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The Race for the Killer App in Insurance, Lap 1 – Missed Opportunities?

The Race for the Killer App in Insurance, Lap 1 – Missed Opportunities?

Lost Opportunities to Out-Innovate the Competition

Remember the must read book “Unleashing the Killer App: Digital Strategies for Market Dominance” by Larry Downes and Chunka Mui?  I was lucky to get a signed copy at a Diamond Technology Partners event and hear them speak about the killer app.  It was in 1998, the start of the eBusiness revolution, with the emergence of the Internet as a platform for a new business model.  Every company was holding executive management strategy sessions discussing the book and brainstorming. In the insurance industry, many were putting up their first websites and beginning to think about eBusiness opportunities that could become their “killer apps”.

Many insurance companies failed in this effort. Their vision wasn’t big enough. Their desire to upend existing models wasn’t strong enough. Rather, they thought incrementally and reservedly. This resulted in strange hybrid solutions, such as websites with no integration to backend systems. Requests were printed off and manually put into the systems. Many companies wasted time on vaporware ideas that never got off the ground due to organizational angst or a lack of leadership. It was an exciting and painful time as we recalibrated our thinking toward an entirely new era of business. In spite of our efforts, we fell a lap or more behind in our race toward innovation.

But some companies succeeded. Think about Esurance and Homesite, startups who understood the opportunities and launched their businesses around this time. These companies exploited the dramatic changes introduced by the Internet and challenged one of the long-held business assumptions, that agents were required to sell and service insurance with direct to consumer models. As a result, they emerged as formidable, innovative companies.

Do established insurers have another chance to stay in the race?

Recently I read the follow-up to the first book titled, “The New Killer Apps: How Large Companies Can Out-Innovate Start-ups,” and another titled, “Billion Dollar Lessons,” both by Chunka Mui and Paul B. Carroll. Interestingly, the new book takes a view that decades or century-long established companies can out-innovate today’s start-ups, many of whom are considered Unicorns, a pre-IPO tech startup with a billion dollar market value. These startups and unicorns have emerged in the last few years with real business models, real revenue, real customers and massive valuations unlike the first Internet boom – think of Uber, Airbnb, Snapchat, SpaceX, and Pinterest.

Even more compelling for insurance, is the rapidly growing intensity of change being influenced by these companies.  Consider Uber and the impact on auto insurance, Airbnb and homeowners insurance, or Snapchat’s new payment options.

The authors are quick to point out what we should all recognize, that being big AND agile is essential in today’s rapidly changing world of converging technology innovations including mobile, social media, sensors, cameras, cloud and emergent knowledge. They estimate that more than $36 trillion of stock-market value is up for “re-imagination” in the near future — meaning that either existing companies reimagine their business and claim the markets of the future or the alternative may happen and they may be reimagined out of existence!

When they compared successes and failures of established companies, they found that successful companies thought big, started small and learned fast. Failures commonly missed on one or all of these points. Is the insurance industry thinking big enough yet? Are they innovating by starting small? And are they learning fast by experimenting, testing and learning from failures?

The only way insurers stand to catch up in a race where the trophy is not just success but also survival, is to out-innovate the competition, including the new competition from outside the industry looking to disrupt insurance. It’s possible, but it is going to require both wise technology investment and a whole new insurance business model mindset.

Next week, we’ll discuss that mindset and look at what it takes to become an emerging leader.


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