peripheral role in the iPhone-centric ecosystem would repeat the same mistake made by those earlier market-leading technology companies.

That’s not to say there is not a lot of money to be made in the defend-the-cash-cow approach. Just look at the more than $650 billion in revenue and nearly $250 billion in earnings that Steve Ballmer delivered in his tenure as Microsoft CEO. Ballmer achieved those impressive numbers by defending and milking Microsoft’s dominant Office and Windows products. Ballmer, Microsoft and its investors missed out, however, on the market value created by Google, Apple, Facebook, Twitter and others that capitalized on search, big data, cloud computing, mobile devices and social media. Ballmer’s inability to grow beyond the core products that he inherited stagnated Microsoft’s market value for a decade.

Likewise, Tim Cook could nurse Apple’s iPhone-driven revenue stream for a long time. I doubt, however, that Tim Cook would be satisfied with a value-creation legacy comparable to Steve Ballmer’s.

It is too early to dismiss the Apple Watch’s potential to transcend the iPhone. We’ll get a measure of Apple’s foresight when it releases the software development kit (SDK) for the Watch. That will show how fundamentally tethered the Watch is to the iPhone and whether Apple has laid the groundwork for the Watch to be standalone at some point.

The real gut check for Tim Cook is further out in time, when technology and creativity enables wearable devices like the Watch to not only stand alone from the iPhone but also to replace it.

Will Tim Cook allow the Watch to cannibalize iPhone sales—as Apple previously allowed the iPhone to eat away at the iPod and risked the iPad’s doing the same to the Mac? Or will Apple stagnate as competitors and new entrants out-innovate it? Will Apple fade away as the riches from new killer apps, devices, ecosystems and business models that coalesce around emerging wearables-centric platforms flow to others?

Getting to 2020 — Defining the Unknown (Part 2)

Today’s exercise focuses on the best concepts you can dream up so your organization can thrive in the future. You’ll then need to perform a reality test on those ideas, using research you’ve developed.

This article follows up on my first, in which I argue that now is the time to prepare for what I call “Agency 2020.” In other words, you need to prepare your organization for the leap that will be required for future prosperity.

In that first article, I asked dozens of questions to help define the current reality of 2014. We searched for the knowns – and the known unknowns – of today. This time around, almost every question will be about a discovery in the “unknown unknowns.”

Your challenge is about asking the right questions – and then stretching yourself beyond your comfort zone to find good answers for tomorrow. Use a flood light on the dark horizon of tomorrow. It’s premature to focus with laser-like intensity.

Pursue this process with enthusiasm and childlike curiosity. Forget what you know and believe. Ask “what if?” Don’t try to define “what isn’t.” My intent is to broaden your horizon, stimulate imaginative thought, encourage you to focus and help you act as you develop your new organization for 2020.

To keep the process simple and open-ended, we’ll focus on four issues:

  • people
  • technology
  • the global economy
  • innovation

PEOPLE: The overriding challenge and opportunity in 2020 will be people: who they are,  their values, the cultures they will create and their wants and needs in their own world. Do their worlds and your world overlap? Is there some common interest and opportunity? How do you communicate with many … as well as with a niche of one?

Research the generational mix in 2020. What percentage of the population will be Gen C, Millennials, Gen X and Boomers? Will the Greatest Generation be gone? What will be the influence of each group in the decision-making process as consumers, managers, leaders, etc.?

If they are clients or prospects, what products and services can you offer to meet their wants and needs? How do you profitably deliver this at a price they are willing to pay? What message, media, metrics are necessary to ensure you maintain intimacy continually with each person and affinity, as well as with their population (generation) – however they define it?

Where and how can your interests align – whether as employers, employees, collaborators, competitors, decision makers, policy leaders, educators, friends or social media group members, etc.? Who is now – or who will be – in your world tomorrow, in 2020?

