Tag Archives: peter diamandis

The 7 New Business Models

While those pressing for innovation often focus on the unbelievable speed of technology change, perhaps the more important issue is the pace at which business models can change.

After all, increases in computing power have been running at the rate of Moore’s law since Intel co-founder Gordon Moore formulated it in the 1960s — processors have roughly doubled in power every 18 months at no increase in cost. But the pivotal moments came when that exponential improvement allowed for a new type of business model: e-commerce in the late 1990s; internet search and social media in the 2000s; data-heavy, asset-light platforms like Uber and Airbnb in the 2010s.

Last week, futurist Peter Diamandis shared his list of the seven business models he believes will dominate the next decade, and they sound roughly right to me, so I’m passing his writeup on to you.

His post lists the seven as:

–The Crowd Economy, which he describes as “crowdsourcing, crowdfunding, leveraged assets and staff-on-demand,” a la Uber and Airbnb or Amazon’s Mechanical Turk.

–The Free/Data Economy, which he describes as “essentially baiting the customer with free access to a cool service and then making money off the data gathered about that customer,” a la Facebook, Google and Twitter.

–The Smartness Economy, which he describes based on an analogy to the late 1800s. At that point, businesses could just “take an existing tool, say a drill or a washboard, and add electricity to it—thus creating a power drill or a washing machine. In the 2020s, AI will be the electricity.” Basically, add artificial intelligence to anything, and you could have a new, smarter, more efficient way model for doing business.

–Closed-Loop Economies, which take an environmentally conscious approach to products, for instance allowing people to pick up waste plastic, turn it in and be paid.

–Decentralized Autonomous Organizations (DAOs), such as a fleet of autonomous taxis, “with no employees, no bosses and nonstop production,” built on top of blockchain.

–Multiple World Models, businesses that reach beyond our real-world personae to online personae. Diamandis notes that people pay to design digital clothes and houses in Second Life and other virtual worlds. (I thought it was clever that the Biden campaign put up campaign signs in Animal Crossing and gave supporters QR codes that would let them put up signs on their Nintendo Switch.) Diamandis adds: “Every time we add a new layer to the digital strata, we’re also adding an entire economy built upon that layer.”

–Transformation Economy, which go beyond what’s known as the Experience Economy — such as Starbucks’ creation of a “third place” that was neither home nor work — and involve paying for a something that transforms your life.

I’d encourage you to read the whole post and dig more deeply into the models, then perhaps sign up for his newsletter, which can sometimes be over-the-top but which is routinely intriguing and informative.

From my standpoint, the most intriguing models for insurers are the Smartness Economy and the Transformation Economy. AI can be added to just about any part of the insurance process and conceivably even allow for new business models — for instance, embedding insurance offers into the process of selling cars, shipping grain in developing countries, etc., without the need for human involvement. And insurance can transform even more lives than it does now, if it shifts its emphasis toward preventing losses and goes beyond the already crucial work of providing peace of mind and making people whole following losses.

But I think it’s worth taking a look at all the potential business models, because business only happens if it can be insured, and new types of business create opportunities for new types of insurance. Just think how interesting it will be to price the risk on a digital house in a virtual world.

Cheers,

Paul

P.S. Here are the six articles I’d like to highlight from the past week:

Why Weak Signals of Disruption Are Key

You must commit to a process that more closely resembles an anthropological journey than a traditional strategic analysis. Here are four steps.

How Life Insurers Can Reach Millennials

Millennials already understand the need for car and home insurance. The pandemic has given life insurers an opportunity.

Benefits of Deploying a Hybrid Cloud

Hybrid cloud models smooth digital transitions because they can easily operate their existing on-premise infrastructure during the shift.

How Digital Health, Insurtech Are Adapting

Due to the spread of the COVID-19 pandemic, the digital health and insurtech sectors have developed rapidly in multiple directions.

