Tag Archives: warren bennis

Wisdom From Some Very Smart People

I’d bet that most of you would be excited to learn that the factory of the future was being built in your hometown. Probably your enthusiasm would be driven by your knowledge of factories of the past. Unfortunately, the difference between the factory of the past and the factory of the future is change – TRANSFORMATIONAL CHANGE.

Warren Bennis (a very smart man) offered the following observation in “New Work Habits for a Radically Changing World” in 1994: “The factory of the future will have only two employees, a man and a dog. The man will be there to feed the dog. The dog will be there to keep the man from touching the equipment.”

From an insurance standpoint, my first questions on the new risks associated with the factory of the future would be:

  1. What is the workers’ comp rate on a dog feeder and a watchdog?
  2. Can you afford to insure this type of new risk?
  3. Is Bennis right about the factory of the future?
  4. What are you doing to prepare to be a profitable agent insuring risks of the future?

Before you call me crazy, remember the travel agents, bookstores and video stores that are no more because they kept admiring their past success in the mirror of yesterday and did not consider the horizon of TRANSFORMATIONAL CHANGE THAT IS TECHNOLOGY.

The bad news is that TRANSFORMATIONAL CHANGE is coming (and in some cases is already here). The good news is the buyers and sellers in our industry who leverage this TRANSFORMATION can be big winners if they TRANSFORM with it or allow themselves to be TRANSFORMED by it.

Recently, I received an e-mail from a very creative industry leader, Ryan Collier, chief digital officer of Risk Placement Services, celebrating innovation/TRANSFORMATION:

“Trying to live the ‘eThink Insurance’ mantra every day. A fun side note for you – the platform that we have developed started offering a ‘friction free’ cyber buying experience officially in 2015. It literally takes a company about one minute (four questions) to buy cyber insurance. Since we have launched it we have taken our proprietary/partner insurance carrier (BCS Insurance) from ZERO premium up to the sixth-largest cyber insurance carrier by premium and third by policy count in the U. S. – all by completely redesigning the process. For me, it is all about the process – and tailoring that process toward the buyer and not the carrier. This is a nascent product that needs to be bought – not sold. We now have 12 products that can be quoted/bound/issued in a moment, which has been a boatload of fun and an extreme amount of work as this old industry doesn’t like to change.”

I call this intimacy being “client-defined and client-driven.” Ryan is a very innovative industry leader, a rare resource in a “me, too” world. We’re more copycats and fat cats than lean and mean innovators. Casual Friday is not innovation.

Our industry will be TRANSFORMED from without – not from within.

See also: 3 Ways to an Easier Digital Transformation  

To reinforce this opinion, I offer the following from an insurance industry leader, Paul Carroll, who from his Innovator’s Edge platform asked: “Will Apple enter insurance? Google? Microsoft? Amazon?” He said, “Apple’s market value crested $1 trillion last week, and its big tech brethren Google, Microsoft and Amazon aren’t far behind; all are valued north of $800 billion.”

I wasn’t shocked until he said, “All have extensive data about customers. And all have the size to tackle mind-bending problems that insurance faces – by contrast, you’d have to combine AIG, Prudential and Allstate just to surpass $100 billion in market value.”

Now that I have your attention: Consider the comments that follow from Peter Drucker and Theodore Levitt, who were TRANSFORMATIONAL leaders in a world that did not voluntarily embrace change.

Levitt – “We habitually celebrate him [Henry Ford] for the wrong reason, his production genius. His real genius was marketing. We think that he was able to cut price and therefore sell millions of $500 cars because his invention of the assembly line had reduced the costs. Actually, he invented the assembly line because he had concluded that at $500 he could sell millions of cars. Mass production was the result, not the cause, of his low prices.”

Peter Drucker, in a Wall Street Journal article titled “The Five Deadly Business Sins” (Oct. 21, 1993), explains the need for a new paradigm in all of our operations:

“The third deadly sin is cost-driven pricing. The only thing that works is price-driven costing. Most Americans and practically all European companies arrive at their prices by adding up all costs and then putting a profit on top. And then, as soon as they have introduced the product, they have to start cutting the price, have to redesign the product at enormous expense, have to take losses – and often have to drop a perfectly good product because it is priced incorrectly. Their argument – ‘we have to recover our costs and make a profit.’ This is true but irrelevant: CUSTOMERS DO NOT SEE IT AS THEIR JOB TO ENSURE MANUFACTURERS A PROFIT.”

Drucker further states, “Cost-driven pricing is the reason there is no American consumer electronics industry any more.”

