Tag Archives: ge

Are You Innovating in the Dark?

The insurance industry is ripe for disruption, drawing a flood of investment and spurring all sorts of smart conversations. But many insurance companies today are either confused or are just shooting in the dark hunting that “big thing” (unknown) in the name of innovation.

The good news is that the fear of disruption has pushed the innovation agenda for many companies. But there are only a handful of players in the industry who are taking innovation seriously. For such companies, innovation is never accidental, seasonal or impulsive. Rather, it is an integral part of the company’s culture of organization and is a continuous process.

Are you a victim of “innovation phobia?”

Innovation makes many players in the industry nervous, forcing them to act fast to do something innovative or deliver superior values to clients in difficult times, spurring a reactive innovations race in the market.

The sad part is that such “knee jerk” reactions last for short lifespans and do not deliver any value to an organization. Typically, such momentum often dies within 12 to 18 months because of reasons such as change of organization priority, leadership change, shortage of funds, skill shortage, poor support within an organization, company politics and resistance of companies to change. Companies burn millions of dollars each year in the name of reactive innovation. Is it time for organizations to assess if they are the victim of the innovation phobia? Are there better ways to use their funds? The answers are yes.

See also: How to Create a Culture of Innovation  

Build meaningful offerings, not just elegant facilities and prototypes

In the last 12 months, innovation activities have ignited insurance industry collaboration with startups and insurtech. Other innovation players are picking this up, which is a good thing and a positive sign for the industry. Keywords such as “incubator,” “accelerator,” “innovation labs,” “garages” and  “design thinking” are gradually becoming the jargon of the insurance industry. Many companies have built (or are building) large, elegant facilities for innovating, assembling teams, creating fancy prototypes and leveraging newer technologies. Few companies are funding startups and few have started separate venture capital funds to capitalize future opportunities. Things are really changing — and fast.

Still, the big questions remain:

  • Are these real attempts toward innovation?
  • Are these meager reactions triggered because of innovation phobia?
  • Are these attempts to create a market illusion that your company is innovating?

None of the above aspects can guarantee success. The hard reality is that such efforts are not sufficient for innovation. Innovation is not about building fancy facilities or shiny prototypes that anyone can mimic easily. It is not about the number of experiments or proof of concepts you are developing. It is also not about the number of hackathons you sponsor or the total partnerships you have with startups or insurtech firms.

It is about creating something meaningful for customers that is distinctive in the market and gives you a long-term competitive advantage. And it is about understanding your future customer’s needs, market insights and evolving industry trends in a timely manner (ahead of your competitors) and about building something meaningful that customers will value the most.

Addressing the “missing” elements of innovation in your organization

Innovation is not an easy thing and cannot happen as a matter of reactive actions. Unless organizations build a culture for innovation; make it a continuous process; invest in people and capabilities; and commit themselves for long-term innovation, any efforts toward achieving innovation are going to be shortsighted. Failures are an inevitable part of innovation, so building a culture that encourages failures and motivates teams to think big, imagine the future, gather insights, validate assumptions and deliver value with greater agility are important part of innovation. It is time for companies to be honest and discover the missing elements of innovation in their organization. Innovation is about building a foundation for the future of the company; it is about creating a futuristic business, talent, expertise and the people of tomorrow.

Many of today’s innovation efforts are merely trying to keep pace with the emerging technologies — such technologies are threatening the existing business models of insurance companies. If you look closely, you would agree that such scenarios have existed for many decades in the industry. It is impossible to keep the same business pace when technological changes are maturing and evolving at a faster pace. There is a need to look for some missing element in your organization, which, when paired with emerging powerful technologies, can bring the real innovation out.

Invest in market intelligence and competitors’ moves

Successful innovation demands long-term organizational commitment, unique market insights, customer validation-feedback, talent, organizational agility and correct assessment of timings of market readiness for any new value proposition.

If you look closely at the history of some of the most successful innovation companies (such as Google, Apple, GE, P&G, PepsiCo and Toyota), you would notice that such high-performance companies have assessed the market, customer behavior and competitors’ moves very cautiously and constantly and have made appropriate investments in the journey for innovation. These companies have built an innovation culture over years. Unfortunately, today, companies do not have the patience to gather the right intelligence on the market and the insights on customers’ behavior. And many companies just want to take advantage of becoming the first movers without doing the proper homework about market readiness, competitors, customer needs and the industry preparedness.

