Talk about interesting times in the business of insurance. The year 2015 saw the attention-getting launch of Google Compare and its hibernation about 12 months later. Traditional insurers like Mass Mutual and Shelter Mutual got busy and launched their own direct-to-consumer digital quoting and sales businesses. State Farm was busy filing patents for by-the-trip car insurance and the means to measure just how stressed drivers were behind the wheel and rate their insurance accordingly. Prudential recognized that previously scary diseases were now chronic conditions that could be medically managed, launching life insurance coverage for HIV positive customers. AOL saw an opportunity and is now selling insurance to its members. And we at Forrester have been busy keeping track of over 700 disrupters across FinTech that have been capturing market attention and venture capital. Some of these firms like Lemonade are returning to the social roots of insurance. Lemonade's founders also appreciate that consumers are irrational economic animals and decided to hire a behavioral scientist to help them anticipate the crazy actions of homo sapiens. And yet some people out there still call insurance a boring industry!
Source: The Forrester Wave™: Innovation Management Solutions, Q2 2016
Innovation that only creates change is just that — change. When we asked firms about their major business objectives, 37% claim that product and service innovation is central to their business transformation.
But old-style innovation will be very tough to maintain. To exploit business value from digital technologies, innovation managers need to increasingly think in open ecosystems, open standards, open platforms, and open source software. Digital innovation equals service innovation, which in turn requires a willingness to experiment and engage in minimal-viable-product thinking, because:
As customers’ demand changes more quickly, innovation cycles must get shorter. Fast software innovation will “eat” slow hardware innovation given the ever greater role that software plays for today’s business value creation. An innovation management solution supports decision sessions and real-time voting and collaboration to quickly validate or gauge the interest of organizational priorities in short sessions. Organizations need to be willing to fail fast, be able to work iteratively on product and service improvements, run idea experiments based on soft-launches, and get feedback on innovation efforts via external feedback loops quickly.
We’re now only a week away from the Mobile World Congress 2016 to be held again in Barcelona. As the excitement builds and we plan our schedules, it serves us to reflect back on last year’s event and to explore what we expect this year.
Mobile World Congress remains the pre-eminent event of the mobile industry and now one of the largest global events across all industries – a fact which illustrates an ambiguity in the meaning itself of “mobile industry.” Last year, over 94,000 people attended the event – a 10% increase from the 2014 event but a 30% increase over the 2013 event. Interest in “mobile” continues to grow – for now. But the most interesting stat about past attendees is diversification. Yes, the event continues to draw representatives from mobile operators, device manufacturers, network equipment providers, software vendors, and other usual suspects. But representation from other industries is growing. Last year almost ¼ of attendees came from industries other than telecom and technology, including 4% from finance, 3% from government and others from automotive, pharmaceutical, retail, education, and entertainment. I expect even more diversity this year.
Finovate came to London again this week and I was lucky enough to attend. Here are my thoughts from the two days:
This year’s big theme was robo-advice. Every Finovate seems to have an unofficial, accidental theme with a large group of start-ups clustered around the same disruption, like PFM, mobile payments, small business banking or digital wallets. This year it was robo-advice.
Robo advice is starting to look crowded. Each of the new digital investment managers has a distinct story. Scalable Capital offers a sophisticated quantitative, value-at-risk strategy. MeetInvest helps investors mimic the strategies of famous investors like Benjamin Graham or Peter Lynch.* Investify lets investors choose themes that feel right. DriveWealth offers fractional share investing to allow low-cost access to the US markets. SwipeStox makes it easy to follow other investors through an app. Capitali.se converts ideas into trading rules. Europe has many countries and investors are diverse. Even so, the market is starting to seem crowded. Clearly the cost of managing investment portfolios is falling, which should enable firms to break even with fewer assets under management, but the costs of regulatory compliance and marketing to achieve growth have not diminished. Investment performance will sort the unicorns from the donkeys.
You have all heard the success stories of Uber and Airbnb as they leverage technology to disrupt existing business norms in the taxi and hotel businesses. Digital business successes such as these are pressuring traditional enterprises to focus on differentiation in business models, customer intimacy and velocity as they look to not only preserve market share, but – more importantly – to grow it! This is what Forrester calls the business technology (BT) agenda – technology investments that help your business win, serve, and retain customers.
Additionally, as an I&O professional you cannot ignore the investments, and success, with public cloud. For instance, public cloud providers like Amazon Web Services drive and deliver systems of innovation to create velocity both in new business ventures and traditional enterprises, especially in fueling mobility and web services. The investments to date are supporting the ability of the Public Cloud to support and drive innovation. Additionally, these solutions now raise the possibility of the cloud’s suitability for the next phase, transition of systems of record. This is one of the predictions in our Forrester “Predictions 2016: The Cloud Accelerates” which articulates 11 key developments for Cloud and what I&O professionals should do about them.