Consider the following as you try to put your arms around a new digital universe that will see the LAGgards (Last Analog Generation) leaving the scene and new Gen C – digital natives – begin to assert their influence before they finish high school. (Before you roll your eyes, have you ever had to ask a teenager to show you how to use your device du jour?)

John Naisbitt painted the picture of this phenomenon in his book Megatrends when he talked about “balancing high tech and high touch.”

If you are unwilling or unable to accept the new world, demographics and diversity, enjoy your retirement.

TECHNOLOGY: Decades ago, the scholar and organizational consultant Warren Bennis observed: “The factory of the future will have two employees, a man and a dog. The man is there to feed the dog, and the dog is there to keep the man away from the machinery.” Could he be right?

To provide perspective, remember that in 2003 the BlackBerry was considered state-of–the-art technology. Some believed this device owned the future of social connection. There was no iPhone, iPad, Facebook, Twitter, etc. By 2012, BlackBerry’s parent – then known as Research in Motion – was teetering on the edge of bankruptcy, and “i” technology, smart devices and social media were out-of-control adolescents.

Today, conversations are focusing on the Internet of Things, or IoT, where inanimate objects – smart watches, “intelligent” cars, home appliances, etc. – communicate without the intervention of people.

In 2020, will technology work for us, or will we work for technology? Will we know more and communicate better than Siri, or will artificial intelligence be the trusted advisers for most consumers? Will facial recognition technology allow your iPhone to read the mood of your clients better than you can, when you’re each sitting at the City Club texting each other over lunch?

Is this ridiculous? Can you afford to be wrong?

THE GLOBAL ECONOMY: Time and place are gone. The lights are always on, and the door is never locked in any place of business. That’s the good news: You can live on Main Street and still compete in Dublin, Dubai or Duson, La. The bad news is that your competitor and many hackers are on Main Street, peering into your shop. You can be a David in a world of Goliaths. But if you’re a Goliath, you’re more vulnerable than ever to a world of Davids. If your company is bureaucratic, you’re just a slower Goliath.

My best suggestion is to “capture population” and become the portal of choice for members of that universe. Don’t worry about selling products. Instead, focus on needs and solutions to problems. Facilitate the “buying,” or capture, of each individual in the group. Remember: If you control a large enough population, you can “insure” needs of the group – without the cost of issuing individual policies.

INNOVATION (the new power plays and power players): In a presentation on change in 1993, I declared: “Today GM, Sears and IBM are the kings of their respective jungles. In our lifetime, one of these companies will fail.” The audience shook their heads in disbelief. I was right, and in the long term I may win the trifecta.

From the Affordable Care Act, to Facebook, Amazon, Twitter, apps, artificial intelligence and IoT, the marketplace is being redesigned by the people who shop there. In other words, the deck is being reshuffled. Opportunities have never been greater, the stakes higher or the risks greater.

That the world will be different is a fact. Remember Einstein’s admonition: “Insanity is to continue to do what you’ve always done and expect a different result.” Don’t be insane. Be prepared.  It can work. As I noted in my first article, we’ve already walked on the moon!

With forethought, an organizational purpose, principles, a vision, a commitment and a plan that ropes you to that commitment, you can and will prevail.  Don’t try to conquer the world. Just identify and prevail in your part of that world.

Be bold and wise in your research and positioning for 2020. Today’s world includes unlimited data, much less useable information and less still actionable knowledge. By 2020 – if you’re willing to try – you’ll be able to take the actionable knowledge, shape it to the wants and needs of a specific group, align your offerings (helping them buy) and innovate your processes to ensure you can deliver at a price they are willing to pay. Align your message, media, meaning, etc. to each specific group. Test the concept. And then act – meaning experiment. Remember, wisdom exists at the intersection of knowledge and experimentation. When you fall down, stand back up.

As business management columnist Dale Dauten states: “Different isn’t always better, but better is always different.” Be better in 2020. Differentiate yourself from the sameness of today and tomorrow!  Take the giant leap of discovery for yourself … and all of mankind!