Beware of those fancy insights that everyone knows

Many companies’ innovation agendas get biased and influenced by a few survey results from the top consulting and analyst firms; few companies are also using future market size projections from the global research companies as a part of justification for the company’s innovation efforts. By and large, the entire insurance industry is referring to the same set of intelligence and insights. If that is the case, there is little possibility that meaningful offerings would emerge that can disrupt the industry as a whole. If you are going to create another new-style offering (similar to that of others or that can be mimicked easily), by leveraging the similar market insights and similar technologies, your innovations efforts are likely to deliver poor results.

Beware of those commoditized insights and research reports that may distract you from doing genuine innovation.

See also: Innovation Won’t Work Without This

You must invest in assessing market intelligence and customer intelligence continuously. Your futuristic offerings are likely to be as differentiated as those of the unique market and customer insights you gather. Align your innovation efforts accordingly, leveraging the best proven technologies and the expertise of your people and partners.

Going back to basics

Industry players must assess if they are addressing innovation requirements holistically. How accurately a company infers future market movement, customer behavior and demands — and creates offerings in a timely manner ahead of its competition — plays a critical role in the success of innovation. If you think this type of innovation sounds more like gambling or shooting a gun up in the air, you are advised to spend your money on some other initiatives that can improve your business performance faster.

Now is the time to invest in your people and build capabilities (underwriting, risk management, sales and distribution, claims, etc). It is the time to build core foundations and address the missing elements of innovations within your organization.

Conclusion

Innovations are critical for a company of any size. Insurers must commit themselves to innovating and must build an innovation-centric culture in their organization. Insurers must honestly assess if they are a victim of innovation phobia and must address the missing elements and innovation gaps in their organization. The distinctiveness of market insights, customer preferences, competitors’ moves and industry readiness plays an important role in the potential success of the innovation. Innovation is never accidental but, rather, is a continuous process that requires the best talent, best capabilities and agility. The role of technology and the startup community cannot be ignored in innovation. Insurers must stop innovating in the dark and instead start fixing the broken elements that are hindering the company’s growth.

Learn about Innovator’s Edge, a first-of-its-kind insurtech matchmaking platform.

Why Your Big Ideas Go Nowhere

After several years of having courageous leaders in the insurance industry begin to fund the flow of new ideas, it is evident that we have begun to overcome one problem and are now facing another. The old problem was a lack of game-changing ideas. The new problem is our bias against them.

Result: The game-changing ideas are not getting launched.

The operative phrase here is “game-changing.” The insurance industry has no trouble launching products, services and business models that are similar to the ones we already have. In fact, the industry is pretty darn good at incremental thinking — but we must do better.

When inspired thinkers offer up disruptive ideas, we turn our backs on them. Why? Many think it is because their cultures are afraid to fail, and the likelihood of failure is high. The real reason for “failure to launch” is that (most of) your people are repulsed by the real game-changing ideas.

Repulsed. What an ugly word. But it’s true.

Why? Because those ideas are different. Natural instinct is to push it aside, try to get rid of it, or wish someone else would deal with it.

GE has a fabulous commercial spot that personifies the new idea as repelling people socially. If you think about what happens to people who are pushed aside from groups, it is usually because they are different in some way. They may communicate differently, look different, eat different food or live by different rules. It’s the same for game-changing ideas. They have their own language, their own rule sets, and must be measured differently than familiar ideas because they were created to be disruptive.

See Also: How to Choose a Great Coach

The most successful innovation leaders are beginning to address this bias. They start by helping their teams answer these four questions:

1) How do we determine consumer acceptance? An idea must be boiled down to its core components, and the key hypotheses must be tested. This usually requires several rounds of testing because, with each test, you learn more about what’s missing and what’s not necessary. With game-changing ideas, consumers can barely articulate a need but know it when they see it. The most important skill set here is the ability to prototype so people can imagine themselves experiencing this product or service. Most insurance companies are weak at prototyping. That’s OK because these skills can be borrowed or bought.

