Tag Archives: Sears

5 Transformational Changes for Clients

In January 1993, I began preaching the Gospel of Change – its management and architecture.

One of my first presentations was to a very successful community bank’s senior management team. I said, “Today, General Motors, Sears and IBM are kings of their respective jungles. I believe in my lifetime (I was 46 at the time) one of these companies will go bankrupt!” The audience rolled their collective eyes! In 16 years, I was vindicated.

GM filed for Chapter 11 reorganization in the Manhattan New York federal bankruptcy court on June 1, 2009. The filing reported $82.29 billion in assets and $172.81 billion in debt.

Then, Sears filed for Chapter 11 bankruptcy protection on Oct. 15, 2018, with $6.9 billion of assets and $11.3 billion of debts, after a decade-plus as a train wreck in slow motion.

See also: How to Earn Consumers’ Trust  

Today, I’m not going to scare you into change – I’ll merely shine a spot light on the changes that are already occurring in the world and you decide if these innovations are friends or foes. Don’t ask what threats these changes mean for you. Ask instead what these changes mean to the marketplace – to each of us as consumers. The consumer is king, and now consumers shop in a global marketplace – when, where and how they want. Below are five transformational changes that are affecting the world for your clients and you–and a word of hope.

Generational Change: Many of us grew up in a “Father Knows Best” world. Today, the universe is more similar to a “Modern Family.”

Look at the demographics. The youngest members of the Greatest or Silent generation are nearing 75. The youngest members of the Baby Boomers are in their mid-50s. The youngest Gen Xers are in their mid-30s. And the youngest millennials are already 15.

As Paul Harvey said often, “We’re not one world.” He was so right. In terms of marketing reality – One size does not fit all.

Big Data and Artificial Intelligence: Yesterday, I opened an e-mail offering me a “deal” on a new Toyota. Within an hour, I had received similar e-mails from most other brands that I might be interested in. Big Brother (or Big Sister) is watching everything we do. Now, sophisticated sellers can anticipate your needs and be first to market with a solution for each need. Can you do this?

Global Marketplace/Virtual Marketplace: As a consumer, you can buy anything you want, wherever you want. As a seller, your competitors are not down the street – they are everywhere.

Language/Diversity: Robert Young as Jim Anderson in “Father Knows Best” was an insurance agent and also an OWGIC (Old White Guy in Charge). Today, ours is a much more diverse and multilingual world. Everyone can be in charge of their own world. Do you speak enough languages to serve this marketplace? Who is/will be your marketplace (Hispanic, Laotian, Muslim, etc.)? Remember that many “youn-‘uns” communicate very differently. If you don’t believe me, call a teen and see she answers. Text, and she will.

Innovation of Products/Services/Competitors: What, where and how you sell has no meaning. What, where and how people buy is all that matters. Remember social media, robotic surgery, driverless cars, Amazon, Expedia, Uber, Google, AirBnB: Innovations change options and in some cases bankrupt organizations and industries that are fat, dumb and happy.

See also: Why More Don’t Go Direct-to-Consumer  

Your Hope/Opportunity:

John Naisbitt developed the concept of high tech, high touch in his 1982 bestseller “Megatrends.” He theorized that, in a world of technology, people long for personal, human contact.

He was so right. Become client-defined and client-driven. Develop client intimacy. Be engaged with the people and markets you serve. Don’t sell them; facilitate their buying. Be a concierge, a friend, a shoulder to cry on and voice of encouragement. Build intimacy – be a professional, expert, trusted resource.

Could an Insurer Be the Next Sears?

The thought of a major insurance company, and its brand, disappearing from the market seems impossible to comprehend and more like the stuff of an attention-grabbing headline. But that’s probably what everyone once thought about Atari, Commodore, Kodak, Nokia, Polaroid, Blockbuster, The Sharper Image, Enron, Blackberry, DeLorean, Radio Shack, Motorola, Toys ‘R’ Us, Tower Records, HMV, Palm, AOL, Compaq, Borders, Circuit City, Pan Am, Netscape, Nortel – and now Sears.

As I was reviewing the NAIC 2018 insurance industry rankings and market share, I could not help but notice that some significant trends were accelerating. In the private passenger auto insurance line of business, Geico has overtaken Allstate to take the #2 spot with a 13% market share and continues to close in on State Farm, whose share has dropped to 17%. In fact, Geico has publicly stated its intention to overtake State Farm soon.

Now this does not mean that State Farm or Allstate is at risk of going out of business anytime soon, but it does underscore the power of market trends that could over the longer term displace carriers that are not paying attention.

