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Key Considerations for Managing Innovation

Innovation is critical for every organization, but it is complex and can be very confusing, too. Poor innovation management and ineffective execution are among the key reasons causing innovation failures in organizations.

Many companies lack well-defined innovation strategy and alignment with business strategy, resulting in poor innovation delivery. While it takes time to build the innovation culture, companies must leverage the startup ecosystem, capabilities of partners to augment the innovation gaps and emerging technologies effectively to deliver innovation faster. Innovation silos within the companies are key impediments that dilute innovation and generate poor innovation results.

It is the time for companies to get honest and acknowledge innovation gaps, prioritize top factors affecting innovation and develop clear innovation strategy and plans that are well-aligned with business strategy. This article covers key considerations, describes the current state of innovation within financial services and the insurance industry and provides recommendations for effective innovation delivery.

Balancing Innovation, Startups and Emerging Technologies

Today, there is lots of buzz on emerging technologies, startups and innovation. While the business environment, economic conditions, political situation and core capabilities of many companies have not changed dramatically over the past year, nevertheless the innovation agenda has taken the front seat in almost every organization.

The big question remains: How effectively are companies managing innovation?

Are companies focusing on business innovation or technology innovation or a combination? Which are the proven models for innovation that deliver results? Is partnering with startups sufficient to drive innovation? Which emerging technologies have higher potential for innovation?

See also: Don’t Just Indulge in “Innovation Theater”  

Well, there are no straight and simple answers to these questions. What matters today is: There need to be serious attempts of organizations toward driving innovation, commitment by senior stakeholders, collaborative culture across teams, alignment between top-down and bottom-up innovations, bridging innovation silos within organization and focus on customer-centricity.

Business Values Are Driving Innovation Initiatives

In my interaction with senior business and IT stakeholders of leading financial services companies in the last few months, one thing has emerged clearly: that business values and outcomes are the most
critical element in getting innovation funding. I have met CIOs of leading insurance companies who have expressed concerns about getting buy-in from the business team for business cases as
one of the key hurdles in delivering innovation. While a majority of innovation efforts are still technology-driven or technology-led, only a portion carries real potential to disrupt the business or push the organization to a rapid growth trajectory. Many organizations are still focusing on incremental innovation, while many others are burdened with operational priorities and legacy challenges.

The good news is that financial services and insurance companies are not fearing experimentation. The partnership with startups, the pace of pilot projects using emerging technologies and the participation of companies in industry events, technology conferences and startup events has grown significantly in recent times. Many financial companies are sponsoring hackathons and are welcoming innovation of all types. A good number of companies within financial services and the insurance industry have already partnered with fintech and insurtech and are clearly finding value. The hunt for innovation is furious. The FinTech, InsurTech influence is pushing companies to innovate faster.

Technologies Enabling Innovation Within Financial Services

SMAC (social, mobile, analytics and cloud) technologies that were new a few years ago have become a new normal, with high adoption rate across industries. Emerging technologies include blockchain, artificial intelligence (AI), robotics process automation (RPA), Internet of Things (IoT), augmented reality (AR) and virtual reality (VR). However, companies are being pragmatic about adopting these technologies.

For example, while it is true that in the last three years more than $1 billion of investment has gone into blockchain technologies alone, with 90-plus companies being part of blockchain consortia across 24-plus countries (according to recent World Economic Forum findings), many companies (insurers, banks and other financial companies) still struggle to identify suitable, viable use cases. The technical complexities and shortage of skills are another big hurdle for adoption of emerging technologies such as blockchain.

While some of these technologies are still evolving, technologies such as AI and RPA are moving faster in terms of adoption within financial services and the insurance industry. For example, AI-enabled chatbot and robo-advisers are moving beyond delivering basic conversational response to enabling channel expansion, enabling cross selling, targeting new segments, delivering training and enabling end-to-end transaction processing within the financial services industry. RPA technologies are also gaining popularity and are in use within financial services and insurance companies, helping
companies automate mundane, repetitive, manual, rule-based tasks or processes. The adoption rate and focus on IoT technologies has been hampered by increased fear of companies toward cyber security risks after various ransomware attacks in the recent past. AR and VR technologies are still hunting for viable use cases within the financial services industry amid the changing shapes and characteristics of AR/VR devices. Emerging technologies are the key enablers for delivering innovation and cannot be ignored any more.