2) What critical capability is needed to make this idea work? Take the most important benefit of the idea and determine what might stand in the way of its being realized. With game-changing ideas, believability is typically a barrier. So you need to figure out ways to help consumers trust the outcomes. This might require some proof or a creative way to tell a story.

3) Who has these capabilities? If you do not find the capability within your organization, you must look externally for pieces of that capability. For game-changing ideas, companies must almost always look externally. Entrepreneurial start-ups often have solutions looking for a home, so they are a great place to start your search.

4) What are the right measurements and milestones for this idea? The “language” of measurement is totally different for game-changing ideas than for familiar ones. If your CFO is looking for revenue numbers, the expectation needs to be reset because measuring a game-changing idea with short-term financials won’t work. Instead, measure key indicators of consumer acceptance. For example, many new start-ups get their early funding by setting up an offer that isn’t available and seeing who clicks. The clicks become the measure, and when they get to a certain number, it marks the milestone for funding.

Big ideas matter. Overcoming short-term bias and becoming skillful at disrupting ourselves are the only things that will keep us from being blindsided.

Now, who wants to embrace a big idea with me?

This post was previously published at National Underwriter Life and Health Magazine.

The Real Powerhouses in Silicon Valley

One of the most important lessons that Silicon Valley learned, that gives it a strategic advantage, is to think bigger than products and business models: It builds platforms.

The fastest-growing and most disruptive powerhouses in history — Google, Amazon, Uber, AirBnb and eBay—aren’t focused on selling products; they are building platforms.

The trend goes beyond tech.  Companies such as Walmart, Nike, John Deere, and GE are also building platforms for their industries. John Deere, for example, is building a hub for agricultural products.

Platforms are becoming increasingly important as all information becomes digitized; as everything becomes an information technology and entire industries get disrupted.

A platform isn’t a new concept; it is simply a way of building something that is open and inclusive and has a strategic focus. Think of the difference between a roadside store and a shopping center. The mall has many advantages in size and scale, and every store benefits from the marketing and promotion done by others.

See Also: Pursue Innovation or Transformation

They share infrastructure and costs. The mall owner could have tried to have it all by building one big store, but it would have missed out on the opportunities to collect rent from everyone and benefit from the diverse crowds that the tenants attract.

Platform businesses bring together producers and consumers in high-value exchanges in which the chief assets are information and interactions. These interactions are the creators of value, the sources of competitive advantage.

The power of platforms is explained in a new book, Platform Revolution: How Networked Markets are Transforming the Economy and How to Make Them Work for You, by Geoffrey Parker, Marshall Van Alstyne and Sangeet Choudary. The authors illustrate how Apple became the most profitable player in the mobile space with the iPhone by leveraging platforms.

As recently as 2007, Nokia, Samsung, Motorola, Sony Ericsson and LG collectively controlled 90% of the industry’s global profits. And then came the iPhone with its beautiful design and marketplaces — iTunes and the App store. With these, by 2015, the iPhone had grabbed 92% of global profits and left the others in the dust.

Nokia Shutterstock

Nokia and the others had classic strategic advantages that should have protected them: strong product differentiation, trusted brands, leading operating systems, excellent logistics, protective regulation, huge R&D budgets and massive scale.

But Apple imagined the iPhone and iOS as more than a product or a conduit for services. They were a way to connect participants in two-sided markets — app developers on one side and app users on the other.

These generated value for both groups and allowed Apple to charge a tax on each transaction. As the number of developers increased, so did the number of users. This created the “network effect” — a process in which the value snowballs as more production attracts more consumption and more consumption leads to more production.

By January 2015. the company’s App Store offered 1.4 million apps and had cumulatively generated $25 billion for developers.

Just as malls have linked consumers and merchants, newspapers have long linked subscribers and advertisers. What has changed is that technology has reduced the need to own infrastructure and assets and made it significantly cheaper to build and scale digital platforms.

