Tag Archives: larry page

Where Silicon Valley Is Wrong on Innovation

Silicon Valley exemplifies the saying, “The more things change, the more they stay the same.” Very little has changed over the past decade, with the Valley still mired in myth and stale stereotype. Ask any older entrepreneurs or women who have tried to get financing; they will tell you of the walls they keep hitting. Speak to VCs, and you will realize they still consider themselves kings and kingmakers.

With China’s innovation centers nipping at the Valley’s heels, and with the innovation centers that Steve Case calls “the rest” on the rise, it is time to dispel some of Silicon Valley’s myths.

Myth 1: Only the young can innovate

The words of one Silicon Valley VC will stay with me always. He said: “People under 35 are the people who make change happen, and those over 45 basically die in terms of new ideas.” VCs are still looking for the next Mark Zuckerberg.

The bias persists despite clear evidence that the stereotype is wrong. My research in 2008 documented that the average and median age of successful technology company founders in the U.S. is 40. And several subsequent studies have made the same findings. Twice as many of these founders are older than 50 as are younger than 25; twice as many are over 60 as are under 20. The older, experienced entrepreneurs have the greatest chances of success.

Don’t forget that Marc Benioff was 35 when he founded Salesforce.com; Reid Hoffman 36 when he founded LinkedIn. Steve Jobs’s most significant innovations at Apple — the iMac, iTunes, iPod, iPhone and iPad — came after he was 45. Qualcomm was founded by Irwin Jacobs when he was 52 and by Andrew Viterbi when he was 50. The greatest entrepreneur today, transforming industries including transportation, energy and space, is Elon Musk; he is 47.

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

Myth 2: Entrepreneurs are born, not made

There is a perennial debate about who can be an entrepreneur. Jason Calacanis proudly proclaimed that successful entrepreneurs come from entrepreneurial families and start off running lemonade stands as kids. Fred Wilson blogged about being shocked when a professor told him you could teach people to be entrepreneurs. “I’ve been working with entrepreneurs for almost 25 years now,” he wrote, “and it is ingrained in my mind that someone is either born an entrepreneur or is not.”

Yet my teams at Duke and Harvard had documented that the majority, 52%, of Silicon Valley entrepreneurs were the first in their immediate families to start a business. Only a quarter of the sample we surveyed had caught the entrepreneurial bug when in college. Half hadn’t even thought about entrepreneurship even then.

Mark Zuckerberg, Steve Jobs, Bill Gates, Jeff Bezos, Larry Page, Sergey Brin and Jan Koum didn’t come from entrepreneurial families. Their parents were dentists, academics, lawyers, factory workers or priests.

Anyone can be an entrepreneur, especially in this era of exponentially advancing technologies, in which a knowledge of diverse technologies is the greatest asset.

Myth 3: Higher education provides no advantage

Thiel made headlines in 2011 with his announcement that he would pay teenagers $100,000 to quit college and start businesses. He made big claims about how these dropouts would solve the problems of the world. Yet his foundation failed in that mission and quietly refocused its efforts and objectives to providing education and networking. As Wired reported, “Most (Thiel fellows) are now older than 20, and some have even graduated college. Instead of supplying bright young minds with the space and tools to think for themselves, as Thiel had originally envisioned, the fellowship ended up providing something potentially more valuable. It has given its recipients the one thing they most lacked at their tender ages: a network.”

This came as no surprise. Education and connections are essential to success. As our research at Duke and Harvard had shown, companies founded by college graduates have twice the sales and twice the employment of companies founded by others. What matters is that the entrepreneur complete a baseline of education; the field of education and ranking of the college don’t play a significant role in entrepreneurial success. Founder education reduces business-failure rates and increases profits, sales and employment.

Myth 4: Women can’t succeed in tech

Women-founded firms receive hardly any venture-capital investments, and women still face blatant discrimination in the technology field. Tech companies have promised to narrow the gap, but there has been insignificant progress.