Consolidation among top tier insurers is one of the many ways that insurance brands will disappear. According to Deloitte’s 2019 Insurance M&A Outlook report, the aggregate deal value of P&C acquisitions grew by 316% to $34.1 billion in deal value, up from $8.2 billion in 2018. American Family, the 10th largest U.S. auto insurer, recently acquired a number of smaller competitors, including Ameriprise Auto & Home, Main Street America, the General and Homesite. And #13 Kemper recently acquired Infinity. Also, in 2018, #19 Hartford Insurance acquired specialty insurer Navigators.

Just as Amazon’s direct-to-consumer model disrupted brick-and-mortar retailers, insurers that deliver and service consumer products and services digitally and on mobile devices will continue to outpace competitors that operate in a “middleman” distribution model. Auto insurance insurtechs such as Metromile, Root and now others will not displace tier 1 auto insurers but will further erode their customer base, particularly those in indirect distribution models.

See also: Insurance 2030: Scenario Planning  

The Internet of Things, consisting of an estimated 50 billion “always on” sensors in connected cars, property and factories and on people by 2030, is enabling the development of very different on-demand and other types of insurance products that lend themselves to fulfillment by smaller, technology-driven companies, further displacing traditional insurers.

As if these threats were not enough, look for car manufacturers to pile on by leveraging connected cars to exert greater control over the sale and design of auto insurance as well as the collision repair claims process. And the potential nail in the coffin – autonomous (self-driving) cars will shift risk and responsibility from “drivers” to manufacturers and software developers – ultimately eliminating auto insurance as we know it.

Insurance carriers that recognize the implications of all of these trends are already making strategic plans to defend themselves. State Farm is in the midst of a long-term restructuring plan that will see it shed thousands of jobs and consolidate its facilities into three major U.S. operational hubs and in 2015 sold its substantial Canadian business to Desjardins. But eliminating overhead alone will likely not be sufficient.

Others are pursuing strategies to alter product offerings to focus on risk prevention and avoidance, to diversify out of traditional insurance into protection products, alternative transportation and travel services and to develop strategic partnerships with auto manufacturers. Others are restructuring and positioning their companies for eventual acquisition, merger or sale.

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

A historical side note: Sears founded Allstate in 1931 and sold its products in the Sears tire and battery department. Allstate was spun off as an independent company and went public in 1993.

Major insurance brands may not disappear any time soon, but their dominance and longevity can no longer be taken for granted.

How Not to Make Decisions

Nancy Newbee is the newest trainee for LOCO (Large Old Company) Inc. She was hired because she is bright, articulate, well-educated and motivated. She is in her second week of training.

Her orders include: “We’ll teach you all you need to know. Sammy Supervisor will monitor your every action and coordinate your training. Don’t take a step without his clearance. When he’s busy, just read through the procedures manual.”

Nancy is already frustrated by this training process but is committed to following the rules.

Upon arriving at work today, Nancy discovers the kitchen is on fire! As instructed, she rushes to Sammy Supervisor. Interrupting him, she says, “There’s a major problem!”

Sammy is obviously disturbed by this interruption in his routine. He tells her, “Nancy, my schedule will not allow me to work with you until this afternoon. Go back to the conference room and continue studying the procedures.”

“But, Mr. Supervisor, this is a major problem!” Nancy pleads.

“But nothing! I’m busy. We’ll discuss it this afternoon. If it can’t wait, go see the department head,” Sammy responds.

Nancy rushes to the office of Billy Big and shouts, “Mr. Big, we have a major problem, and Mr. Sammy said to see you!” Mr. Big states politely, “I’m busy now,” all the while wondering why Sammy Supervisor hires these excitable airheads.

“But, Mr. Big, the building…” Nancy interrupts.

“Nancy, see my secretary for an appointment or call maintenance if it’s a building problem,” Mr. Big says impatiently, thinking, “Where does Sammy find these characters?”

Near panic, Nancy calls maintenance. The line is busy. As a last resort, Nancy calls Ruth Radar, the senior secretary in the accounting department. Everyone has told her that Ruth really runs this place. She can get anything done.

“Ruth Radar, how may I help you?” is the response on the phone.

“Miss Radar, this is Nancy, the new trainee. The building is on fire! What should I do?” shouts Nancy through her tears.

“Nancy, call 911!” Ruth says.

Now, of course this is a ridiculous example… or is it?