The “low hanging fruit” is gone – now it’s time to reach higher
Tomorrow Forrester will host our Geneva-based clients for a breakfast meeting and discussion on “Powering Innovation Strategies with Insights.” My colleague, Luca Paderni, will kick off the morning with a presentation on digital disruption in the age of the customer, specifically looking at how to take a pragmatic approach to innovation with the “adjacent possible.” Then I will lead a discussion on how to build an action-oriented approach to data and analytics, exploring examples of companies that have successfully turned their data into new business opportunities – into data-derived innovation.
Thanks to Forrester’s Business Technographics, we know that business and technology leaders prioritize initiatives that secure their position in the age of the customer – to improve customer experience, address rising customer expectations, and improve their products and services (kind of all the same thing, or very closely related). It’s all about the customer. But when we ask about these priorities, the one that comes next – right after the customer-focused initiatives – is innovation: “improving our ability to innovate.” They know that the disruptions they face in the age of the customer won’t be addressed with business as usual (BAU as one of my clients referred to it yesterday; I learned a new TLA). Innovation has been elevated to an initiative, which means that executives are focused on it and likely someone is in-charge of it – we’ll come back to that one.
I interviewed companies from a variety of verticals – travel, retail, energy, clothing, financial services – and spoke to thought leaders in innovation theory to help I&O leaders solve a series of problems: How can we innovate using customer-facing interaction technologies such as mobile devices, robotics, digital signage, and virtual reality (VR)? How can we establish a device innovation lab (DIL) to help technology and business leaders at our company develop technology-infused, customer-obsessed strategies? And what are the success factors for DILs – from mission statement to staffing to key performance indicators?
In the context of my report, a device innovation lab is an a in-house space for designing, experimenting, piloting, and deploying device-based innovation projects. Done right, a DIL can differentiate your business's digital business efforts in impressive ways. Take, for example, Lowes' robotic retail associate, OSHBot.
CIOs will be orchestrators of digital ecosystems to boost innovation, production, and go-to-market capabilities. In the age of the customer, every business needs to put the customer at the center of marketing, sales, service, and delivery in order to support the brand promise.
Business ecosystems comprise many market players, including suppliers, distributors, customers, competitors, and government agencies. People, processes, and technology are the fundamental building blocks of business ecosystems. They evolve as a form of collaboration between these market players as part of the process of developing and delivering products or services. Now business ecosystems are going digital.
The digital transformation is a huge challenge and opportunity for each individual business. Business processes are changing significantly as a result of real-time information exchange, the mobile mind shift, always connected and mobile devices, and the opportunity to collect and monitor structured and unstructured data. As a business enabler, no CIO can ignore the digital transformation. Digital ecosystem management is much more than a sourcing project: According to Capgemini, businesses with the digital maturity to build digital innovations and to drive enterprise-wide transformation are 26% more profitable than their average industry competitors on a range of measures including EBIT margin and net profit margin. The CIO must actively help the organization to deliver value in the emerging digital ecosystems.
American and Canadian insurers are facing some big challenges in 2015. Customer experience expectations, their willingness to consider a growing array of new options to buy insurance, and new competitors creeping into the business of insurance are pushing traditional insurers into new digital strategies. It’s no longer a question of digital channels or “other” when it comes to the customer journey; they’re now intertwined. Digital-dependent customers are eyeing new and more digitally savvy market entrants, while demanding more control over the experience and how their personal information is used. This year, digital insurance teams are crafting agendas that satisfy their firm’s hunger for increase market share and revenue balanced with changing demographics, adaptations in response to extreme weather, and regulation that has lagged the changing realities of digital. One thing’s for sure: Insurance eBusiness teams can’t afford to wait around, but they also can’t afford to make the wrong digital decisions.
Just what are the factors propelling North American insurer agendas this year? For starters, it’s about:
Uneven economic growth in North America. The 2008 financial crisis? It’s a distant memory in much of the US, but not for all. By most measures, the US economy is thriving, driven by rising consumer demand for homes, cars, and consumer goods, and, by extension, insurance. And in oil-producing Canada the decline in gasoline prices isn’t good news: Canada is threatened with recession.
I spent Tuesday and Wednesday of this week at Finovate Europe. As always, it is a great way to spend two days thinking about digital financial innovation and how firms can deliver better experiences for their customers. Here are a few of my impressions from the two days:
Biometrics is becoming mainstream.We barely raise an eyebrow when shown authentication processes by firms like eBankIT, ID Mission, Jumio, Nice Systems and Wipro that use facial recognition, fingerprints or voice recognition because these technologies now seem almost commonplace. Yet the technologies are hugely impressive and far advanced on what was available or even possible a decade ago.
Future generations will pay differently. The credit card is one of the greatest financial innovations of all time. Yet, despite the various card innovations on show, I cannot rid myself of the belief that plastic cards will one day soon start to seem as quaint and outdated as cheques (and, indeed, business cards). There are many big obstacles on the path to mainstream mobile payment adoption, and payment habits take decades to change, but I don’t think the future is bright for plastic cards.