When I started in the agency business (1975), we were paid 25% commission on homeowners insurance. Agents boldly stated, “I won’t sell homeowners for less than that.” They were wrong. I believe, in my lifetime (and I’m old), insurance will be quoted net of commission or with full disclosure of commission. That will ensure TRANSFORMATIONAL CHANGE.

See also: Core Transformation Is Not Negotiable  

Want to be here tomorrow? Heed Drucker’s advice: “There are only two functions in business, marketing and innovation.” Our world is transforming because the people and the global marketplace are changing. They now enjoy unlimited options.

Consider the following simple outline of the marketing process:

  1. Who is your customer (prospect) base? As a niche of one, customers can shop anywhere.
  2. What are their wants and needs? Do not limit your research based on just what you sell.
  3. What products/services and client intimacy must you offer to meet these wants and needs?
  4. How will these be priced to sell?
  5. How will you anticipate these needs and deliver a solution to customers at a profit?

Plan to innovate everything: people, process, products, pricing, performance (expectations), places, etc. Try “everything,” and, if something doesn’t work, go back to what did. Your marketplace will be the judge and arbiter of what is good and what is not so good!

If this article starts making you sing “Crazy” – I like the Patsy Cline version best – consider how much online banking you do now and know that Capital Bank is now opening “branch cafes” in lieu of branch banks!

A Contrarian Looks ‘Back to the Future’

A recent week started with reading a page by Paul Carroll from his Innovator’s Edge platform. The title question was: “Will Apple enter insurance? Google? Microsoft? Amazon?” His opening statement was, “Apple’s market value crested $1 trillion last week, and its big tech brethren Google, Microsoft and Amazon aren’t far behind, all are valued north of $800 billion…”

I wasn’t shocked until he said, “All have extensive data about customers. And all have the size to tackle mind-bending problems that insurance faces – by contrast you’d have to combine AIG, Prudential and Allstate just to surpass $100 billion in market value…”

A day later, someone sent me Reagan Consulting’s “The Golden Age of Insurance Brokerage.” As I read through this short update, I could almost hear, “Happy days are here again” playing in the background for the brokers. The following captures the essence of this document: “We are living in the Golden Age of insurance brokerage. There are so many good things happening, it is hard to keep track of them all.” This was followed by six bullet points providing evidence of why the brokers are so happy. (No mention was made of insurance buyers, who may not be as HAPPY!)

A friend then sent me a link to “The Death of the Old School Agency,” by Michael Jans. This is a more in-depth view (30-plus pages) of the world as it may or will be.

From the executive summary, we learn that today’s agent faces a new world of:

  • Rapid changes in consumer behavior and expectations
  • Emerging, existing and well-funded competitive channels
  • A rising millennial generation with different expectations, both as consumers and workers
  • A pace of change unlike anything they’ve ever seen before.

Depending upon who, what and where you are, this report will bring good news or bad news, but nonetheless – it is news that (I believe) every agent needs to hear, consider, ponder and then decide on.

Agencies tomorrow are not “your daddy’s Oldsmobile.” Ask someone older than 40 to explain the phrase. This was the beginning of the end of a legendary line of General Motors automobiles and probably a foreshadowing of the collapse of General Motors.

I encourage you to study all three of these documents – they are well-written by very successful folks. Their ideas should be carefully considered, and, if properly adapted to your circumstances, all can improve your results. That is – as long as the world goes as “we the people” in this industry think it should. What follows is my contrarian view – less “raining on your parade” and more clearing the air as you look to the horizon in tomorrow’s consumer-driven economy. We are not in charge. We today are wagering on our individual and industry’s future. Place your bets. The market will pick the winners.

See also: 3 Myths That Inhibit Innovation (Part 3)  

This contrarian will offer his ideas by looking “back to the future.”

There will remain great opportunities in our future, but these will require transformational change. From today’s selling in an industry that is product-defined and product-driven, to a new client-defined and client-driven marketplace where we will facilitate our client’s buying – solving their problems and meeting their needs. In the competitive nature of tomorrow’s world – we’ll have to use artificial intelligence (AI) to anticipate these needs and deliver solutions before our clients “go shopping.”

Some of the people, gifts, expertise, disciplines, skills, etc. we’ll need will be much different than the mechanical process we use today. We will need communicators (verbal and nonverbal), empathizers, artists, inventors, designers, storytellers, caregivers, consolers, big picture thinkers, storytellers, caregivers and “techies.” This is not an all-inclusive list. (Consider reading “A Whole New Mind,” by Daniel Pink.)

Warren Bennis offered the following wisdom decades ago: “The factory of the future will have only two employees, a man and a dog. The man will be there to feed the dog. The dog will be there to keep the man from touching the equipment.”