This is despite the fact that, according to 2017 Census Bureau data, women earn more than two-thirds of all master’s degrees, three-quarters of professional degrees and 80% of doctoral degrees. Not only do girls surpass boys on reading and writing in almost every U.S. school district, they often outdo boys in math — particularly in racially diverse districts.

Earlier research by my team revealed there are also no real differences in success factors between men and women company founders: both sexes have exactly the same motivations, are of the same age when founding their startups, have similar levels of experience and equally enjoy the startup culture.

Other research has shown that women actually have the advantage: that women-led companies are more capital-efficient, and venture-backed companies run by a woman have 12% higher revenues, than others. First Round Capital found that companies in its portfolio with a woman founder performed 63% better than did companies with entirely male founding teams.

See also: Innovation — or Just Innovative Thinking?  

Myth 5: Venture capital is a prerequisite for innovation

Many would-be entrepreneurs believe they can’t start a company without VC funding. That reflected reality a few years ago, when capital costs for technology were in the millions of dollars. But it is no longer the case.

A $500 laptop has more computing power today than a Cray 2 supercomputer, costing $17.5 million, did in 1985. For storage, back then, you needed server farms and racks of hard disks, which cost hundreds of thousands of dollars and required air-conditioned data centers. Today, one can use cloud computing and cloud storage, costing practically nothing.

With the advances in robotics, artificial intelligence and 3D printing, the technologies are becoming cheaper, no longer requiring major capital outlays for their development. And if entrepreneurs develop new technologies that customers need or love, money will come to them, because venture capital always follows innovation.

Venture capital has become less relevant than ever to startup founders.

Voice of the Customer: They’re Not Happy

Early in November 2014, immediately following the release of the SMA research report Crowdsourcing and Open Innovation: Powering the Sharing Economy, which explored the shared economy and its implications for insurance, I received an interesting email from the CEO of a shared shipping start-up. The CEO stated, “I just wanted to let you know that I have found the hardest problem to solve as the CEO is that, after talking with 12 different insurance companies, I am still stuck on finding someone to write a policy for me! I am not sure you can overstate the tsunami of change that insurers are trying to avoid. It is frustrating to me as a CEO trying to get my company going.”

My instant reaction was … what a powerful voice, and what a compelling, if troubling, customer statement! I immediately reached out to him to discuss his predicament.

In our SMA research, we have written about how the shared economy is empowering individuals and businesses to access specialized skills, resources, goods or services from anyone, anywhere, at any time based on an instantaneous need. The change is spawning new business models and leveraging the combination of crowdsourcing, open innovation and technology. These new business models are challenging decades of business assumptions, models, pricing and growth that were based on the principle of ownership, rather than access or subscription. As a result, the fundamentals of insurance, from risk models to pricing, products and services, are feeling shockwaves. My discussion with the CEO about his business provides a great but jolting example of the need for these new business models, new risk models and (especially) new insurance products. He agreed to do a webinar to describe his needs and his frustrating experiences for our SMA Innovation Communities.

During the webinar, the CEO shared his experience and powerful insights for insurers:

It was easier to obtain $2 million for investment funding than to find insurance. The funding would likely be completed within 30 days. Contrast that with finding insurance coverage: After talking to more than 20 insurers, brokers or agents, over nearly 12 months, there is still no coverage. He found two companies, one of which works with Peers (the non-profit company backed by shared economy companies), that are bringing insurance to this market segment. But he is still awaiting confirmation.

Outdated insurance business models don’t fit today’s market needs. The old models are based on historical actuarial models, rather than real, point-in-time data (i.e. coverage when driving and shipping something). The lack of visibility into capabilities of insurers and independent agents and the language barrier (the coverage needed is inland marine, which implies the use of a boat rather than land surface shipping) make it especially difficult to find exactly the right coverage.

Finding the right independent agent is “tricky” because of referral chains, lack of skill sets, unclear representations, and agent incentives. In seeking coverage, he was told by many in the industry that, “Insurance has not updated the business model since the 1800s, so you won’t find anything.”

