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Why Trump’s Travel Ban Hurts Innovation

Silicon Valley exports technology and imports the world’s best talent. That is how it has helped grow America’s economy and boosted its competitive advantage. President Trump’s executive order banning immigrants from some Muslim countries sent shock waves through the tech industry over the weekend because it was a loud and clear message to the world that America’s doors are now closed, and that xenophobia and bigotry are the new rules of law.

It is no wonder that executives at almost every major technology company, including Alphabet, Facebook and Apple, have made statements defending immigrants and distancing their companies from the president. These companies are worried about their survival and the future of the country.

Let there be no doubt that immigrants are essential to our economic present and future. These newcomers start a disproportionate number of U.S. businesses, particularly in advanced technologies. Immigrants and foreign-passport holders occupy a growing majority of places in graduate education programs in computer science, mathematics, physics and other hard sciences. They play an outsize role in U.S. research and innovation.

See also: An Open Letter to the Trump Administration  

A 2012 research paper I co-wrote, “America’s New Immigrant Entrepreneurs: Then and Now,” documented that 24% of U.S. engineering and technology startup companies and 44% of those based in Silicon Valley were founded by immigrants. My research also determined that immigrants contributed to more than 60% of the patent filings at innovative companies such as Qualcomm, Merck, General Electric and Cisco Systems. And surprisingly, more than 40% of the international patent applications filed by the U.S. government had foreign-national authors.

Study after study has found that immigrants are more likely to start job-creating businesses, not only in tech but across the economy. In 2014, 20% of the Inc. 500 companies had immigrant founders. That’s despite immigrants accounting for less than 15% of the U.S. population. According to research by economist Robert Fairlie for the Small Business Administration, immigrants are more than twice as likely to found businesses as non-immigrants, and 7.1% of immigrant-founded businesses export their products outside the U.S. as compared with only 4.4% of non-immigrant-founded businesses.

Clearly, blocking the path of immigrants into the U.S. cuts off the exact economic growth serum that has made America great. Creating an atmosphere where immigrants are fearful and uncertain about their future will reduce their incentives to open businesses here and stay. This is becoming even more so as other countries increasingly court educated immigrants and entrepreneurs. Those who support the president’s executive order say that the intent is to block people from countries where terrorism is sourced. But it’s not so simple.

By blocking entrance based on passport or country of birth rather than objective criteria, the executive order paints all immigrants from those affected countries and possibly dual passport holders with the same scarlet letter. What if the next Mark Zuckerberg happens to be Iranian? Or if an Einstein happened to be born in Libya? Let’s not forget that Steve Jobs’s father was Syrian — and he would have been banned from entering the U.S. under Trump’s dictate.

Yes, it is true that the affected countries are not the largest sources of immigrant entrepreneurs. But setting a precedent like this can mean that a politician can use this weapon against other countries that have become critical in supplying talent to fuel U.S. innovation. What if a frustrated president elected to block immigrants with Mexican, Chinese or Indian passports? The scenario, totally unthinkable a few months ago, is today entirely plausible.

In my 2012 book, “The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent,” I documented the stories of numerous immigrant entrepreneurs who were forced to leave the country because of shortages of skilled immigrant visas, called green cards. It wasn’t that we didn’t want these people here; American politics was caught in a political quagmire on skilled immigration. As a result, the country began suffering a brain drain, with highly skilled foreign-born doctors, engineers and scientists returning home.

With this executive order, Trump has made it clear that immigrants will have to worry about being singled out even after they have become lawful permanent residents; that their religion and place of birth may be the deciding factor in whether they are allowed to reenter the U.S. after going abroad. This will no doubt turn the trickle of skilled workers permanently leaving the country into a flood. Entrepreneurs who had wanted to come here will have now second thoughts.

See also: What Will Trump Mean for State Regulation?  

Whether or not the courts uphold the legality of the executive order, the damage has been done. Already, the number of billion-dollar technology startups, commonly called “unicorns,” that are located outside the U.. has been increasing dramatically. Fifteen years ago, almost all were in the U.S., while today 86 of the 191 unicorns are in countries such as China and India. We can expect this trend to accelerate because the Trump administration has just added fuel to the fire of innovation abroad and handicapped our own technology industry.