Traditional businesses, called “pipelines” by Parker, Van Alstyne and Choudary, create value by controlling a linear series of processes. The inputs at one end of the value chain, materials provided by suppliers, undergo a series of transformations to make them worth more.

pipes

Apple’s handset business was a classic pipeline, but when combined with the App Store, the marketplace that connects developers with users, it became a platform. As a platform, it grew exponentially because of the network effects.

The authors say that the move from pipeline to platform involves three key shifts:

  1. From resource control to orchestration. In the pipeline world, the key assets are tangible — such as mines and real estate. With platforms, the value is in the intellectual property and community. The network generates the ideas and data — the most valuable of all assets in the digital economy.
  2. From internal optimization to external interaction. Pipeline businesses achieve efficiency by optimizing labor and processes. With platforms, the key is to facilitate greater interactions between producers and consumers. To improve effectiveness and efficiency, you must optimize the ecosystem itself.
  3. From the individual to the ecosystem. Rather than focusing on the value of a single customer as traditional businesses do, in the platform world it is all about expanding the total value of an expanding ecosystem in a circular, iterative and feedback-driven process. This means that the metrics for measuring success must themselves change.

But not every industry is ripe for platforms because the underlying technologies and regulations may not be there yet.

See Also: InsurTech: Golden Opportunity to Innovate

In a paper in Harvard Business Review on “transitional business platforms,” Kellogg School of Management professor Robert Wolcott illustrates the problems that Netflix founder Reed Hastings had in 1997 in building a platform.

Hastings had always wanted to provide on-demand video, but the technology infrastructure just wasn’t there when he needed it. So he started by building a DVDs-by-mail business — while he plotted a long-term strategy for today’s platform.

According to Wolcott, Uber has a strategic intent of providing self-driving cars, but while the technology evolves it is managing with human drivers. It has built a platform that enables rapid evolution as technologies, consumer behaviors and regulations change.

Building platforms requires a vision, but does not require predicting the future. What you need is to understand the opportunity to build the mall instead of the store and be flexible in how you get there. Remember that business models now triumph products—and platforms triumph business models.

A Practical Tool to Connect to Customers

I recently led a workshop at the BRITE Conference at Columbia University on how to connect to customers and was honored to be among speakers including Shelly Lazarus, Ogilvy’s chairman emeritus; Vikram Somaya, ESPN’s global CDO; Linda Boff, CMO of GE; and Columbia Professor and innovation thought leader Rita McGrath. Organized by faculty members David Rogers, Matt Quint and Bernd Schmitt, and now in its ninth year, BRITE promotes dialogue on top brand, innovation and technology trends across business and academia.

I’ve condensed about half the workshop into a self-directed exercise, so you can try it.

The workshop started with three premises:

  1. People-based offerings are the basis for market relevance. Product pushing cannot endure. We are doing business in an “I want” world where companies like Amazon and Apple have set an “anything is possible” standard. The standouts will be companies that know how to walk in the shoes of the people they aspire to serve. These successful brands will follow the customer’s journey through life with authenticity — not just fixated on how to push product selection and purchase.
  2. Customers wear different hats – they may be users, buyers or payers for your offering. People see different brand benefits based on their role. Building brand/customer connections requires you to parse these roles and tune into the relevant benefits. The benefits may not be the same — this matters when it comes to product, communications and experience decisions.
  3. Network thinking overrides linear thinking and action. Building a business through binary relationships with suppliers on the one hand and customers on the other hand has been supplanted by businesses driven by value networks, or “value constellations.” Once you have a clear picture of the user, buyer and payer roles, you have in hand raw material to begin to assemble the members of your constellation. More on this topic in a future post.

Growth and Transformation: The Holy Grail

There’s not a conversation I’ve had with a senior executive in the past few years – irrespective of business size or sector – that didn’t share two linked priorities: growth and transformation. Technological possibilities, customer expectations and the need for speed demand a departure from historically beneficial but now outmoded strategies.

To Solve A Big Problem, You Have to Chunk It Down

To paraphrase a favorite colleague of mine from my days at American Express, “you just have to chunk” the big, hairy problems to make progress toward solving them.

Traditional business strategy starts with questions like: “What business are we in?” and “What core competencies can we use to compete?” These are inside-out questions whose answers assume “sustainable competitive advantage” is something you can achieve and own.

