Insurers need to optimize and transform their existing business models, while exploring new models that will be better suited to the emerging digital economy and will create new value for customers and the organization alike.
We call this "pivoting to the new": transforming the core business to reduce costs and maximize growth, and then using the funds released in this way to create space for investments in new business models and innovative digital ventures. As these new ventures mature and confirm their potential to generate real value, the organization prudently shifts its focus from the core and scales up "the new."
Here are seven steps you can take to thrive in the new:
1. Lead change with vision
Ensure the organization has a clear understanding of the change that is required. If this is lacking, it may be necessary to challenge its existing orthodoxies and explore its future direction. Develop a flexible roadmap for heading in this direction. Strive to deliver outcomes and value more rapidly, and accept that your vision and roadmap will evolve constantly as you learn from your experiences and as the world changes around you.
2. Prioritize investments in the new
Balancing change investments across the core business and the new can be challenging. Increasingly, these investments are converging, moving from "digital on the side" in a standalone unit or internal challenger, toward investments that both benefit the core business and build the new business for the future.
The change portfolio intended to realize these two goals should be re-prioritized continually, and new change should be initiated all the time. As they balance resources between "run the business" and "change the business," leaders must ensure that change the business activities are not just enhancements at the margins of existing business models, but are actually creating new robust and sustainable value streams.
3. Innovate and scale for value
As the deluge of emerging technologies grows, it is essential that you undertake innovation for the right reasons. Experimentation and scaling thrive in the right culture, with the right funding, talent and infrastructure. Being able to execute proof of concepts and pilots quickly is essential to understanding potential value.
Many insurers are doing this, but are struggling to scale innovation and join up innovations around new customer propositions and value-chain plays. Where there is no clear value or the innovation does not work in your new business model, stop quickly, learn from the experience, and shift your investment of time and money elsewhere.
Where there is sufficient potential, you need to increase the investment and clear obstacles to iterate rapidly and scale the innovation to drive real business and customer value.
4. Make change more human
Most digital change displaces, automates or augments human work. To avoid fear and job insecurity you should create an inspiring vision and a supportive culture that fosters innovation, increases security by tolerating failure and nurtures a positive attitude to change. By putting people at the heart of the change, you remove many of the barriers to transformation, while allowing employees to acquire new digital skills and creating space for creativity.
5. Be open to change from outside
The growth in Insurtech and ecosystems has made insurers significantly more open to change from outside. You need to consider what role you will play in the industry ecosystem—especially your contribution to the customer experience and meeting customer needs, whether you will continue to hold the customer relationship, and whether you will be a platform for best-of-breed services or be a niche player.
6. Build true agility
True agility balances pace and stability—adaptability and speed of reaction on the one hand, and effective decision making and strong disciplines on the other. A culture of risk aversion and resistance to transformation is not the only impediment to agility. Others are complex legacy systems, fragmented business divisions, time-poor product owners, workspace and lack of collaboration tooling, and legacy organization structures rooted in old ways of doing business. These are serious obstacles, but they must be addressed to deal with constant change.
7. Prioritize and develop your change capability
To be able to handle constant change, especially larger transformational change, you must develop your professional change capability. An understanding of the change capabilities that are needed depends on a clear change vision and portfolio. Key operating model decisions can then be taken to develop and apply this capability.
This change capability should include the right internal teams, methods, tools and governance appropriate for a range of change programs and continuous change scenarios. It also requires relationships with the right external change partners.