#ITC2018: Disruption from within – is it really possible?

InsurTech of the past has been about enhancing retail-based offerings with improved customer engagement. InsurTech of today is focused on business model innovation and reconfiguring value chains. [ Tweet this ]

A couple of weeks ago in Las Vegas, InsureTech Connect 2018 welcomed almost 6,000 leaders from 56 countries who all came together to network, learn, and advance the insurance innovation ecosystem.

During the conference, I hosted a panel discussion exploring disruption from within, and whether or not it’s possible. InsurTech of the past has been about enhancing retail-based offerings with improved customer engagement. InsurTech of today is focused on business model innovation and reconfiguring value chains. While customers and venture partners are working in tandem to redefine the core of an organization’s design, to be successful and drive disruption from within, there must be an open innovation mindset and culture within the organization.

Encouraging an open innovation mindset and culture

True, transformative/ disruptive innovation is more than simply throwing random ideas around and seeing what works. It’s about analyzing where your business is heading, identifying which trends will have an impact on your business, and developing a clear strategy that guides your business’ future direction. A robust innovation strategy will not only tick these boxes, but will also encompass the people within the business to cultivate internal culture and mindset.

During our panel discussion, we touched upon this key topic -- how can corporates support their own people to take risks in their every day jobs in a way that allows them to be confident to run innovative projects?

Dan Johnson, SVP, CTO & Head of Innovation of Guardian Life mentioned how he uses the term “prototyping” with his team to allow employees to feel safe developing, testing, failing, and pivoting new projects and ideas. Dan followed this definition stating:

“You can’t get fired for a failed prototype, so we’ve encouraged a whole innovation culture within our organization.”

Similarly, on a different, but closely related, ITC panel, Debbie Brackeen, EVP, Chief Strategy & Innovation Officer, CSAA Insurance Group, coined the colloquial term “scrappy” amongst her team. Team members are encouraged to come up with innovative projects, even if they’re considered “scrappy,” and quickly test them to see if they’re viable.

Techniques as simple and straightforward as formulating a word or phrase to represent ideation, innovation, etc. can both consciously and subconsciously encourage people to think differently, especially if the whole process is supported by business leaders.

Other strategies to disrupt from within

As insurers adapt to the pace of change within uncertain markets and highly blurred industry boundaries, they are working to rationalize, adapt and redesign their operating and business models. However, as we reflect on some of the mistakes made by retail and investment banks when dealing with FinTechs, we recognize that the overall process requires more strategic thinking work than simply digitizing existing and/or traditional processes.

Let’s first dive into the key differences between digital transformation and digital innovation.

Digital transformation is the transposition and digitization of traditional business operations. At its most basic level, it is the straight translation of analogue activities into digital ones.

Digital innovation is the delivery of value-generating ideas into complete and real products and services that may be delivered using very unique ways so that to meet current and future customers’ needs.

Digital transformation elevates the whole business to a level able to solve today’s problem and develop consistently digital capabilities using new technology. In order to build this level of business flexibility and agility, businesses must also develop digital innovation competencies to drive long term resilience and sustainability -- and there are two styles of digital innovation we tend to see: 1. Incremental innovation and 2. Disruptive innovation.

Incremental innovation focuses on enhancing the performance of existing services, products, and processes with new sets of capabilities, and is seen through engagement with:

• In-house Innovation Labs: changing an organization’s internal culture and innovation activity by creating digital environments able to accelerate learning and collaboration. Such setting ease entrepreneurs’ involvement in day-to-day innovation activities of business functions.
• Ecosystem Engagement: engaging with structured open innovation frameworks, including accelerators & incubators, to drive outside-in innovation and identify relevant startup candidates that could add value to the business.
• Alliances & Partnerships: identifying mature startups, scale-ups, for partnership purposes based on a set of criteria. Such facility provides capital, investment, technology and other resources to integrate new capabilities within

Disruptive innovation has a much more significant impact on the industry’s structure and how it functions. It involves completely uprooting or even reshuffling current revenue, business and operating models, or replacing them completely. It is demonstrated through engagement with:

• Corporate Venture Capital Funds (CVCs): investing in business ventures to achieve financial returns. Often linked to the core business, CVCs also provides an opportunity to explore investments for strategic partnerships and prototyping with investment targets and ensure the deploy of their capability within the core business. 
• Venture Build: designing complete new ventures by leveraging the financial resources of the core business and working with innovators and entrepreneurs with the skills and expertise to create and up-scale new businesses
• Mergers & Acquisitions: identifying acquisition-ready targets to enhance internal learning of working with new world businesses or develop new strategic capabilities to re-sell to others.