Set these assumptions aside. Our economy demands you define your strategy from the “outside” — where the customer is. Twentieth-century notions of strategy revolved around your position relative to competition. Twenty-first century strategy revolves around the customer.

This means the first chunk to work at is “Who is our customer?” And next, “Can we engender a transformational relationship with our customer, starting with focusing on needs, and then align all of our activities and decisions to deliver?”

A Simple, DIY Tool to See Your Customers as People, Not Data Points

Here’s a tool you can use to deepen your brand’s connection to customer needs and begin to conceptualize new business models for enablement.

Whether you complete it in your head or around the table at a team meeting, this simple template can nudge even stubborn traditionalists to ask new questions about how customer insight translates into business results.

Milton Rokeach: The Hierarchy of Needs and the User/Buyer/Payer Model

Rokeach, a 20th-century social psychologist, conducted research resulting in an inventory of desired end states for human existence. These end states, or values, are summarized below:

POSTPeopleBased

How Does This Theory Apply to Brands and Innovation?

Brand managers tend to enumerate product features to explain value to customers. Better brand strategists get to the benefits, too. But almost always, brands stop short of the much richer territory – connecting the brand to the values people strive toward in life.

By pushing a little harder to understand which values your brand satisfies (i.e., back to Rokeach’s inventory) you can find new growth levers, and pragmatic transformation priorities can emerge.

What Does Soup Have To Do With It?

POSTsoupcan

So, in the simple example of a can of soup purchased for my family, the benefits may be a tasty, quick, low-cost meal that satisfies my daughter’s hunger and provides some nutrition. But as a mom, my values are things like fulfilling my sense of duty to family, maintaining family harmony at the dinner table, keeping my life under control and getting time back in my day. Brands that demonstrate connection to these sorts of deeper values will win my perpetual loyalty. Features and benefits are temporal. Values endure.

Next, by delineating what is sought by users vs. buyers vs. payers (and understanding what the implications are when these roles are played by different people), you will establish a new angle on segmentation and shine a light on otherwise hidden innovation opportunities.

So back to the can of soup, note the differences below between the benefits that matter to the user, the buyer and the payer. These may be one, two or more people. But even when one person plays all three roles, the benefits that one person sees through each lens are different.

Slide1

Slide1 copy

So what about features?

Features may provide reasons to believe in the brand benefits, or even ladder up to the brand values. But by themselves, they will almost never endear customers to you. And, in fact, they may burden people with detail that distracts from a quick determination of whether the brand represents a good choice. At a minimum, features must be shared for the sake of ingredient transparency – the latter representing a brand value that has gained in importance especially for millennial buyers.

Try to complete the user/buyer/template model as a team exercise or on your own. See how it can get you thinking about improving customer focus and engagement by connecting to the higher-order needs of whatever marketplace you serve.

It’s Time to Toss ‘Rank and Yank’

When executives don’t perform well, sometimes they’re fired. But when the company’s merit rating system doesn’t improve employees, do you fire it, too?

If you’re Accenture CEO Pierre Nanterme, you do. That’s right, he fired ‘rank and yank.’

There will be no more annual performance reviews at Accenture — a decision that employees wholeheartedly support, according to their responses on Facebook, and the Washington Post, whicho broke the story.

This wasn’t the first time in recent memory that rank and yank was given the boot.

Earlier this year, GE and Deloitte largely eliminated their annual review processes, too. They followed Adobe, which blazed the way in March 2012.

If the unintended consequences of annual performance reviews haven’t yet hurt your business, consider yourself fortunate. But if your organization is one of the millions of businesses that have not fundamentally improved people — effectively making employees worse off today than they were when they first came to work for you — you owe it to yourself and your employees to rethink how you reward and improve people.

The Unintended Consequences

Dr. W. Edwards Deming first suggested eliminating the annual performance review 50 years ago. Deming called it “a disease that annihilated long-term planning, demolished teamwork, left people crushed, bruised and despondent and unable to comprehend why they were inferior.”

Today, with fewer than 40% of employees feeling as though they matter at work, is there much data from which to disagree?

Probably not.