Consider the following – brief observations from one man’s experience:

  • In 1978, Fireman’s Fund/Famex Agents offered a GM-endorsed insurance program for dealers. I was the SW Louisiana agent. In those days, the No. 1 concern of GM and its dealers was that GM would reach 65% market share and the federal government would break GM up into separate companies, Chevrolet, Pontiac, Buick, etc. GM’s arrogance, the dealers’ complacency, foreign competition, a poor product and a marketplace wanting change reshaped their world. GM never made it to 65% market share. I believe the insurance industry is ripe for a similar transformational experience.
  • In 1994, I was speaking to a bank in St. James Parish (Louisiana) about change. I said, “Today, GM, Sears and IBM are the kings of their respective jungles. I believe, in my lifetime, one of these companies will fail.” I was laughed off the stage. Fourteen years later, I was vindicated with the bankruptcy filing by GM. I personally believe that I’ll also prove right on Sears.
  • In June 2008, I was an instructor for attendees in a risk and insurance class at the KPMG Advisory University in Chicago. This was a continuing education week for KPMG consultants. A rookie consultant asked, “How does an insurance company fail?” I explained with the Champion Insurance story.

Then he asked for an example of a “rock solid” insurance company. I said, “AIG.” The KPMG senior partners in the room nodded in agreement. Less than 100 days later, AIG was functionally bankrupt, requiring a $182 billion bailout by the government. None of us saw that coming. (I’ll bet you were surprised, as well.)

As I wrap up this article, hoping I’ve stimulated a much more important discussion about the future, consider the following:

  1. Companies valued at $100 billion are “big” until measured against trillion-dollar operations in a world in transformation – especially if the giants have better technology and data!
  2. Apple, Google, Microsoft and Amazon (AGMA) are kings of their respective jungles. Yet these companies are not even as old as the majority of readers of this column (with the possible exception of Microsoft and Apple, founded in the mid-1970s). Why would we think that our “old and stoic” industry is “safe” and “promising” for tomorrow? Are we celebrating our past when we should be planning our future?
  3. Do you think that any of your clients who have recently received a rate increase will be as enthusiastic about the profitability of our industry and the future of the world of brokers as stated in the article offered by Reagan? I’ve rarely (if ever) heard a client celebrate the profitability of our industry when it is an expense to theirs…
  4. Generational changes, social media and our societal rethinking of issues of race, gender, ethnicity, family, values, economic models (socialism / capitalism), etc. may result in our going in directions that we, 10 years ago, would have never considered possible.
  5. Has our industry let the government get its nose into our tent/economic system. NFIP has been in this industry as long as I have. The private sector didn’t want to address the flood risk. Now, these nearly 50 years later, the flood program is a government program and not sustainable. Unfortunately, the government may be ready to have the camel stand up in the tent? Medicare for everyone is no longer a crazy idea. It may not work, but….
  6. If the insurance industry was being designed today to do what it does, do you really believe it would be what we have? If you answered yes, please reread the question!

See also: What Is Really Disrupting Insurance?  

Bookstores, travel agencies, video stores, etc. were important in our communities of yesterday – UNTIL THEY WEREN’T. Should we begin redesigning our own operations and industry and future before a competitive innovator does it for us?

Getting to 2020 — Defining the Unknown (Part 2)

Today’s exercise focuses on the best concepts you can dream up so your organization can thrive in the future. You’ll then need to perform a reality test on those ideas, using research you’ve developed.

This article follows up on my first, in which I argue that now is the time to prepare for what I call “Agency 2020.” In other words, you need to prepare your organization for the leap that will be required for future prosperity.

In that first article, I asked dozens of questions to help define the current reality of 2014. We searched for the knowns – and the known unknowns – of today. This time around, almost every question will be about a discovery in the “unknown unknowns.”

Your challenge is about asking the right questions – and then stretching yourself beyond your comfort zone to find good answers for tomorrow. Use a flood light on the dark horizon of tomorrow. It’s premature to focus with laser-like intensity.

Pursue this process with enthusiasm and childlike curiosity. Forget what you know and believe. Ask “what if?” Don’t try to define “what isn’t.” My intent is to broaden your horizon, stimulate imaginative thought, encourage you to focus and help you act as you develop your new organization for 2020.

To keep the process simple and open-ended, we’ll focus on four issues:

  • people
  • technology
  • the global economy
  • innovation

PEOPLE: The overriding challenge and opportunity in 2020 will be people: who they are,  their values, the cultures they will create and their wants and needs in their own world. Do their worlds and your world overlap? Is there some common interest and opportunity? How do you communicate with many … as well as with a niche of one?