The Importance of Captive Insurance

Policies that insure a person in spite of the absence of bodily harm, that exist because of the threat of reputational harm—these policies are hard to find.

2-Speed Strategy: Optimize and Innovate

Success in moving from the past to the future of insurance requires a two-speed strategy: Speed of Operations and Speed of Innovation.

Driverless Vehicles: Brace for Impact

On June 26, Waymo (Google’s autonomous car firm), signed a deal under which Avis Budget Group will provide “fleet support and maintenance services” to Phoenix-area Waymo vehicles. Waymo uses Chrysler Pacifica minivans to autonomously shuttle Phoenix residents around town. Its first fleet of 100 minivans quickly grew into an order for 500 more.

The Waymo/Avis agreement may only be a pilot, but the implications are enormous. Not unlike standard cab companies, Waymo realized that a fleet of autonomous vehicles would need cleaning and maintenance throughout the day and storage throughout the night. When practical matters like auto cleaning and storage become news enough for a press release, something big is going on.

Here are some fun facts:

  • According to USA Today, Avis’ stock rose 14% on the news.
  • The Chrysler Pacifica was chosen, in large part, because it could close its own doors. Waymo usage experts theorized that riders might often hop out and forget to close the door.
  • Within hours of the Waymo announcement, Apple likewise unveiled a deal where Hertz Global would manage its autonomous fleet.

Autonomous vehicles have picked up the pace of disruption over the last two years. What will life be like when the Autonomy of Things takes on many of our everyday behaviors or occupations, like driving? Will we be safer? Will we need insurance? Will auto manufacturers cover accidents via product liability? Who will cover bodily injury or property damage? How will risk products be changed to fit this new model? Is there an insurance right-road to surviving autonomy?

See also: The Evolution in Self-Driving Vehicles  

Is Autonomy Impact Still Underrated?

There has been a lot of talk and certainly a wealth of words written on the impact of auto autonomy, and safety is at the top of the concerns and promises of autonomous vehicles. Insurers are, of course, focused on how autonomous vehicles might cause a decline in the need for auto insurance.

The pace of development, rollout, experimentation and expansion of autonomous vehicles has far exceeded original expectations. In his blog, Peter Diamandis (XPrize Founder) noted that a former Tesla and BMW executive said that self-driving cars would start to kill car ownership in just five years. John Zimmer, the cofounder and president of Lyft, said that car ownership would “all but end” in cities by 2025.

The Wall Street Journal reported in July 2016 that auto insurance represents nearly a third of all premiums for the P&C industry, with projections that 80% could evaporate over the next few decades as autonomous vehicles are introduced, some of them replacing legacy vehicles and some created for shared transportation. At the same time, U.S. government support strengthened in September 2016 when federal auto safety regulators released their first set of guidelines, sending a clear signal to automakers that the door was wide open for driverless cars and betting that the nation’s highways will be safer with more cars driven by machines instead of people.

Those statements, among others, might cause some scrambling. Manufacturers are working frantically to partner with AI providers, cab services and ridesharing services such as Uber, Lyft and Waymo. Naysayers will note that rural areas will be highly unlikely to use autonomous vehicles soon, and it’s true that the largest impact may be in urban areas. But if car ownership were even cut by 5% by 2030, a tremendous number of auto manufacturers and auto insurers would be affected.

Autonomy and its insurance impact isn’t limited to personal autos. Truck company Otto is testing self-driving commercial trucks — a necessary automation that could help alleviate the growing lack of truck drivers. Husqvarna has several models of autonomous lawn mowers on the market. Yara and Rolls Royce are among companies working on autonomous ships. Case, John Deere and Autonomous Tractor Corporation have all been developing driverless tractors.

In nearly every one of these cases, there are safety benefits and disruptive insurance implications, but there are also revenue growth opportunities for those that think more broadly and “outside the box.” From developing partnerships with automotive companies to leveraging the autonomous vehicle data for new services, each offers alternative revenue streams to counter the decline of traditional auto insurance. The key is experimenting with these technologies to find alternative “products and services” and develop an ecosystem of partners to support this, before the competition does.