See also: How We’re Wired to Make Bad Decisions  

Assuming you are the boss, try this eight-question test:

  1. In your business, do you hire the best and brightest and then instruct them not to think, act or do anything during their training, except as you tell them to do?
  2. Do you promise training and, instead, substitute reading of procedure manuals?
  3. Do you create barriers to communication, interaction and effectiveness by scheduling the new employees’ problems and inquiries to accommodate the busy schedules of your other personnel?
  4. Do you and your staff ignore what new employees are saying?
  5. Is the process more important than the result? Does the urgent get in the way of the important?
  6. Do layers of bureaucracy between you, your employees and customers interfere with contact, communications and results?
  7. Is “Ruth Radar” running your shop?
  8. Do you have any fires burning in your office?

If you answered “no” to all of these questions, congratulations!

Now go back and look at the questions again. The perfect business would have eight “no” answers, but very few businesses are perfect. If you are like LOCO, our large old company, you might be so far out of touch with your trainees, employees and customers that you won’t hear about a “fire” until it starts to burn your desk.

Look back at IBM, GM and Sears in the late 1980s. These were  the kings of their respective jungles. Yet all of these leaders nearly burned to the ground. Many thousands of employees were terminated, profits were ended and stock values fell. If you would have talked to any of these terminated employees, you would have learned that the fire had burned for a long time and that many people had tried to sound the alarm.

Remember the large old insurance companies that are no longer here: Continental, Reliance, etc. Did their independent agents smell the smoke? Did the leadership of these carriers ignore the alarm?

Sam Walton, who had reasonable success in business during his lifetime, once said, “There is only one boss — the customer. Customers can fire everybody in the company from the chairman on down, simply by spending their money somewhere else.”

Walton was right. In your business, do you or Nancy have the most direct contact with the customer — the ultimate boss? If Nancy has the most contact, is she adequately trained, motivated and monitored? Is she providing feedback? Are you listening?

Take a minute to draw a picture of your organization. Now, draw a frame around your picture. Does this frame create a pyramid? Are you, as the boss, at the pinnacle? Are Nancy and her fellow trainees at the base? Is it prudent to have the least experienced personnel closest to the customers?

Your organization was formed to meet the needs of customers. You exist to serve these same customers. Where are these customers in the organizational chart? Did you “forget” to draw them into the picture? How much distance is there between you (as boss) and the customers?

Does this pyramid model facilitate the free flow of information between you and the customers, or does it buffer you from the real thoughts and feelings of the real boss (the customer)? In your business, is the customer and his problem seen as an interruption of the work or as the very reason for your existence?

If you had to downsize your company, where would the cuts be made? At the top, middle or bottom of the pyramid? Are the people in the hierarchy of the pyramid there because they did or can do more for the consumer, or were they pushed up by the people they hired to support them? Is your company fat or lean?

See also: How Basis for Buying Decisions Is Changing  

If your employees answered all the above questions, would they agree with you? If your customers were asked, what would they say? If your customers voted tomorrow, who would be retained? Who would be fired?

Think about it!

Do you dare ask?

New Era of Commercial Insurance

Despite a generally soft market for traditional P&C products, the fact that so many industries and the businesses within them are being reshaped by technology is creating opportunities (and more challenges). Consider insurers with personal and commercial auto. Pundits are predicting a rapid decline in personal auto premiums and questioning the viability of both personal and commercial auto due to the emergence of autonomous technologies and driverless vehicles, as well as the increasing use of alternative options (ride-sharing, public transportation, etc.).

Finding alternative growth strategies is “top of mind” for CEOs.  Opportunities can be captured from the change within commercial and specialty insurance. New risks, new markets, new customers and the demand for new products and services may fill the gaps for those who are prepared.

Our new research, A New Age of Insurance: Growth Opportunities for Commercial and Specialty Insurance at a Time of Market Disruption, highlights how changing trends in demographics, customer behaviors, technology, data and market boundaries are creating a dramatic shift from traditional commercial and specialty products to the new, post-digital age products redefining the market of the future.

See also: Insurtechs Are Pushing for Transparency

Growth Opportunities

New technologies, demographics, behaviors and more will fuel the growth of new businesses and industries over the next 10 years. Commercial and specialty insurance provides a critical role to these businesses and the economy — protecting them from failure by assuming the risks inherent in their transformation.

Industry statistics for the “traditional” commercial marketplace don’t yet reflect the potential growth from these new markets. The Insurance Information Institute expects overall personal and commercial exposures to increase between 4% and 4.5% in 2017 but cautioned that continued soft rates in commercial lines could cause overall P&C premium growth to lag behind economic growth.