2017: A Journey Toward Self-Disruption

Last year, an EIOPA stress test revealed that a large portion of European insurers remain vulnerable for one or both of the tested scenarios. At the same time, insurers continue to struggle with a constant shift in customer expectations. We are all used to seamlessly working digitally in more and more aspects of our lives, and we’ve come to expect the same treatment when it comes to insurance.

So what’s the problem? Shouldn’t a healthy insurer be perfectly able to cope with some adversity while making the change to become a more digital and customer-minded organization?

Unfortunately, a number of reasons mixed together provide a particularly toxic combination that slows the transformation. To start with, insurers are still largely running on legacy applications. Not only does this limit organizational agility dramatically, but it also means that available change capacity is predominantly used to keep the legacy infrastructure up and running.

On top of this, regulatory pressures are dramatically increasing the cost of doing business. Complex risk and compliance requirements in legacy-dominant environments reduce the ability to transform on a more fundamental level. Furthermore, there is continued pressure on product margins, and historically low interest rates are reducing returns.

See also: Insurance Disruption? Evolution Is Better  

Beyond the insurtech hype

As incumbents struggle with internal inefficiencies and adverse conditions, fintech and insurtech initiatives are starting to emerge – based on fresh thinking and modern application architectures. These new initiatives relentlessly exploit inefficiencies in the value chains. And with the rise of the sharing economy, new ways to manage risks like usage-based or P2P insurance are becoming increasingly important.

The right stuff?

The awareness that incumbents need to transform their way of working, and solve some fundamental problems in their business models, is prevalent. There is in fact a lot of activity and experimentation taking place, through innovation labs, partnerships or direct strategic investments in insurtech.

This is all well and good, but are these initiatives sufficiently grounded to become successful? Do incumbents possess the right stuff to create, develop, nurture and scale new business concepts with sufficient impulse to remain relevant and profitable in the long run?

The journey toward self-disruption

These are all questions that the industry will be posing in 2017, and there is no doubt the insurance sector needs to adapt to a new world. One thing is for certain, simply embarking on a journey to implement one of the “Top-10 Insurtech Solutions” is not going to cut it.

The real challenge lies in first removing the legacy culture from organizations before trying to solve the challenge in application landscapes and value chains. This journey toward self-disruption requires courage and leadership. To reach the desired destination, boards may consider numerous approaches to rebalance change programs. 

Considered approaches

Scenario planning and storytelling can be a powerful tool for coping with a large number of uncertainties. Scenarios are perfectly suited to translate into compelling, vivid images of the future, using powerful storytelling as an effective way to convey messages.

Changing the innovation mix is also something insurers will be contemplating. The composition of your innovation mix (product-, process- or business-model focused) should be in line with the lifespan of your dominant business model. For insurers, this might imply that now is the time to direct more resources toward more radical forms of innovation.

Replacing incentives blocking change is another approach to consider. If a board’s primary responsibility is to facilitate the presence of a long-term business model, then this implies that the board should worry about anything in the organization that blocks this purpose. A review of existing performance management and key performance indicator (KPI) frameworks might be one of the most critical things to address as this drives behavior throughout the organization.

See also: Which to Choose: Innovation, Disruption?  

Then there is creative destruction as a driving force. A constant process of internal creative destruction is required to avoid becoming the victim of an external, competing creative force. The likes of General Electric and Johnson & Johnson have mastered this. Carefully applying these design principles in the insurance sector might be a critical activity.

Looking ahead  

The insurance sector has a long way ahead adapting to a new world. There is a critical role for current and coming leadership. We see insurers increasingly partner with insurtech companies, hoping to find fresh thinking, agility and entrepreneurship. We’ll have to find out if this brings sufficient change. Otherwise, the EIOPA double-hit scenario might be a blessing in disguise – it could, in fact, provide the required burning platform for the long-awaited transformation.

