Despite a decade of talking about the three key buzzwords, the insurance industry continues to grapple with how be ‘innovative’. For example, the Lloyd’s Blueprint Two Programme and the development of the Core Data Record –tells us that it’s taken 300 years for the insurance market to agree that it needs a centralised data record.
It’s a common trope to reference organisations like Apple as a shining light of innovation – but the company fundamentally changed its operating model in the late 1990s to foster a culture of innovation and lay the foundations for success. Shifting to a single P&L and combining disparate functional units made a material difference – three years later came the iPod, and the rest is history.
The question for insurers is ‘why should I invest in innovation?’ In our experience, insurers who are embedding innovation at the heart of business strategy are seeing top and bottom-line benefits. Competitors are viewing them enviously. Intermediaries seek them out as partners. And if the marketing machine has done its job properly, customers want to engage with them. All in all, a compelling argument.
The more innovative insurers have similar characteristics:
- There is explicit agreement amongst the executive around the level of ambition and investment and why the organisation wants to do things in a different way.
- Innovation is not a fringe activity siloed to the side – it’s embedded across the organisation both functionally and more importantly, culturally.
- Early success should not create complacency – innovation requires a mindset of constantly looking over your shoulder, an imperative to establishing and maintaining their competitive edge.
To achieve the true potential from innovation, it needs to be an inherent part of your operating model from distribution, product and underwriting, through to claims and customer service. The complexity of the insurance value chain means there is ample opportunity to differentiate from your competitors. The imperative to act now is growing and it starts with embedding innovation at the heart of your organisational psyche.
Alpha’s key takeaways:
- Create a genuine mandate for innovation and the space to explore it – strong and consistent executive sponsorship is required for innovation to become reflexive behaviour. Innovation leaders need to be at the top table and in possession of the right tools to do their jobs
- It doesn’t have to be big and expensive – necessity and scarcity often breed some of the best results. Investing in building something with low investment but high scalability is prudent.
- Explicitly embed innovation in your strategy – this means OKR’s (objectives and key results) and KPIs (key performance indicators)- after all, ‘what is measured is managed’ – and accountability needs to have a home. If nobody is held responsible, don’t expect anything to happen.
- Normalise taking chances and making mistakes – successful innovative cultures will embrace risk-taking and understand the consequences. Your middle management is critical to this and will make or break the success of innovative culture at any organisation.
How Alpha can Help:
Alpha is already helping a number of our clients to embed innovation in their operating model. If you are facing these challenges, we are more than happy to speak to you and provide our expert insights – please reach out to us here.