Innovation continues to be a key topic within the industry, attracting greater attention in the last few years because companies like Google, Walmart, Apple and others have raised the bar with strong innovation cultures that are challenging existing companies and industries, including insurance, in a multitude of ways. Their commitment to create, nurture and inspire a culture that mobilizes their creativity and resources is breathtaking and is also backed by the commitment of top leadership to ensure innovation is seen, heard and acted upon each and every day.
In this rapidly changing marketplace, innovation is no longer a nice-to-have initiative. It is a must-have, strategic business capability and core mandate that is defining a new era of market leaders across all industries, including insurance. The change and disruption are not from any one influencer, but rather a combination of influencers that together are creating a seismic shift in business models, customer expectations, products and services and infrastructure. As result, companies are increasingly embracing innovation to address the challenges and opportunities of this disruption … and insurers must, too.
Many insurers are on the journey to becoming a Next-Gen Insurer by reinventing the business of insurance. Unfortunately, too many are only retooling their traditional business elements such as products, services and processes. These varied approaches expose a wide and dangerous gap in the levels of innovation maturity. Based on our research results, only 13% have a strong innovation culture, 35% have a formal innovation team, 26% have formal innovation processes and 36% are using collaboration tools. The diversity and small amount of engagement in these four critical areas suggests that only about a quarter of insurers would likely have the necessary foundation in place to achieve mover or market leader status, leaving the majority of insurers at the laggard or “mainstreamer” level.
What does this reveal? Insurers appear to be significantly behind — especially when compared with new challengers that are moving at a high pace and level, with innovations and capabilities emerging regularly through their own development, acquisitions or partnerships. The new challengers are transforming other industries, and the insurance industry is being threatened, both directly and indirectly. Retail with Amazon, taxi service with Uber, banking with Lending Club, venture capital funding with Kickstarter, automotive with Google and insurance with Google all illustrate ways that innovative capabilities are being introduced and that industry boundaries are being eliminated. A commitment to innovation is at the heart of growth and success.
The implications for insurance are vast. If insurers fail to achieve a robust level of innovation maturity, they will increasingly fall behind and risk becoming irrelevant in a changing marketplace, just like Kodak, RadioShack, Borders and others. But those that embrace the inevitable nature of the seismic shifts that will affect almost every line of business and every product within the insurance industry’s portfolio will be well-positioned to lead their organizations’ innovation initiatives beyond traditional comfort zones.
This report provides a framework to help insurers assess their current innovation maturity level compared with where they want to be. By doing so, they can best determine strategies to establish innovation as a core business capability to help win in today’s world.
In a world of rapid change, new competitors, emerging technologies, advancing innovation and fading industry boundaries are intensifying the challenge to traditional insurance business assumptions. How insurers respond to these changes – with a fresh set of views that combine both inside-the-industry and outside-the-industry perspectives within a robust innovation process – will very likely influence their future.
So how should insurers respond?
- Insurers must assess their current innovation maturity level, define the desired maturity and formulate a plan to move the organization forward on their journey as a Next-Gen Insurer. Evaluate your current state across key elements and provide executives a baseline from which to define and develop mature innovation capabilities necessary to compete today and in the future.
- Insurers should establish an innovation mandate and business capability by leveraging best-practice methodologies, like the SMA innovation framework, to guide and implement the desired innovation maturity level within the organization. Ensure that innovation becomes a sustainable and robust capability similar to other core capabilities like program management, financial management or product management.
- An organization must focus on the level of strategic and organizational commitment, on tracking and assessing inside and outside industry trends, on being willing to embrace open innovation and an ecosystem, on the ability to develop long-term scenarios and on investment of resources. They will define the level of innovation maturity and determine future success.
- Insurers must create and participate in robust ecosystems of internal and external resources to gain insights.
- The commitment to innovation should be viewed no differently than the organizational and financial commitments needed for any strategic initiative, new market entry or new business. Market leaders are embracing innovation as a requirement for fueling the organizations’ potential and securing their market leadership.
Innovation is a must, and time is of the essence. Leading futurists, including David Smith and Erik Qualman, suggest that 40% of the Fortune 500 companies won’t exist in 10 years. It is reasonable to expect a similar ripple effect through all companies. It is imperative that insurers assess their current state of innovation maturity and commit to a future state that is fully capable of fulfilling their vision for a viable future. Those that embrace innovation and capitalize on the disruption and influencers stand to make the biggest gains and remain relevant in the future. But those that hesitate will fall short in both competitive position and financial stability. What is your next move?
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