It\u2019s Time to be Bold<\/h2>\n\n\n\n
I first made this point in my blog<\/a> last week, emphasizing that the traditional planning process needs to exhibit much bolder thinking \u2014 and action. The unprecedented conditions created by the COVID crisis have accelerated to light speed many changes that were already moving rapidly before the pandemic. Most notable \u2026 the imperative to transform to a digital insurance business model leveraging an API-enabled, microservices-based cloud platform and ecosystem of partner services and capabilities. Digital has been in the top 3-5 strategic priorities for insurers over the past few years. We expect it to become the top priority now.<\/p>\n\n\n\n Last week I highlighted McKinsey\u2019s research about the economic profit gap that has been widening between 23 industries they have been tracking since 2010, noting that those with future-ready, digital business models were in the top tier[i]<\/a>. Unfortunately, insurance was one of six industries in the bottom tier.<\/em> And, importantly, I emphasized that COVID is widening the gaps between the top and bottom tiers, as the impact of the pre-pandemic trends have become even more acute with the massive changes created by COVID. It is a similar gap we have seen widening between Leaders, Follower and Laggards from our Strategic Priorities research over the last 5 years.<\/p>\n\n\n\n McKinsey\u2019s research showed that the companies who create the most economic profit pursue five bold moves. And with the rapid acceleration of changes occurring right now, considering bold moves like the ones suggested by McKinsey in your strategic planning is now more important than ever:<\/p>\n\n\n\n This bold approach to strategic planning is something we\u2019ve emphasized for the past couple of years in our Strategic Priorities<\/a> research. The two-speed strategy we derived from this research aligns closely with McKinsey\u2019s five bold moves:<\/p>\n\n\n\n Our research highlighted the growing gaps between the Leaders, who are more boldly positioning themselves for the future of insurance, and the Followers and Laggards whose chances of becoming irrelevant are real. Leaders continue to distinguish themselves from the other two segments with their stronger focus on strategic initiatives that support the two-speed strategy. As seen in Figure 1, all three segments are focused on the foundational aspects for modernizing and optimizing the existing business \u2013 which is good. While there are gaps, they are relatively small and can be addressed.<\/p>\n\n\n\n Figure 1<\/p>\n\n\n\n However, with regard to speed of innovation and creating the business for the future, the significant gap between Leaders and Followers with Laggards is striking, as seen in Figure 2. Leaders and Followers are well-ahead of Laggards with their plans and active development for channel expansion, entering new markets, adding value-added services and integrating emerging technologies.<\/p>\n\n\n\n Figure 2<\/p>\n\n\n\n Even before the additional disruption that COVID has created, we emphasized the opportunities for creating new value that crises create. Last year we highlighted a December 2018 Boston Consulting Group (BCG) article on creating value from disruption describes how some companies successfully navigated disruption\u2014 earning the title, \u201cthrivers.\u201d[ii]<\/a> It stated that successful reinvention requires making a large bet\u2014one that can overcome the drag of the old way of doing things.<\/p>\n\n\n\n Making that big bet requires leadership, confidence and expertise to eliminate the \u201cknowing \u2013 doing\u201d gap. We see big bets being made in new business models, products and services from both InsurTech and incumbent insurer leaders who are \u201cearly responders,\u201d capturing customer and market attention.<\/p>\n\n\n\n As noted in the BCG article, those who wait will need to make bigger and potentially riskier bets to gain parity with the \u201cearly responders.\u201d As \u201cearly responders\u201d gain growth momentum, the \u201cknowing \u2013doing\u201d gap grows, leaving followers and laggards with dwindling options and relevancy in fast-changing market.<\/p>\n\n\n\n With the arrival of COVID-19, McKinsey is doubling down on the urgency to be bold in order to seize the opportunities and avoid the threats created by the pandemic, as highlighted in their July 2020 report, The Great Acceleration:<\/em><\/p>\n\n\n\n \u201cIn times of crisis, however, the burning platform is clear, leaders are often in military-command mode, and pre-crisis budgets have become obsolete. Resources are easier to reallocate when no one needs to be convinced of the need for a rapid response and the individual targets set before the crisis no longer apply.