While Deming’s comments certainly weren’t popular with mainstream American leadership, they have resonated loudly with millions of employees.

One thing Deming frequently talked about is systems thinking and how it relates to rank and yank and improving people and their productivity.

Output Equals Input

A Formula One race car running at peak performance maximizes the engine and transmission to generate both horsepower and torque as it speeds along the track. But other components of the system also contribute greatly to the race car’s success or demise.

For example, the conditions of the track can vary based on the weather. Heat, cold, humidity, wind and other climatic conditions all affect racing, creating the need for differing types of tire compounds and race car setup. The speed at which a team can change tires also goes into the mix.

So which element is most likely to propel the car to victory?

All of them. None of them stands alone. This is precisely the point behind systems thinking. The sum of the parts is far more important than individual components.

A System of Profound Knowledge (SOPK)

In Deming’s System of Profound Knowledge, he promoted the idea that a system of production had four key elements that were necessary to improve and transform an organization.

  1. Appreciation of a system
  2. Knowledge of variation
  3. Theory of knowledge
  4. Psychology

All four elements needed to be thoroughly understood by leadership to materially improve production rates, create greater operating efficiencies and, most importantly, improve people on a continuum.

The Element Of Psychology: Destroying the Entire Herd

The original thinking behind the merit rating system was that ranking employees — one against another — would bring the cream to the top, and separate the butterfat from the buttermilk. But the system as we know it has not only spoiled the milk but destroyed the herd used to produce it.

In addition, the merit rating system does little to improve a system’s performance. While a handful of employees might “feel” able to produce more goods and services for a few days following favorable performance reviews, the fact is, over the long haul, this isn’t true.

The Element of Variation and a Bunch of Red Beads

In his famed red bead experiment, Deming destroyed the fallacy that different people, doing the same thing over and over again in a standardized production process, would yield markedly different results. And the variation in output was predictable to near certainty.

During Deming’s experiments, he first established a standardized process. Employees would use the exact same machinery, methods and materials to perform his experiment. The only difference was the person performing the process. Deming, in fact, often used company executives to be production workers for a day.

The goal was to make white beads, of the highest quality and at the fastest rate.

So, pay for performance, maximize output, separate the wheat from the chafe and men from the boys, right?

Wrong!

Mixed within the white beads would be problems, represented by red beads. Executives would reach down inside a container to pull out white beads, and red beads would be mixed in.

Deming compared the white-bead production of each executive, and they were astonished when they couldn’t outproduce one another on a meaningful basis, no matter how competitive they were or how much encouragement or punitive action they received from Deming or other team members.They were all impaired by the wasteful red beads that kept popping up.

Deming’s simple example of controlled variation showed thousands of executives that merit ratings were ineffective tools at improving human productivity, and improving humans themselves.

To increase production, what was needed was a different way of doing things. A systemically better way. One that used an entire team’s talents and knowledge to find the root causes behind production problems. Knowledge and talents that could be used to improve the system while getting to the bottom of the causes of the red beads.

Deming promoted a system of win-win. One that helped any man or woman working within a system get dramatically better psychologically, not intrinsically worse emotionally. A system that avoided using one man’s talents to destroy another man’s ego — or perhaps even “annihilate it,” as Deming suggested was happening throughout American culture more than 30 years ago.

The Importance of Knowledge

Harvard sociologist Chris Argyris defined learning as “the detection and correction of errors.” Deming suggested that man’s long-term need to learn — an intrinsic motivator — far outweighed the extrinsic rewards and short-term benefits from his financial success.

It was within this context that Deming talked at length about knowledge, psychology, variation and systems thinking and their respective impact on people, productivity and engagement. All aimed directly at improving the conditions in which employees work.

Individuals Vs. Team-Based Merit

Many employees will be happy to see you yank old rank and yank. Especially those who — according to your merit rating system — are indispensable performers one year but dispensable slugs the next.

It’s time to revisit the ideas behind systems thinking and how it can improve man on a continuum.

I rarely use the word “terminate.” But if firing, or simply “laying off” the merit rating system for a while will bring about the good change we need to improve people and profits simultaneously, let’s bring about its pink slip.