Bridging the Gaps and Making a Balance With Innovation

While every company has a well-defined business strategy and IT strategy that are reviewed periodically, many lack a well-defined innovation strategy. It is time for companies to revisit their innovation strategy, align it to business strategy and make it an integral part of the operating model. The innovation silos, poor governance, complex organizational structure, lack of funding,
talent gaps and organizational politics are a few known elements that hinder innovation delivery. Only a few innovation-driven companies take tangible actions to overcome these challenges and
work toward building an innovation-centric culture. Agility, experimentation, customer validations, pivots, failures and talent development are integral parts of innovation delivery, and
companies that understand that, will measure innovations regularly, reward teams and encourage open innovation.

See also: Pursue Innovation or Transformation?  

While corporate venturing, partnership with startups and acquisitions are some methods to fast-track innovation efforts and mitigate risks, without addressing the root cause that hinders innovation, companies are just postponing the real problems. Startups are a good catalyst for innovation, but many companies merely leverage them as a reference model or mitigation element, which they think they can mimic, buy or obtain through partnership using brand and financial muscles. If companies find many gaps with the existing innovation model, they must explore partnership and acquisition of appropriate startups seriously and integrate them effectively into the companies’ ecosystem to ignite innovation delivery.

Business model innovations that are market- or industry-driven typically deliver successful innovations that are disruptive. Companies that bring together the best elements of
business and technology (talent, people, vision, insights, partners) at the right time, collaborate effectively internally and externally, learn from failures and involve customers in every stage of the innovation life cycle are the ones that are most successful in innovation delivery. In addition, emerging technologies offer numerous opportunities for companies to fast track innovation efforts when coupled with the right business case. Companies must balance the innovation, startups’ influence and the power of emerging technologies for competitive advantage and market leadership.

Why Not to Buy a Startup

The startups are the talk of the town today. Fintech, insurtech, retailtech, regtech, autotech, edtech are the new vocabulary for enterprises. Innovation is on the priority list of most executives globally. Many are getting worried about the risks, disruption and impact of startups.

With more than $80 billion of investment funding already injected into the startup ecosystem in the last three years, it would be foolish for companies to overlook startups. There are more than 4,000 startups globally active at the moment across various categories that are challenging incumbents across industries.

A good number of companies across financial services, insurance, retail, travel and healthcare segments are already exploring partnership with startups. But many executives are confused about how to deal with startups.

Buying a startup not the right answer for innovation

There are still questions on how effectively companies can leverage and integrate startups into their ecosystem. A few companies are exploring selective startups for purchase while many others are keeping their options open.

While buying a startup may sound like a good move, it does not guarantee success. Companies can buy a startup — but not the innovation.

Companies must innovate internally first. While startups can help to bridge the innovation gaps to some extent, they cannot solve the basic innovation challenges. There is a need to build innovation culture.

See also: Startups Take a Seat at the Table  

Many large organizations today struggle with innovation. If a startup coming from nowhere can innovate, drives passion within teams and delivers incredible value, what is stopping the large companies to excel?

The problem is with the traditional, tactical approaches. Many executives, used to stringent financial measurements, measure innovation with a similar yardstick. The results are obvious. When innovation initiatives fail to deliver quick results, executives back away.

It is time for executives to revisit their approach on innovation.

Get the basics right before fixing the organization

Innovation demands commitment, agility, perseverance, collaborative culture, hard work and passionate teams. Innovation is mostly achieved as a result of failures and continuous learnings. There is no company in the world that has delivered disruptive innovation without witnessing failure. 90% startups fail, proving that innovation is not easy.

Today’s dilemma is that executives hate failure. The quarter-on-quarter pressure, macro-economic conditions and competitiveness in business hinders them from committing 100% to innovation. Organizational complexities, silos, bureaucracy and rigid culture add more pain in delivering innovation.

Startups are no longer a bubble, but an ongoing challengers

Many see the growth of startups as a bubble that may bust soon. But startups are not going away, so companies must exercise caution and develop a symbiotic relationship with startup ecosystems.

The best strategy is to partner for co-existence. While many startups operate on the periphery of business, they will move into the core part of business across industries. We are already seeing many examples in banking and insurance, where startups are getting licenses to manage end-to-end business. London-based startup Monzo, Berlin-based Number26 (N26), Atom and Tandem in the U.K. and Klarna in Sweden signal the backing of banking regulators for startups globally. Similarly, Lemonade in New York, Oscar in New York, Zhong An in China and Acko in India are examples of insurtech startups licensed for business.

Soon, companies will find startups snatching portion of their business. The only way to respond is to become a startup. Companies must start thinking like startups and act and deliver value like startups.