Share and Transportation as a Service — Insurers May Like

In our report, A New Age of Insurance:  Growth Opportunity for Commercial and Specialty Insurance in a Time of Market Disruption, we cite a report from RethinkX, The Disruption of Transportation and the Collapse of the Internal-Combustion Vehicle and Oil Industries, which says that by 2030 (within 10 years of regulatory approval of autonomous vehicles), 95% of U.S. passenger miles traveled will be served by on-demand autonomous electric vehicles owned by fleets, not individuals, in a new business model called “transport-as-a-service” (TaaS). The report says the approval of autonomous vehicles will unleash a highly competitive market-share grab among existing and new pre-TaaS (ride-hailing) companies in expectation of the outsized rewards of trillions of dollars of market opportunities and network effects.

Welcome to the adolescence of the sharing economy and transportation as a service. Autonomy isn’t the only road for vehicle progress. Vehicle sharing is growing and will remain in vogue for some time. Just as Airbnb and HomeAway have given rise to new insurance products, Zipcar and Getaround and Uber have given rise to new P&C products.

At the same time, a merging of public and private transportation and a pathway to free transportation is in the early stages of being created in the TaaS model. This will shift risk from individuals to commercial entities, governments or other businesses that provide the public transportation, creating commercial lines product opportunities beyond traditional “public transportation.”

Vehicle users, whether they are riders, borrowers, sharers or public entities, are going to need innovative coverage options. Tesla and Volvo may be promising some level of auto coverage for owners of autonomous vehicles, but that kind of blanket coverage is likely to mimic an airline’s coverage of passengers and cargo — it will be limited. Those who lend their vehicle, through a software-based consolidator, such as Getaround, will need coverage that goes beyond their auto policy.

In the past few weeks, we’ve also seen how cyber attacks can undermine freight and shipping, not to mention systems. Nearly all of these service-oriented options will require new types of service-level coverage. Autonomous freight may be safer in transit, but in some ways it may also be less secure.

The lessons appear to be found in brainstorming. Technology is breeding diversity in service use and ownership. There will be new coverage types and new insurance products needed.

See also: Will You Own a Self-Driving Vehicle?  

Up Next … Flying Vehicles

Remember the movie “Back to the Future” and the Jetsons flying cars that were so cool? Well, they are quickly becoming a cool reality. A June 2017 Forbes article says flying cars are moving rapidly from fiction to reality, with the first applications of flying vehicles for recreational activities in the next five years. The article says that, in the past five years, at least eight companies have conducted their first flight tests, and several more are expected to follow suit, indicative of the frenzied activity in this space.

Companies such as PAL-VTerrafugia, AeromobilEhangE-VoloUrban AeronauticsKitty Hawk and Lilium Aviation completed test flights of their flying car prototypes, with PAL-V going further by initiating pre-sales of its Liberty Pioneer model flying car, which the company aims to deliver by the end 2018. This sounds like Tesla and its pre-sales move!

Not to be left behind … ride-sharing companies are aggressively entering the space. Uber launched the Uber Elevate program, with a focus on making flying vehicles transport a reality by bringing together government agencies, vehicle manufacturers and regulators. Google and Skype are entering the space by investing in start-ups: Google in Kitty Hawk and Skype in Lilium Aviation. Not to be left behind, Airbus has unveiled a number of flying car concepts, with plans to launch a personal flying car by 2018. Airbus also plans to build a mass transit flying vehicle…the potential next TaaS option.

So, it pays for insurers to keep their attention on autonomous vehicle trends … because it is more than the personal autonomous vehicle … it is the transformation of the entire transportation industry and will have a significant impact on premium and growth for auto insurers. As we recently found in our commercial and specialty insurance report, the transportation industry is rapidly changing and new technologies may be lending themselves to safety, but the world itself isn’t necessarily growing any safer.