But a diverse group of customers will increasingly create narrow segments that will demand niche, personalized products and services. Many do not fit neatly within pre-defined categories of risk and products for insur­ance, creating opportunities for new products and services.

Small and medium businesses are at the forefront of this change and at the center of business creation, business transformation and growth in the economy.

  • By 2020, more than 60% of small businesses in the U.S. will be owned by millennials and Gen Xers — two groups that prefer to do as much as possible digitally. Furthermore, their views, behaviors and expectations are different than those of previous generations and will be influenced by their personal digital experiences.
  • The sharing/gig/on-demand economy is an example of the significant digitally enabled changes in people’s behaviors and expectations that are redefining the nature of work, business models and risk profiles.
  • The rapid emergence of technologies and the explosion of data are combining to create a magnified impact. Technology and data are making it easier and more profitable to reach, underwrite and service commercial and specialty market segments. In particular, insurers can narrow and specialize various segments into new niches. In addition, the combination of technology and data is disrupting other industries, changing existing business models and creating businesses and risks that need new types of insurance.
  • New products can be deployed on demand, and industry boundaries are blurring. Traditional insurance or new forms of insurance may be embedded in the purchase of products and services.

Insurtech is re-shaping this new digital world and disrupting the traditional insurance value chain for commercial and specialty insurance, leading to specialty protection for a new era of business. Consider insurtech startups like Embroker, Next Insurance, Ask Kodiak, CoverWallet, Splice and others. Not being left behind, traditional insurers are creating innovative business models for commercial and specialty insurance, like Berkshire Hathaway with biBERK for direct to small business owners; Hiscox, which offers small business insurance (SBI) products directly from its website; or American Family, which invested in AssureStart, now part of Homesite, a direct writer of SBI.

The Domino Effect

We all likely played with dominoes in our childhood, setting them up in a row and seeing how we could orchestrate a chain reaction. Now, as adults, we are seeing and playing with dominoes at a much higher level. Every business has been or likely will be affected by a domino effect.

What is different in today’s business era, as opposed to even a decade ago, is that disruption in one industry has a much broader ripple effect that disrupts the risk landscape of multiple other industries and creates additional risks. We are compelled to watch the chains created from inside and outside of insurance. Recognizing that this domino effect occurs is critical to developing appropriate new product plans that align to these shifts.

Just consider the following disrupted industries and then think about the disrupters and their casualties: taxis and ridesharing (Lyft, Uber), movie rentals (Blockbuster) and streaming video (NetFlix), traditional retail (Sears and Macy’s) and online retail, enterprise systems (Siebel, Oracle) and cloud platforms (Salesforce and Workday), and book stores (Borders) and Amazon. Consider the continuing impact of Amazon, with the announcement about acquiring Whole Foods and the significant drop in stock prices for traditional grocers. Many analysts noted that this is a game changer with massive innovative opportunities.

The transportation industry is at the front end of a massive domino-toppling event. A report from RethinkX, The Disruption of Transportation and the Collapse of the Internal-Combustion Vehicle and Oil Industries, says that by 2030 (within 10 years of regulatory approval of autonomous vehicles (AVs)), 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 “transportation-as-a-service” (TaaS). The TaaS disruption will have enormous implications across the automotive industry, but also many other industries, including public transportation, oil, auto repair shops and gas stations. The result is that not just one industry could be disrupted … many could be affected by just one domino … autonomous vehicles. Auto insurance is in this chain of disruption.

See also: Leveraging AI in Commercial Insurance  

And commercial insurance, because it is used by all businesses to provide risk protection, is also in the chain of all those businesses affected – a decline in number of businesses, decline in risk products needed and decline in revenue. The domino effect will decimate traditional business, product and revenue models, while creating growth opportunities for those bold enough to begin preparing for it today with different risk products.

Transformation + Creativity = Opportunity

Opportunity in insurance starts with transformation. New technologies will be enablers on the path to innovative ideas. As the new age of insurance unfolds, insurers must recommit to their business transformation journey and avoid falling into an operational trap or resorting to traditional thinking. In this changing insurance market, new competitors don’t play by the rules of the past. Insurers need to be a part of rewriting the rules for the future, because there is less risk when you write the new rules. One of those rules is diversification. Diversification is about building new products, exploring new markets and taking new risks. The cost of ignoring this can be brutal. Insurers that can see the change and opportunity for commercial and specialty lines will set themselves apart from those that do not.

For a greater in-depth look at the implications of commercial insurance shifts, be sure to downloadA New Age of Insurance: Growth Opportunities for Commercial and Specialty Insurance at a Time of Market Disruption.