Research the generational mix in 2020. What percentage of the population will be Gen C, Millennials, Gen X and Boomers? Will the Greatest Generation be gone? What will be the influence of each group in the decision-making process as consumers, managers, leaders, etc.?

If they are clients or prospects, what products and services can you offer to meet their wants and needs? How do you profitably deliver this at a price they are willing to pay? What message, media, metrics are necessary to ensure you maintain intimacy continually with each person and affinity, as well as with their population (generation) – however they define it?

Where and how can your interests align – whether as employers, employees, collaborators, competitors, decision makers, policy leaders, educators, friends or social media group members, etc.? Who is now – or who will be – in your world tomorrow, in 2020?

Consider the following as you try to put your arms around a new digital universe that will see the LAGgards (Last Analog Generation) leaving the scene and new Gen C – digital natives – begin to assert their influence before they finish high school. (Before you roll your eyes, have you ever had to ask a teenager to show you how to use your device du jour?)

John Naisbitt painted the picture of this phenomenon in his book Megatrends when he talked about “balancing high tech and high touch.”

If you are unwilling or unable to accept the new world, demographics and diversity, enjoy your retirement.

TECHNOLOGY: Decades ago, the scholar and organizational consultant Warren Bennis observed: “The factory of the future will have two employees, a man and a dog. The man is there to feed the dog, and the dog is there to keep the man away from the machinery.” Could he be right?

To provide perspective, remember that in 2003 the BlackBerry was considered state-of–the-art technology. Some believed this device owned the future of social connection. There was no iPhone, iPad, Facebook, Twitter, etc. By 2012, BlackBerry’s parent – then known as Research in Motion – was teetering on the edge of bankruptcy, and “i” technology, smart devices and social media were out-of-control adolescents.

Today, conversations are focusing on the Internet of Things, or IoT, where inanimate objects – smart watches, “intelligent” cars, home appliances, etc. – communicate without the intervention of people.

In 2020, will technology work for us, or will we work for technology? Will we know more and communicate better than Siri, or will artificial intelligence be the trusted advisers for most consumers? Will facial recognition technology allow your iPhone to read the mood of your clients better than you can, when you’re each sitting at the City Club texting each other over lunch?

Is this ridiculous? Can you afford to be wrong?

THE GLOBAL ECONOMY: Time and place are gone. The lights are always on, and the door is never locked in any place of business. That’s the good news: You can live on Main Street and still compete in Dublin, Dubai or Duson, La. The bad news is that your competitor and many hackers are on Main Street, peering into your shop. You can be a David in a world of Goliaths. But if you’re a Goliath, you’re more vulnerable than ever to a world of Davids. If your company is bureaucratic, you’re just a slower Goliath.

My best suggestion is to “capture population” and become the portal of choice for members of that universe. Don’t worry about selling products. Instead, focus on needs and solutions to problems. Facilitate the “buying,” or capture, of each individual in the group. Remember: If you control a large enough population, you can “insure” needs of the group – without the cost of issuing individual policies.

INNOVATION (the new power plays and power players): In a presentation on change in 1993, I declared: “Today GM, Sears and IBM are the kings of their respective jungles. In our lifetime, one of these companies will fail.” The audience shook their heads in disbelief. I was right, and in the long term I may win the trifecta.

From the Affordable Care Act, to Facebook, Amazon, Twitter, apps, artificial intelligence and IoT, the marketplace is being redesigned by the people who shop there. In other words, the deck is being reshuffled. Opportunities have never been greater, the stakes higher or the risks greater.

That the world will be different is a fact. Remember Einstein’s admonition: “Insanity is to continue to do what you’ve always done and expect a different result.” Don’t be insane. Be prepared.  It can work. As I noted in my first article, we’ve already walked on the moon!

With forethought, an organizational purpose, principles, a vision, a commitment and a plan that ropes you to that commitment, you can and will prevail.  Don’t try to conquer the world. Just identify and prevail in your part of that world.

Be bold and wise in your research and positioning for 2020. Today’s world includes unlimited data, much less useable information and less still actionable knowledge. By 2020 – if you’re willing to try – you’ll be able to take the actionable knowledge, shape it to the wants and needs of a specific group, align your offerings (helping them buy) and innovate your processes to ensure you can deliver at a price they are willing to pay. Align your message, media, meaning, etc. to each specific group. Test the concept. And then act – meaning experiment. Remember, wisdom exists at the intersection of knowledge and experimentation. When you fall down, stand back up.

As business management columnist Dale Dauten states: “Different isn’t always better, but better is always different.” Be better in 2020. Differentiate yourself from the sameness of today and tomorrow!  Take the giant leap of discovery for yourself … and all of mankind!