What does this mean for the insurance industry? Mildly put, listening to the voice of the customer should be a wake-up call. The lack of understanding and inability to respond rapidly to new market needs opens the door to new competitors and the potential loss of customers.

Just like many other industries that are being disrupted and transformed, insurance must reimagine its business models – from the mission to the customer to the product, pricing, operational and revenue models. Historically, insurance has been about the transfer of the risk of a loss from one entity to another in exchange for payment. In today’s fast-paced, changing world of emerging technologies, new business models and shifting industry boundaries, is that focus limiting our opportunities? This experience by a “could-be” customer clearly suggests we are at least limiting our future, if not risking it altogether.

Other industries (and companies) are noticeably redefining their visions and focus to compete in this new world. At the 2015 Consumer Electronics Show, the media noted that Ford CEO Mark Fields sees Ford as rethinking itself as a mobility company rather than being defined by its legacy as an automotive company, and Ford is delivering a wide array of new services and experiences via the auto. Even Google’s CEO, Larry Page, has acknowledged that its vision statement – “To organize the world’s information and make it universally accessible and useful” – is too narrow, as reported in a Nov. 13, 2014, Fortune magazine article, “Google’s Larry Page: The most ambitious CEO in the universe.” Page is creating a future by leveraging emerging technologies to reshape the business beyond the legacy as a search engine.

Yet the view that insurance vision and business models are shackled in decades or even centuries of tradition is, unhappily, very real. This notion is reinforced in a Jan. 21, 2015, Forbes article titled “Insurance: $7 Trillion Goliath” that compares banking with insurance relative to change and innovation. The article notes that 15 years ago banking was a lumbering, vertically integrated giant that was largely untouched by the technology revolution. Today, however, there are a group of “Davids” like CoverHound, Lending Club and Square that are challenging traditional banking “Goliaths” with some digital “slingshots.” The article further observes that insurance has also remained largely untouched by the technology revolution, but that we are beginning to see the emergence of “Davids” who will challenge the traditional “Goliaths,” leveraging the technology revolution to disrupt the traditional business assumptions and models of insurance.

Insurers must redefine their vision and reinvent their business model, taking into consideration the new and emerging technologies, the growing amount of real-time data, new market trends and much, much more. If they do not, they risk facing a disruption that will be devastating, when it could have been transformational, creating new relevance in a rapidly changing world.

The reimagination of businesses in the context of today’s world and tomorrow’s potential are already defining and revealing future market leaders and winners. Will insurance remain focused on risk transfer products? Or will we look more broadly toward offering products and services that provide much more, enhance the lives or businesses of our customers and meet the needs of a reimagined business model, like the shared economy?

The possibilities are significant. Are you reimagining your business, considering the impossible as the new possible? Insurers need ingenuity and outside-in thinking to reimagine their business as a Next-Gen Insurer and ignite a vision of possibilities.

If not you, then someone else will. So dream the impossible and become a Next-Gen insurer

Healthy Disrespect for the Impossible

When people are extraordinarily successful, examining their characteristics, values and attitudes can be instructive. The rest of us can learn from them and possibly adopt some of them to advance our own goals. Larry Page, co-founder of Google is an example of one who has achieved exceptional heights. Peering into his thought process can be enlightening.

Page says, “Have a healthy disrespect for the impossible.”

To conceive and develop the Google concept and then the massive company, its young founders had to have a very healthy disrespect for the impossible. Others besmirched the idea of collecting all the information in the world and then making it available to everyone in the world. Not only was it a bold idea, it was thought by most to be ridiculous and impossible. But Larry Page and Sergey Brin had a very healthy disrespect for the impossible. They made it happen.

The concept of disrespecting the impossible could be entertained by those of us in the workers’ compensation industry. True, few of us are likely to reach the pinnacle level of Larry and Sergey, but we can borrow some of their bold thinking to get past the assumptions and barriers that keep us from achieving more.