10 Building Blocks for Risk Leaders (Part 4)

Important things in life are not easily reduced to 10 easy steps. Nevertheless, this series provides a list of 10 building blocks to achieving long-term success in risk management from someone who has spent more than 25 years striving to carve out the most satisfying career possible, while never losing sight of the attributes attached to the bigger picture. Part 1 is here, Part 2 here and Part 3 here. This is Part 4 in the series.

7. Developing the Bench

While all managers are expected to develop their employees, this aspect of management is harder in risk management than in many other disciplines or functions, if only because of the often smaller teams. But getting the right bench strength established is essential to getting the risk management fortified for the hard times that will inevitably arise. The right bench will also improve the chances of sustained success.

Just finding great people is hard enough. In the risk management world, keeping them can be more challenging for a variety of reasons, including limited upward mobility because of the small team size. However, there are ways to deal with this limitation. For example, GE is well-known for running talented managers though the audit function, where managers have opportunities to gain a broader and deeper understanding of what makes the business tick.

Taking a similar approach with risk management accomplishes the same goals and argues for a regular rotation of talent through both risk management and operations. This allows talented people to be exposed to other leaders and their functions, perhaps opening doors of opportunity. Doesn’t that detract from developing long-term risk leaders? At first blush, it may look that way. In reality, the approach furthers another goal all risk leaders should have; namely, to make every employee into a “little risk manager” for the specific risks for which they are accountable.

While the actual direct report bench of the average risk department will often appear shallow, it can be deepened by considering all employees as a part of the risk team and emphasizing risk stakeholders who can be rotated through risk management to help build a risk culture. Be sure to consider vendor/supplier partners to be part of the team. As we’re all in the risk game together, it behooves every risk leader to look at teams in this broader, more inclusive fashion.

Finally, don’t forget interns. Many view interns incorrectly, as a drag on an already small team, requiring time-consuming training, coaching and direction that fully trained employees may not. Others think interns are only good for mundane tasks and end up underutilizing their skills. But if there is a good intern recruitment strategy—recruiting from the “right” schools and presenting an attractive case for why students should intern in risk management—great interns will be discovered who can materially contribute to the success of both the team and its mission. The key is to not think of them as “temps” but as those who lend themselves to being developed over time for full-time roles. This approach will demonstrate commitment to a solid intern program, which in turn will attract the best and the brightest and broaden the recruitment and team effectiveness strategy.

8. Supplement Value Preservation With Value Creation

While protecting and preserving is job one for risk leaders, the bigger opportunity is helping others understand what it means to exploit risk for gain. This is a foreign concept to many because they don’t think in terms of risk when they’re stress-testing a strategic plan and its component parts . Therein lies the tremendous opportunity to find a way into the planning process, by helping planners make this connection, and understanding the relationship between risk and success.

Because every risk represents the possibility of failure for organizations, the ultimate challenge for all risk leaders is getting a seat at the planning table, to educate, inform and contribute to the thinking of those charged with plan development and measurement. Don’t be fooled into thinking , however, that acceptance in this realm is a slam dunk. Just as the value proposition for enterprise risk management has been difficult for many to articulate and sell, so planners are naturally skeptical about allowing risk managers to participate directly in their process. Part of this reluctance comes from the reality that, in many organizations, the C-Suite is not sold on risk management as a strategic contributor to helping define success for the enterprise. This stems from the dated perception of risk managers as “just insurance” managers. But, as entrenched as that perception may be in many organizations, it is changeable. That is the challenge.

Central to changing this perception is helping educate key management on how risk can and should be leveraged for gain—the upside of risk. Every risk leader needs to educate and make organizations more aware of risk “opportunities” and be willing to take the personal risk associated with doing so. This personal risk is one reason many risk leaders have not evolved into the strategic advisers that can be the pinnacle of the profession. Don’t assume that, just because someone is adorned with the title of chief risk officer, that she is actually acting as strategic adviser. Many are just high-level risk owners with accountability for some related processes, rather than truly “enterprise-wide” risk leaders.