Without building an innovation culture, this is not going to happen.

Innovate or pay the price: Choice is yours

Startups will continue to be a challenge for companies of all sizes. Companies must innovate continuously and develop tailored strategies to manage the growing influence of startups. While partnership with startups or even a purchase of a startup can fast-track innovation efforts, these are not sufficient to transform a company or ignite its culture.

Companies must simplify complexities and structure and invest in people to develop an innovation-centric culture.

See also: Innovation: ‘Where Do We Start?’  

Innovation is not a commodity that can be purchased using financial muscle. Innovation will never be up for sale and cannot be purchased or mimicked. It has to be built from the ground up.

Convergence: The Inevitable Reality

The insurance industry is expected to converge soon. It is an inevitable reality. The question is how quickly such convergence likely to happen? The answer is soon. Definitely within a decade. And needless to say, customers are going to drive the next wave of convergence for the insurance industry.

The insurance industry must examine the convergence journey of banking industry closely. Today, banks offer varied converged portfolio of products for customers. It ranges from various account types, deposit and savings products, range of loans, various cards, investments, portfolio services to numerous products as per need of customers. The question is: if today, insurance buyers shop for P&C, life and health insurance products for their needs at different places, why such insurance is not readily available in a converged manner? This is definitely a big opportunity for the insurance industry. Insurers that already possess licenses for different insurance segments, must leapfrog in offering converged insurance products for competitive advantage.

Market and Product alignment: P&C, Life and Healthcare industry

Insurance industry traditionally has been operating differently for property and casualty (P&C), Life and Healthcare segments. It followed such industry alignment as per needs of various buyers since its formation time and historically such alignment continued over decades with minor tweaks as per market demand. The regulatory frameworks were built around an industry structure to protect the interest of buyers and encourage healthy competitions in the marketplace.

Today, the insurance industry has reached the multi trillion dollar in size globally and it is one of the key contributors for every economy serving billions of people in the world. Although there a few handful insurance companies that offer personal, life, annuities, disability, health and other range of insurance products for its customers, such products are typically sold either as separate policies or different business lines under a different legal entity or divisions in a fragmented manner. The overall market is fragmented today in terms of serving the customer holistically. And this is a great opportunity for the insurance industry in offering converged insurance to its buyers.

See also: Model for Collaboration and Convergence  

Why worry about it now? It is an opportunity that cannot be ignored!

Today, every individual or corporate buyer cares for the insurance. It is different thing that many lack understanding of insurance products, few find them too complex to understand and many think companies are not selling or offering the right products for their needs. However, this issue is more related to customer education or awareness and can be addressed.

It is very likely that within a family or household, you may find a minimum of 3 or more different policies for personal, life insurance and healthcare needs that are purchased from different insurance companies. This is definitely a missed opportunity for many insurance companies and shows the poor state of the industry in not serving the customer holistically for their basic insurance needs. The question is not about whether the buyer understand insurance or not, but more about whether insurance companies offer adequate products catering to common/generic needs of buyers. Few people may cite regulatory hurdle, licensing challenges, underwriting/actuarial complexities and operating models as potential bottlenecks in adoption of converged insurance, however such doubts may become irrelevant in case the market start maturing or your competitor’s starts moving in that direction or customers start demanding such converged insurance. It is the time to assess the demand holistically, assess market future demand and measure customer feedback and inputs.

Product bundling as a strategy is certainly good for competitive advantage

Within a household, if we assess the personal lines insurance products that are purchased, one may mostly find that auto insurance is being bought from one insurance company, homeowners from another and travel insurance from different insurance company.

The product bundling is a good opportunity not just within a segment (e.g. Personal insurance within P&C) but it makes more sense to bundle products across various insurance segments (e.g. P&C, Life, Healthcare) to serve the customer needs. And there are many successful companies today, who have been doing it with very positive results consistently. State Farm, Progressive, Liberty Mutual are a few good examples who have attained market leadership position in personal insurance in the United States by offering bundled Auto and home products for its customers for quite some time. Nationwide Insurance has been helping customers with bundling Auto, Life and Home products. Similarly, there many other leading brands globally who have been benefitting from product bundling. For example, in the UK, the market leader Aviva is the first mover this year (2017) in offering the converged insurance and made a formal commitment by merging its General, Life and Health insurance business units across the organization to offer simple, convenient and improved value service to its customers. The shift towards converged insurance is just starting in the marketplace and not very far to hit the industry in a big way.