Everyone agrees workers’ compensation as an industry needs a healthy nudge to try new things. The industry is known for its resistance to change. Maybe the way to change the industry, to be an industry disruptor, is to begin with an attitude of disrespecting the impossible.

Many people, including those in the workers’ compensation industry, focus on why something cannot be done. Reasons for this notion are many, but probably cultural tradition plays a role. Inventiveness is not expected or appreciated. Too often, the best way to keep a job in corporations is to keep your head down and avoid being noticed. Spearheading a new ideas is risky.

Stonewalling new ideas or doing things differently or adopting new technology in an organization thwarts creative thought and certainly diverts progress. I was once told that to incorporate a very good product would mean doing things differently in the organization. So the answer was automatically no!

We all know the old saying about the word “ass-u-me.” It actually packs some truth. To avoid the trap, check assumptions for veracity. Incorrect assumptions can be highly self-limiting.

Begin the process of problem-solving with new thinking — disrespect the impossible. What could be done if the perceived barriers did not exist? What could be accomplished if new methods were implemented.

Probably the most important ingredient for achievement in any context is tenacity. It’s easy to quit when the barriers seem daunting. Tenacity combined with a disrespect for the impossible might be unbeatable.

9 Technologies That Will Change Insurance

“We’re at maybe 1% of what is possible. Despite the faster change, we’re still moving slow relative to the opportunities we have.”

This compelling statement from Larry Page, CEO and co-founder of Google epitomizes the power and potential of emerging technologies. Yet most insurers have difficult comprehending how fast emerging technologies are being introduced. And the pace is gathering speed, having a profound impact on our lives, our businesses and our industry. Moore’s Law tells us that computing power doubles every 18 – 24 months, but even that seems to be irrelevant compared with the power of emerging technologies, because they are coming faster, and they are more formidable than ever before.

This rapidly accelerating pace comes at a time when the convergence of advancing technologies, increasing customer expectations and access to capital for new technology start-ups are magnifying the extremes, and the impact to the insurance industry is more game-changing than ever before. Never before has technology advancement had as much influence as what we are experiencing now.

Technologies promise breakthroughs that will challenge long-held business assumptions and shift the boundaries between business and industry – creating completely new businesses and industries. SMA is actively tracking nine emerging technologies: 3D printing, the Internet of Things (IoT), drones/aerial imagery, driverless vehicles, wearable devices, “gamification,” artificial intelligence, semantic technologies and biotechnology. We are following them from a perspective inside the industry as well as taking an “outside-the-industry” view. 

Not surprisingly, adoption is being led by the Internet of Things (IoT). The IoT is followed by artificial intelligence (AI), drones/aerial imagery and then gamification. The insurance industry’s rapid adoption is impressive. Five of the nine technologies are projected to arrive at or go well beyond the tipping point within three years. All nine are projected to surpass the tipping point within five years.

Adding to the momentum, individuals and companies that are a part of SMA’s Innovation Ecosystem and represent outside-the-industry perspectives see an even faster rate of adoption and greater potential for the transformation of insurance. This underscores that the insurance industry is on the crest of a massive wave of change.

Over the next five years, these emerging technologies, just like the Internet, smartphones and social media before them, are expected to drive new business models and foster the formation of companies from unexpected combinations of companies and industries — capturing the customer relationship and revenue. The astounding influence of these technologies — over a relatively short period — will begin to delineate a new generation of market leaders within and outside the insurance industry. Who will be the next Facebook, Uber or eBay?

So how should insurers respond to this rapid adoption? Insurers must quickly begin to develop strategies and experiment with and invest in these technologies today. If not, many insurers will be placed at significant risk, because there is typically a minimum two-year lag time between leaders and the mainstream and a minimum four- to five-year lag time between leaders and laggards. And given the pace of adoption of these technologies by insurance customers, the lag time carries more potential for damage than it did in the past. Consider that Apple introduced the iPhone just seven years ago, in June 2007. The result has been massive destruction and transformation that has created new leaders while forcing others into increasing irrelevance.

