In business, the gap between “knowing what to do” and “doing it” is of increasing concern. Why? Because in a world of rapid change, the gap between leaders and fast followers or laggards will at some point become insurmountable. The forces of change are shifting the status quo. New competitors are rising within and outside the insurance industry.
Last month, Majesco published a research report, Strategic Priorities 2017 — Knowing vs. Doing, that highlighted how insurers are responding to changes in the marketplace. We followed that up with two blogs explaining the Knowing — Planning — Doing Gap, and how Habits Stifle Strategy. Today we are focusing on what’s really important…catching up or even leap frogging! How do we close the gap between where we are and where we need to be in order to stay competitive?
Recognize the gap. Seize the opportunity.
Insurers are, at their core, risk averse. With today’s pace of change, however, the path of least risk will include taking some risks. The risk to invest in new business models, new products, new markets, and new channels can, at minimum, keep insurers competitive. Even better, taking these risks could allow insurers to leapfrog the competition. Because the new competition does not play by the traditional rules of the past, insurers need to be a part of rewriting the rules for the future. There is less risk in a game where you write the rules. Are we acting upon our knowledge of the insurance industry, regulatory requirements and market trends to create a game that plays to our strengths in meeting changing customer and market needs? Or, are we simply educated observers waiting to see if it works, then follow?
“Fail fast” is more than a technology, product, service or business model development mantra — it’s a directive to do ANYTHING that will place the organization out on the edge of change. A position of knowledgeable risk — risk with an opportunity for differentiation and growth — is the new normal for insurers. Ask your organization…is it more risky to jump into the gap with uncertainty about the potential of new ideas, or to sit still and accept the certainty of dramatic changes to the insurance industry as we know it?
Bridge the gap in logical phases.
To move from thinking to doing requires a new business paradigm in how we define and think about insurance in the digital age. Most organizations can’t simply flip off one switch (traditional business model and products administered on traditional systems) and flip another on (new business model and products on modern, flexible systems that will handle digital integration and better data acquisition and analysis). The shift is separating the insurance business models of the past 50+ years that have been based on the business assumptions, products, processes, channels of the Silent and Baby Boomer generations from those of the next generation, the Millennials and Gen Z, as well as many in Gen X. So, the shift will require steps that provide a bridge across a growing gap of pre and post digital age between leaders, fast followers and laggards.
A paradigm shift in phases makes sense, so that business streams overlap each other. For example, we expect to see existing insurers and reinsurers increasingly looking for paths to create the business of the future and revenue growth, by capturing the next generation of customers with new engagement models, products and services. But while doing that, they must fund the future by transforming and optimizing today’s business and the current customers that they have grown over the past decade.
As they rethink their business models and realign them with the customer needs and expectations of those who will be their customers for the next 10-20 years, they will logically still be catering to their loyal customers from the past 50+ years. This will require insurers to know, plan and execute across these three paths:
- Keep and grow the existing business, while transforming and building the new business.
- Optimize the existing business while building the new business.
- Develop a new business model for a new generation of buyers.
These three focal points are critical steps in a world of change and disruption. A new generation of insurance buyers with new needs and expectations creates both a challenge and an opportunity. Those who recognize and rapidly respond to this shift will thrive in an increasingly competitive industry to become the new leaders of a re-imagined insurance business.
Act. Right now. Close the gap.
Not every insurance company will be successful in this new world of new customer risks and expectations, ever-advancing technology, data and analytics capabilities and expanding and blurring market boundaries. But if you are determined that your company will succeed, you must act now to start closing the most critical gaps between what your company knows and what it is doing in response to that knowledge.
Insurance companies must stop talking and start doing. We are entering a new age of insurance underpinned by a seismic shift creating leaps in innovation and disruption, challenging the traditional business assumptions, operations, processes and products of the last 30-50 years. The challengers, such as Lemonade, Splice, TROV, Haven Life, Root, Next Insurance and others, are bucking the status quo and introducing new business models, products, processes, channels and experiences for the future. Will they all succeed? Maybe not. But they will alter the landscape, just as others have in the past or in other industries, leaving companies who did not change in their wake. The implications for insurers are enormous. The gap between knowing and doing is putting insurers at significant risk. It is allowing them to fall further behind, making them irrelevant … and potentially extinct.
On the flip side, once your organization jumps the gap, you’ll be in the enviable position of putting distance between your organization and those that didn’t act on their knowledge. Following a roadmap (similar to the one outlined in the three steps above) will bring your organization to a place where it will be prepared to capture growth and gain the agility to move in new markets.
Closing the gap is a journey that begins with a first step of action. Take that step now!