Convergence of products is becoming more critical in today’s digital age

In today’s digital age, customers are inclined towards digital products that can be purchased seamlessly with ease with some initial research. If the brand is strong and insurance product(s) offer adequate value at affordable price, customers mostly would prefer to buy it from the same insurance company. The days are not very far when many insurers will adopt “one-stop-shop” strategy for serving customer in the new digital age by offering converged insurance products.

It is the right time for insurance companies to start preparing for the new converged world, develop cross functional capabilities, identify changes required in processes, operating model and develop platforms that caters to the needs of the new digital world. Emerging Technologies definitely play a critical role in shaping the new converged digital ecosystem. It also offers an opportunity for IT players, software vendors and insurtech companies develop fit for purpose solutions that can address the need of the new digital and converged insurance economy.

See also: Convergence: Insurance in 2017  

Avoid market distractions: Focus on core capabilities and customer Centricity

Many insurance companies today are concerned about the disruptions in the industry. The influence of emerging technologies, insurtech and sluggish growth are adding to the anxiety of insurers globally. While many insurers are focusing on digital themes today trying to keep pace with digital technologies, few are unknowingly tilting themselves away from their focus for core capabilities. Underwriting, risk management, claims management and customer Service are the core capabilities of any insurance company and they must continually refine, invest and improve these areas irrespective of the state or direction of technologies for its competitive advantage and market leadership. The technology investments and core capabilities, investment must be detached. Any trade off here is harmful in the long term for insurance companies.

In today’s digital age, convergence of insurance is an opportunity for insurers to address the fragmented products and services landscape. Convergence of insurance is inevitable. The market shifts had just started and customer will drive the next wave of convergence for the insurance industry. Are you ready to be part of the industrial transformation? It is right time to think about it as a long term business strategy and distinctive tool for competitive advantage.

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.


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.

Insurtech Investment to Flourish in 2017

The insurance industry is observing technology innovations and their adoption rate carefully. The impact of artificial intelligence, robotics, machine learning, driverless and connected cars, IoT, cloud, wearables and blockchain cannot be ignored. Many leading insurance companies are now focusing on themes such as “Re-imagining insurance” and “Shaping the future of insurance” and “Discovering the future.”

The current economic uncertainties, sluggish growth environment, geopolitical risk and cyber risks are affecting every industry not just insurance, so you are not alone here!

A “wait and watch” approach, hoping for the environment to stabilize, would be foolish in today’s fast-paced world. Insurers simply cannot confine themselves in a “current year” strategic trap. That approach limits your plans, actions and imagination beyond the current financial year and makes your behavior tactical.

See also: Asia Will Be Focus of Insurtech in 2017  

Here is how aggressively some companies are moving:

If you are thinking that the above companies are the industry biggies with deep pockets that can afford innovation, you are giving mere excuses. There are more than 80 insurance companies today that are already working or experimenting with insurtech companies worldwide today!

You cannot blame budget constraints or company culture/resistance to change, senior leadership lethargy or inaction in sponsoring innovation. I am confident that no CEO today would say “no” to fund or sponsor innovation.

It is true that not all startups succeed (90% fail), so you must exercise caution while picking a startup. Note that a venture capitalist (VC) assessment of a startup must differ from an insurer’s. While most VCs fund or invest in a startup by buying equity to make quick returns and move out, insurance companies must pick a startup based on how its offerings align and integrate into the company ecosystem for generating long-term value to its business and customers.

There are 1,000-plus startups today (backed by funding of about $18 billion) that are already challenging the business model of insurance companies and have potential to disrupt the insurance industry. You don’t have time to assess such 1,000 companies? Relax. In the context of your country, your industry, your line of business and the product lines where your company specializes, this list is much more manageable.

See also: Insurtech’s Pay-As-You-Go Promise

Insurance companies must seriously explore partnerships with the startup ecosystem. If you continue to focus on cost reduction or worry about finding the solution to legacy challenges or think about why business-IT alignment is not getting fixed in spite so many attempts, you will remain inward-focused and lose precious time for innovation. Any forward-looking insurance company cannot ignore the potential that insurtech has to disrupt the industry and redefine business models, plus the agility, passion and out-of-the-box thinking that startups can provide.

Insurers must partner with insurtech companies to reimagine insurance, discover the future and reshape the industry. The investment in insurtech is going to grow significantly during the current year.

Are you thinking you are too late to get involved? Let me assure you, you are not late!

The only caution is that you must act. The time is now!