Innovation needs to be a top-down initiative, and different types of innovation require different strategic approaches to those methods. However, regardless of what your innovation strategy looks like, your people -- your team -- needs to share your business’ vision for the future to execute on it.

Working to build an overall innovative company, not just an innovation department

Companies cannot manage innovation the same way they manage their core products, so many corporates are expanding their innovation efforts via different methods based on constant learnings.

Rather than establishing separate innovation arms, many business leaders are rigorously focusing on shifting the internal culture. They’re working to create an atmosphere safe for ideating and pivoting and encouraging their teams to challenge institutional ways of thinking, which will ultimately lead to learning experiences and notable successes.

An example of a corporate fostering an innovative internal culture is Startupbootcamp InsurTech Hartford partner Travelers:

"The biggest shift we've had at Travelers is how much time we're spending outside of Travelers...because innovation won't happen inside. You have to partner with startups, educational institutions, and others in the ecosystem; spend quality time with these people; and rethink what your value chain is and what your position is within it. This has been key." Beth Maerz, VP, Customer Experience & Innovation, Personal Insurance, Travelers

A startup’s role in an insurer’s innovation vision

Oftentimes, especially in the beginning of a corporate’s innovation journey, simply training employees to apply design thinking and lean startup methods isn’t enough. Whether your business’ innovation agenda is green or seasoned, it’s important to work with startups who are pioneering emerging technologies and new business models.

We welcomed some of these bright startups on our ITC panel, including Krish Krishnan, CEO of Zasti, one of our InsurTech alumni, and Dr. Mylea Charvat, CEO, Savonix, Inc., who has worked closely with Zia Zarma at MetLife LumenLab on their dementia proposition for the Japanese market. Both brought to the conversation different perspectives – those of entrepreneurs.

These entrepreneurs had some advice formed from years of experience working with corporates.

Dr. Mylea Charvat said:

“To the startups: treat the insurer as a partner. Things aren’t going to happen quickly, and you’re probably not going to get everything you want. But be tenacious, listen a lot, focus on solving the main problem, focus on your relationships and allies, and don’t forget to get to know the IT guys and risk guys; they’re important too.”

“To the corporates: treat entrepreneurs like thought partners.”

Krish Krishnan said:

“To the corporates: It is important to recognize the clear benefits delivered by the emerging technologies you aim to use. This includes AI and any other Tech products that can demonstrate key alignment with the core objectives of your corporate digital innovation or transformation strategy.”

“To the startups: The key to our success thus far has been to develop really specific use case applications that provide obvious, tangible, and short-term ROI. It takes time but it must be done. During the initial process of working with various departments, we take the time to learn how best to work with our corporate partners. From there, we go from a small pilot to larger budget projects; from simple use case to complex, multiple-outcome modelling scenarios and from one location to multiple geographies.”

In the industry, we talk a lot about startup-corporate collaboration, as both entities bring different strengths and perspectives to the conversation. It’s important for these relationships to be built on trust, transparency, and expertise on both sides. Businesses who know why they want to work with new ventures and who have a clear strategy, sets of processes, and a can do execution mindset in place tend to move forward faster and build genuine collaborative relationships with startups. Likewise, startups who have a clear understanding of how they’re impacting the value chain and what strategic business benefits they’re aligned with are more likely to move from pilot to production stage and beyond.

The key takeaways

Wrapping up our session, we agreed on some key takeaways. In order to disrupt from within, you have to be very clear on your strategic outcomes.

Start backward and then set key milestones to advance toward that path. Then you must ensure that you have planned a balanced portfolio of activities, combining your incremental innovation and disruptive innovation – and this will translate to the tech you choose to use, the partners you partner with, etc. [ Tweet this]

Finally, I’d like to give a huge thank you to the whole InsureTech Connect team, including Jay Weintraub, Caribou Honig, Samara Jaffe, Jessica Levin and everyone else who made #ITC2018 such a huge success. We’re already looking forward to next year.