The Big Lesson From Amazon-Whole Foods

I doubt that Google and Microsoft ever worried about the prospect that a book retailer, Amazon, would come to lead one of their highest-growth markets: cloud services. And I doubt that Apple ever feared that Amazon’s Alexa would eat Apple’s Siri for lunch.

For that matter, the taxi industry couldn’t have imagined that a Silicon Valley startup would be its greatest threat, and AT&T and Verizon surely didn’t imagine that a social media company, Facebook, could become a dominant player in mobile telecommunications.

But this is the new nature of disruption: Disruptive competition comes out of nowhere. The incumbents aren’t ready for this and, as a result, the vast majority of today’s leading companies will likely become what toast—in a decade or less.

Note the march of Amazon. First it was bookstores, publishing and distribution, then cleaning supplies, electronics and assorted home goods. Now, Amazon is set to dominate all forms of retail as well as cloud services, electronic gadgetry and small-business lending. And the proposed acquisition of Whole Foods sees Amazon literally breaking the barriers between the digital and physical realms.

See also: Huge Opportunity in Today’s Uncertainty  

This is the type of disruption we will see in almost every industry over the next decade, as technologies advance and converge and turn the incumbents into toast. We have experienced the advances in our computing devices, with smartphones having greater computing power than yesterday’s supercomputers. Now, every technology with a computing base is advancing on an exponential curve—including sensors, artificial intelligence, robotics, synthetic biology and 3-D printing. And when technologies converge, they allow industries to encroach on one another.

Uber became a threat to the transportation industry by taking advantage of the advances in smartphones, GPS sensors and networks. Airbnb did the same to hotels by using these advancing technologies to connect people with lodging. Netflix’s ability to use internet connections put Blockbuster out of business. Facebook’s  WhatsApp and Microsoft’s Skype helped decimate the costs of texting and roaming, causing an estimated $386 billion loss to telecommunications companies from 2012 to 2018.

Similarly, having proven the viability of electric vehicles, Tesla is building batteries and solar technologies that could shake up the global energy industry.

Now, tech companies are building sensor devices that monitor health. With artificial intelligence, these will be able to provide better analysis of medical data than doctors can. Apple’s ResearchKit is gathering so much clinical-trial data that it could eventually upend the pharmaceutical industry by correlating the effectiveness and side effects of the medications we take.

As well, Google, Facebook, SpaceX and Oneweb are in a race to provide Wi-Fi internet access everywhere through drones, microsatellites and balloons. At first, they will use the telecom companies to provide their services; then they will turn the telecom companies into toast. The motivation of the technology industry is, after all, to have everyone online all the time. The industry’s business models are to monetize data rather than to charge cell, data or access fees. They will also end up disrupting electronic entertainment—and every other industry that deals with information.

The disruptions don’t happen within an industry, as business executives have been taught by gurus such as Clayton Christensen, author of management bible “The Innovator’s Dilemma”; rather, the disruptions come from where you would least expect them to. Christensen postulated that companies tend to ignore the markets most susceptible to disruptive innovations because these markets usually have very tight profit margins or are too small, leading competitors to start by providing lower-end products and then scale them up, or to go for niches in a market that the incumbent is ignoring. But the competition no longer comes from the lower end of a market; it comes from other, completely different industries.

The problem for incumbents, the market leaders, is that they aren’t ready for this disruption and are often in denial.

Because they have succeeded in the past, companies believe that they can succeed in the future, that old business models can support new products. Large companies are usually organized into divisions and functional silos, each with its own product development, sales, marketing, customer support and finance functions. Each division acts from self-interest and focuses on its own success; within a fortress that protects its ideas, it has its own leadership and culture. And employees focus on the problems of their own divisions or departments—not on those of the company. Too often, the divisions of a company consider their competitors to be the company’s other divisions; they can’t envisage new industries or see the threat from other industries.

This is why the majority of today’s leading companies are likely to go the way of Blockbuster, Motorola, Sears and Kodak, which were at the top of their game until their markets were disrupted, sending them toward oblivion.

See also: How to Respond to Industry Disruption  

Companies now have to be on a war footing. They need to learn about technology advances and see themselves as a technology startup in Silicon Valley would: as a juicy target for disruption. They have to realize that the threat may arise in any industry, with any new technology. Companies need all hands on board — with all divisions working together employing bold new thinking to find ways to reinvent themselves and defend themselves from the onslaught of new competition.

The choice that leaders face is to disrupt themselves—or to be disrupted.