In “Challenge or be Challenged,” a report that came out early last year, Rich Karlgaard, publisher, Forbes Media wrote that “Every organization needs a plan to get twice as good every two years. Even if you get the digital evolution thing right, your work is only halfway done. Now you must put your organization on a cultural evolutionary path.”
At first glance, this doesn’t seem to be a very positive view of the digital evolution. Late on, comparing it to the Death Star from Star Wars, Karlgaard laments that digital technology changes everything. “First it pulls your industry, company and career into its orbit. Then it wipes out your old, tired (but, alas, nicely profitable) business model. Then it imposes its own laws on how you must run your business. Transform, or you die. Play by the digital rules, or you die. Not just one time, but again and again.”
Against this digital and cultural call to action, the insurance industry faces a couple of huge hurdles: risk aversion and a culture that is also very averse to change. With the latest disruptors pushing their way into the discussion, insurers may not have much choice when it comes to playing by the digital rules. This is especially true in the retail, direct-to-consumer segment, where upstarts such as Trov and Lemonade threaten to level the playing field. In some cases, insurers realize that it’s less about fulfilling specific business objectives and more about the importance of joining a visible accelerator program or publicizing efforts within an innovation lab in order to prove to competitors that they are ahead of the game, openly embracing the digital revolution. Regardless of the reasons given to support digital, however, it’s what’s coming out of these relationships — or not — that’s worth watching.
As expected, the bulk of digital transformation success stories are coming from tier-one carriers. Yet this call for change affects large and small insurers alike. More than one insurer has told me that it’s the people, not the technology, that end up driving digital change, “and if your employees don’t want to change, you end up having a different discussion.”
Daniel Newman, principal analyst of Futurum Research and the CEO of Broadsuite Media Group, recently blogged that digital transformation is not top down or bottom up. It’s top down and bottom up. Specifically, it begins with the user.
“One of the biggest drivers of companies successfully reimagining the user experience is providing technology and tools employees want to use,” says Newman. “You’d be surprised how many companies get this wrong. They leave tech decisions up to the tech teams, never bothering to make sure the teams who will use the software believe it is capable, intuitive, and worthwhile.”
In contrast to Newman’s view that users hold the key to digital transformation, Forbes’ study of 400 C-level executives representing $1 billion or more in annual revenue and a range of industries including insurance, nearly 60% say millennials are helping shape culture. In response, notes Forbes, many businesses are expanding social awareness initiatives as proof that, by leveraging purpose, companies can gain a competitive edge.
One thing is clear: Reluctance to change — both at management and employee levels — has been proven to substantially slow innovation at companies of all sizes. Consider a small regional carrier or a self-insured group that still relies on Excel spreadsheets for its risk management data analysis and reporting. Although it’s obvious that there are more opportunities for digital to unlock value with end-to-end operational transformation, even the smallest move away from the familiar is a difficult one. In fact, some older employees within these organizations believe they are already working in a digital environment because they use computers and spreadsheets to “manage information.”
With the natural passing of generational talent, this will change. And, because the bulk of insurers understand the urgency of playing by the digital rules, it follows that they also know that it’s up to leadership as well as employees (users) to bridge the communications gap that’s preventing light to shine on the true benefits of digital transformation.
Meanwhile, if Forbes’ Karlgaard is correct in his assertions that the digital Death Star evolves at the pace of Moore’s Law, meaning it gets twice as powerful every 18 to 24 months, it will be as important for insurers to focus on insurtechs, accelerators and innovation labs as it will be to focus on bringing their internal culture into the conversation.
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