While it may be difficult to grasp the sheer magnitude of the change coming from the emerging technologies, remember that Larry Page of Google says we are only seeing 1% of the potential. Insurers must aggressively find a way to engage these technologies and uncover the potential, first to stay in the game, and then to win it. To do so, insurers must have modern core systems as a foundation to integrate the use of these technologies.

Consider these questions: How will product liability need to be redefined for driverless vehicles? If individuals or businesses no longer need auto insurance, what is the impact on other products? Multi-policy discounts? Will the driverless car encourage shopping for alternative options? Will it drive commoditization into other products? How will insurers assess the value and risk of a 3D-printed structure, body organs or vehicle parts? How will biotechnology-based agriculture change risk factors? How will drones help underwriting and claims? Can drones also provide resources needed during catastrophes, creating new services and value? Could gamification be a new channel to help drive increased market penetration through engagement and education about life insurance, health, medical, liability, home, umbrella and more?

These are but a few of the implications for insurance. They are inter-related and complex. They stress the significant disruption that is coming, and coming fast, as represented by the five out of nine emerging technologies that will reach the tipping point within three years … and some much sooner. Insurers that have not begun to pilot these technologies are already lagging behind and will struggle to keep up with this accelerated pace of adoption, not just from today’s competitors, but also from tomorrow’s competitors, as well as their customers. That poses a question: Will you remain relevant, or become the next Kodak, Blockbuster Video, Borders or CNN of insurance – the iconic brand that dies?

The coming years hold unparalleled opportunities for innovation and matchless potential for becoming market leaders that leverage emerging technologies to increase customer value, engagement and loyalty to insurers. As Steve Jobs stated, “Everyone here has the sense that right now is one of those moments when we are influencing the future.” The question to you is: Will you influence the future or be a remnant of the past?

This article is adapted from a new research report, Emerging Technologies: Reshaping the Next-Gen Insurer.

Fasten Your Seatbelts: Driverless Cars Change Everything (Part 1)

In fact, the driverless car has broad implications for society, for the economy and for individual businesses. Just in the U.S., the car puts up for grab some $2 trillion a year in revenue and even more market cap. It creates business opportunities that dwarf Google’s current search-based business and unleashes existential challenges to market leaders across numerous industries, including car makers, auto insurers, energy companies and others that share in car-related revenue.

Because people consistently underestimate the implications of a change in technology — are you listening, Kodak, Blockbuster, Borders, Sears, etc.? — and because many industries face the kind of disruption that may beset the auto industry, I’m going to do a series of blogs on the ripple effects that the driverless car may create. I’m hoping both to dramatize the effects of a disruptive technology and to illustrate how to think about the dangers and the opportunities that one creates.

In this installment, I’ll start the series with a broad-brush look at the far-reaching changes that could occur from the driver’s standpoint. In the next installment, I’ll show just how far the ripples will reach for companies—not just car makers, but insurers, hospitals, parking lot operators and even governments and utilities. (Fines drop when every car obeys the law, and roads don’t need to be lit if cars can see in the dark).

After that, I’ll explore how real the prospects are for driverless cars. (Hint: The issue is when, not if—and when is sooner than you think.) In the last installment, I’ll go into the strategic implications for every company thinking about innovation in these fast-moving times.

To begin:

Driverless car technology has the very real potential to save millions from death and injury and eliminate hundreds of billions of dollars of costs. Google’s claims for the car, as described by Sebastian Thrun, its lead developer, are:

  1. We can reduce traffic accidents by 90%.
  2. We can reduce wasted commute time and energy by 90%.
  3. We can reduce the number of cars by 90%.

To put those claims in context:

About 5.5 million motor vehicle accidents occurred in 2009 in the U.S., involving 9.5 million vehicles. These accidents killed 33,808 people and injured more than 2.2 million others, 240,000 of whom had to be hospitalized.

