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6 Real-World Tips Insurance Companies Can Use for Successful Innovation

May 17, 2013

Choral music has been around a long time, usually attributed to 2nd century BC Greece.  For the next 2200 years, and through various evolutions, choral music remained a group of vocalists standing in a common area, singing in unison.  Not much breakthrough-no-going-backwards innovation.  Then along comes the disruptor, Eric Whitacre.  A classical choral music composer, he innovated by crowdsourcing voices, instead of putting a group of singers in a studio.  He uses social media and technology to source voices from around the world, which he then merges into beautiful arrangements, often with thousands of voices, all expertly synchronized by Eric.  For example, his Water Night received 3,746 videos, spanning 73 countries, and almost 3,000 people sang one or more parts.  And of course, he uses Kickstart and sells via iTunes, like any other innovator.  This innovator made classical choral music popular and globally relevant.

Insurers must innovate. No more Great Recession reactive procrastination.  Now insurers must validate and then leverage institutional knowledge and capabilities, massively improve processes, reduce and simplify multiple silo’d systems (one major carrier had 60 Claims and Policy systems due to inorganic growth) and use data for risk and fraud controls ensuring not just profitability, but perhaps even survival.  Time is short – insurers can no longer afford incremental change; they need to become Eric Whitacres.

Easier said than done. I’ve read many articles by extremely bright bulbs (or these days, intense LEDs) on how to innovate or today’s’ ‘Top 5 things every Insurer should innovate on’, or ‘The top 10 technologies for innovation’. Throw technology at anything and declare it ‘new’; create committees, have fun, etc.  From my experience, the answer is culture and those employees hand-chosen to fit into that innovation culture.  Think you can pluck a ‘good employee’ and put them onto an innovation project?  Here’s an interesting story from Aaron Levie, the CEO and founder of $1B Box, illustrating the point:

 “We had a brand new employee that noticed something wrong on a marketing program we were doing.  He and I were talking about it and I said, “Well, why don’t you just go tell the person who’s running the marketing campaign that you don’t think it’s a good idea” and he responded, “I didn’t know that would be appropriate”. 

Sure enough, this morning’s email barrage includes an offer titled ‘Become More Innovative’.  It contains the usual mantras of ‘be innovative’ and ‘go sit in a park and think way out of the box’.  All true, for an inherently innovative person.  But what about most organizations where even the best of employees are bounded by a decade or more of fitting in? Do you push them aside, bring in the smart people, and then spend a lot of your time telling your employees they’re not the stupid crew? We recommend staffing innovation initiatives based on the type of innovation needed.

Innovation, per the literature and in practice, comes in two flavors: exploitative innovation, focusing on improving that which already exists and exploratory innovation, creating brand new ideas and concepts.  In portable electronics, longer battery life is exploitative innovation because you’ve discovered a new battery technology and you’re insistent on being first it market with a longer lived smartphone (or car).  This is not easy, involves the extended supply chain and engineering extensively, as well as testing, among other departments, and so we should not put it into a lower category.  Insurance companies can use exploitative innovation as part of their multi-channel distribution strategy.  Exploratory innovation would be creating the smartphone to begin with; again, extremely valuable (think Apple), but not always necessary. Telematics is an example of exploratory innovation.  In either case, innovation is not limited to the tangible – insurance companies should be focusing on both innovative product drivers, as well as their core business model. How you staff innovation initiatives flows directly and logically from the innovation type needed at any given moment.

Our critical staffing and organizing tips, based in the literature and our hard-won experience are:

  1. An often overlooked factor in all the hype about positive energy around innovation is a highly practical matter.  Prior to start, you must learn how your organization punishes intelligent-failure.  Pretty radical, but if your organization punishes intelligent-failure with the ‘smell of the skunk’, it will be hard to get the right people on the project. Senior Management Team has to stipulate, in writing, they require a fair and supportive analysis of all new ideas, and not just tops-down, but primarily bottoms-up. Be careful about special bonuses – sometimes people propose ideas just to get the cash.  I would link success to promotions and being on the implementation team, near-term or future.
  2. Remove unnecessary impediments to creativity, while remaining realistic about implementation realities, such HITECH and NAIC regulatory rules and timing. Just as some lawyers are ‘deal makers’ and others are ‘deal breakers’, populate any innovation group with ‘deal makers’ – they intrinsically know how to make something work within the larger business organization. Keep that balance between ‘wow’ and near-term doable, or do the ‘wow’ in stages.
  3. Find an innovation leader with the right leadership style and personality.  Leaders already successful because they lived within the boundaries of processes, without pointing out the process could be changed or improved, are not the right choice.  Same for go-along to get along types, even if they grouse about the rigidity over coffee breaks. If they don’t have the self-assuredness to bring it forward, they’re not the right leader. Like several highly successful armies around the world, the innovation leader has to be a natural leader and, therefore, current rank and title is not a key selection criterion.
  4. Empower the innovation leader to choose their own staff, using the ‘if this is my own company would I hire them as an early-in (Levie calls this his first-10 principal and we’ve seen this work well over the years).  We’ve found the best traits for innovation participants are the ability to live under months of ambiguity, innate curiosity, like and need autonomy, accepting of new and potentially challenging ideas and concepts, self-confidence, and a healthy disrespect for ideating for its own sake. Most likely, within their own span of control, they have already innovated or at least improved processes affecting them. Diversity in backgrounds, roles and experience is necessary to avoid group think.  If everyone looks like the leader, talks like the leader and blindly follows the leader, innovation will be hard.
  5. Use moderated social media and pair it with a flexible methodology such as Design Thinking. IBM reinvented itself using a Jam process, where moderators asked specific questions, everyone entered their comments and a moderator team filtered the comments down to those which seemed most promising.  We believe rather than filtering for most promising, you simply remove the weird (ex: turning ‘Insurco’ into a fast-food Master Franchiser) and nurture promising idea candidates.
  6. No tee shirts, conferences to see what others are doing or any other conventional ‘team building’. Don’t get stuck on today’s over-hyped new technology.  Unstructured data is essential for BI, but with the proliferation of sensors, structured data will be pouring in more than ever. Innovation is serious stuff and is business focused, with technology as a partial enabler.

The 20th century was all about mass organizing and implementing new communications technologies to manage the organization.  The 21st century is about speed and innovation, and the insurance industry needs to embrace its newest chapter in its almost 6000 year history.

Richard Eichen is the Founder and Managing Principal of Return on Efficiency, LLC,http://www.growroe.com and is one of their senior turnaround leaders/CROs, Program Rescue and Interim Executives with over 25 years’ experience reshaping companies, Operations, IT/Systems Integration and key initiatives. Return on Efficiency, LLC specializes in those companies and initiatives where technology is the primary means of service delivery and revenue creation.  He can be reached at richard.eichen@growroe.com , and followed on Twitter, @RDEgrowroe .

 

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