Risk doesn’t end. Insurers will always be helping individuals and companies manage risk. The key will be using the trends to rapidly adapt to a shift to the new digital age. Insurers will need to understand and value new risks and offer innovative products and services that meet the changing needs in this shift during the digital age.

#1 Affliction Costing Businesses Billions

Preserving the status quo (PTSQ) is repeatedly the cause of lost revenue, missed opportunities and even bankruptcies. The pace of innovation and change in business is accelerating at an ever-faster pace. Organizations with good leadership decide to move forward scared, rather than remain frozen with fear.

Recently, I had the pleasure of spending the day with Peter Diamandis, the founder of X Prize Foundation and the best-selling author of Abundance and BOLD. Diamandis was named by Fortune as one of  “The World’s 50 Greatest Leaders.” He spoke about why we are living in a world of abundance and about how to recognize the future direction of technology and business opportunities. All of his examples and stories were directed at educating the audience on how to stay ahead of the competition and how to create disruptive innovation in any industry. (And, did I mention he graduated from medical school and has very strong opinions about the future direction of medicine? I’ll save those comments for another day.)

See also: 10 Reasons Why Healthcare Varies

His talk on the “6 D’s of Exponentials” was exceptional. It’s a way of thinking about how exponential technologies are affecting our world. He proceeded to describe business examples in robotics, artificial intelligence, 3-D printing, biotechnology, self-driving cars, space exploration and medicine.

So, how is it, in the face of exponentially increasing change and all this business opportunity, that managing healthcare for so many organizations represents a slow, linear decision-making process characterized by rigid thinking, detached leadership and high costs? Even more confounding is that many corporate C-suites have abdicated responsibility of a multimillion-dollar division (healthcare) to internal managers who inadvertently make the problem worse each year. The typical corporate culture talks about innovation, but it only reinforces and encourages business as usual and the preservation of the status quo.

Business as Usual, No Disruption Here

For the majority of mid-sized organizations, healthcare is “managed” as one of the largest operational expenses on the balance sheet —instead of as a strategic asset that delivers a sustainable competitive advantage. Continuing to manage healthcare as an expense while somehow expecting a different result will continue to be costly.

If you don’t disrupt your business practices, then someone will disrupt you. A study from the John M. Olin School of Business at Washington University estimates that 40% of companies in today’s S&P 500 will not exist in 10 years.

The world of healthcare is changing rapidly. The Affordable Care Act was merely a catalyst that has triggered a tsunami of endless change in the future of healthcare in America. The challenge is to recognize new opportunities and to implement them effectively.

In PwC’s latest CEO study, almost 75% of those surveyed said they are concerned their companies lack the skills needed to meet future competition.

Think about all the job duties, responsibilities and competing demands a typical healthcare manager experiences. These day-to-day competing priorities mean a manager must focus time and energy on eliminating the tallest fire first, regardless of the schedule, all while managing the second-largest capital allocation for the organization: healthcare. Is it any wonder that incrementalism, fear of change and choosing the path of least resistance run rampant in corporate America?

See also: Healthcare at the Tipping Point

The C-suite needs to get involved and apply its business finance skills to healthcare. The C-suite must wake up to the fact that linear thinking — like the illusion that vendor size creates market leverage in healthcare — is as outdated as flip phones and fully insured insurers who refuse to substantiate annual billing and rate increases with financial transparency.

According to an AON/Hewitt Survey of more than 1,000 companies, 77% of respondents said the actions of their peers influence their organization’s healthcare strategy. Comparing your results with other organizations trapped by the same poor outcomes of legacy best practices and groupthink is like listening for an echo and expecting a different answer. The survey results should make the C-suite sheepish.

If you’re a CEO or CFO, you have to ask yourself these questions: With all the evidence about increasing change in business, do you honestly believe managing healthcare to preserve the status quo is the prudent thing to do? Can your organization’s stakeholders afford the cost of doing nothing?