Adding up all costs related to accidents — including medical costs, property damage, loss of productivity, legal costs, travel delays and pain and lost quality of life — the American Automobile Association studied crash data in the 99 largest U.S. urban areas and estimated the total costs to be $299.5 billion. Adjusting those numbers to cover the entire country suggests annual costs of about $450 billion.

Now take 90% off these numbers. Google is claiming its car could save almost 30,000 lives each year on U.S. highways and prevent nearly 2 million additional injuries. Google claims it can reduce accident-related expenses by at least $400 billion a year in the U.S. Even if Google is way off — and I don’t believe it is — the improvement in safety will be startling.

In addition, the driverless car would reduce wasted commute time and energy by relieving congestion and allowing cars to go faster, operate closer together and choose more effective routes. One study estimated that traffic congestion wasted 4.8 billion hours and 1.9 billion gallons of fuel a year for urban Americans. That translates to $101 billion in lost productivity and added fuel costs.

The driverless car could reduce the need for cars by enabling efficient sharing of vehicles. A driverless vehicle could theoretically be shared by multiple people, delivering itself when and where it is needed, parking itself in some remote place whenever it’s not in use.

A car is often a person’s second largest capital expenditure, after a home, yet a car sits unused some 95% of the time. With the Google car, people could avoid the outlay of many thousands of dollars, or tens of thousands, on an item that mostly sits and, instead, simply pay by the mile.

A study led by Lawrence Burns and William Jordon at Columbia University’s Earth Institute Program on Sustainable Mobility showed the dramatic cost savings potential. Their analysis found that a shared, driverless fleet could provide far better mobility experiences than personally owned vehicles at far radically lower cost. For medium-sized cities like Ann Arbor, MI, the cost per trip-mile could be reduced by 80% when compared to personally own vehicles driven about 10,000 miles per year — without even factoring in parking and the opportunity cost of driving time. Their analysis showed similar cost savings potential for suburban and high-density urban scenarios, as well.

Driving could become Zipcar writ large (except the car comes to you).

Looking worldwide, the statistics are less precise, but the potential benefits are even more startling. The World Health Organization estimates that more than 1.2 million people are killed on the world’s roads each year, and as many as 50 million others are injured. And the WHO predicts that the problems will only get worse. It estimates that road traffic injuries will become the fifth leading cause of worldwide death by 2030, accounting for 3.6% of the total — rising from the ninth leading cause in 2004, when it accounted for 2.2% of the world total.

If Google could give everyone a world-class electronic driver, it would drastically reduce the deaths, injuries and direct costs of accidents. The driverless car might also save developing countries from ever having to replicate the car-centric infrastructure that has emerged in most Western countries. This leapfrogging has already happened with telephone systems: Developing countries that lacked land-line telephone and broadband connectivity, such as India, made the leap directly to mobile systems rather than build out their land-line infrastructures.

China alone expects to invest almost $800 billion on road and highway construction between 2011 and 2015. It is doubtful, however, whether even this massive investment can keep up with the rising accidents and traffic congestion that the country endures. And road construction won’t deal with the issue of pollution, to which the massive car buildup contributes and which is becoming an ever more politically sensitive issue.

How might China and other developing economic powers’ massive car-related investments be redeployed if fundamental assumptions were viewed through the lens of the driverless car?

In sum, the Google driverless car not only makes for a great demo; it has worldwide social and economic benefits that could amount to trillions of dollars per year.

Insurers will feel major effects because hundreds of billions of dollars of reductions in losses obviously mean reduced requirements for insurance in all sorts of areas: auto, life, P&C, health and more; even workers’ comp needs will diminish because so many claims that would have stemmed from car accidents simply won’t happen. The locus of power in some parts of the insurance industry will shift, too. Why should a driver buy insurance if the car is doing the driving? Instead, car makers will likely take on the responsibility, and perhaps as part of their traditional approach to product liability, rather than working through auto insurance companies as they are currently constituted. I’ll look at those issues and others next time.