\u201d[iii]<\/strong><\/a><\/em><\/p>\n\n\n\n There are many companies that didn\u2019t need a crisis like COVID to motivate them to reinvent their insurance business model, which can serve as examples and inspiration for the types of bold moves the rest of the industry needs to build into this year\u2019s annual strategic planning. Consider these nine different business models and some of the companies that are playing in these spaces:<\/p>\n\n\n\n The innovators creating these new businesses come from all segments, including traditional insurers, greenfields and startups, and outside industry entrants including automobile manufacturers, \u201cBig Tech\u201d and more. <\/p>\n\n\n\n Auto manufacturers are leading with embedded insurance and subscription models, which our primary research has shown to be growing in popularity among insurance customers. The interest in purchasing insurance from Google, Amazon and other Big Tech is also growing, as evidenced by our research and other sources as well. In fact, Capgemini reported that policyholders\u2019 willingness to buy from these companies reached 44% in April 2020, from only 17% in 2016.[iv]<\/a><\/p>\n\n\n\n These companies are leveraging an outside-in, customer-first approach with cloud-native digital platforms and ecosystems to create a true customer experience<\/em>, not just a \u201cmachine\u201d to execute insurance transactions. The rapid ascent of these outsiders with their digital business models should be motivation enough for insurers to make bold strategic moves \u2013 starting with this year\u2019s annual planning.<\/p>\n\n\n\n Change, as we have known it, has changed. It is faster, deeper, wider and more powerful than we\u2019ve ever been used to before. The ways we\u2019ve analyzed and adapted to change in the past, namely, through the annual strategic planning process, won\u2019t cut it in this new environment.<\/p>\n\n\n\n Your strategic planning needs to be bold enough to match the velocity and magnitude of the changes we\u2019re facing right now. In this year\u2019s annual plan, it will no longer be sufficient to allocate most of your resources to maintaining the status quo of your current systems and processes. Look at our Strategic Priorities 2020<\/a> report to see where you are compared to others as you prepare plans. Consider accelerating areas that you are behind to close the gap.<\/p>\n\n\n\n Resolve to boldly allocate your resources to a true two-speed strategy: Modernize and optimize your existing business with next-gen cloud, API and microservices-enabled core systems; and build a new business model with next-gen technology to meet the demands of the next generation of customers. <\/p>\n\n\n\n Are you ready to make a bold change?<\/p>\n\n\n\n [i]<\/a> DiAmico, Alex, et al., \u201cHow to win in insurance: Climbing the power curve,\u201d McKinsey & Company, June 18, 2019, https:\/\/www.mckinsey.com\/industries\/financial-services\/our-insights\/how-to-win-in-insurance-climbing-the-power-curve<\/a><\/p>\n\n\n\n [ii]<\/a> Farley, Sam, \u201cFacing Disruption? The Need to Reinvent? Better Move Fast.\u201d Boston Consulting Group, December 4, 2018, https:\/\/www.bcg.com\/publications\/2018\/facing-disruption-need-to-reinvent-better-move-fast<\/a><\/p>\n\n\n\n [iii]<\/a> Bradley, Chris, et al., \u201cThe great acceleration,\u201d McKinsey & Company, July 2020, https:\/\/www.mckinsey.com\/business-functions\/strategy-and-corporate-finance\/our-insights\/the-great-acceleration<\/a><\/p>\n\n\n\n [iv]<\/a> Violino, Bob, \u201cCoronavirus drives more consumers to consider big tech for insurance,\u201d DigitalInsurance, September 22, 2020, https:\/\/www.dig-in.com\/news\/coronavirus-drives-more-consumers-to-consider-big-tech-for-insurance<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" As I look out my window and drive around my hometown of Omaha, it\u2019s evident that Fall is approaching. Technically, it started last Tuesday according to the meteorologists. It\u2019s my favorite time of year. I love the colors, sounds and smells of fall \u2013 burning wood from fire pits, corn harvesting and the smell of…<\/p>\n\n
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<\/figure>\n\n\n\nCrises Create Opportunity<\/h2>\n\n\n\n
Need Some Bold Inspiration?<\/h2>\n\n\n\n
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Make Your Bold Move Now<\/h2>\n\n\n\n
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