The saying in journalism is that there are no new stories, just new reporters. It seems the same is true of mistakes in innovation programs: There are no new errors, just new companies making them.
I say that having spent years watching innovation programs at established companies fail for almost the same reasons, time after time. I thought I’d share the 10 most common mistakes, on the theory that it’s a lot better to learn from others’ costly errors than to make these yourself.
Here are the 10 most dangerous things I’ve seen companies believe about innovation:
- Investment is innovation. It’s not. If you’re assigning importance to a technology or insurtech based on how much money it has raised, you’re making a huge mistake. You are ceding your future to a crowd of financial analysts and technology treasure hunters. Money always looks backward. You need to look forward. The genius behind RiskGenius didn’t suddenly appear once the company raised a bunch of money. The genius was always there, and RiskGenius, whose natural language tools improve the quality and accuracy of policies, should have a game-changing effect. (We told you about RiskGenius almost three years ago because we know there’s more to anticipating the success of an early-stage company than the capital raised.)
- We’re focused on customer engagement. Just stop. Your customers do not want to be engaged by their insurance company any more than I want to engage with the guy who did my colonoscopy. Your customers want to be served. Stop talking about customer-centricity, which is an excuse for spending a ton of time and money trying to figure out how to sell folks more of the products you developed based on what you thought they needed. Try customer empathy instead. Stand in the shoes of your customers (internalizing all their concerns, fears, hopes, dreams, etc.) and look around for solutions. The answer may not be any of your products. It might not be a product at all. But if you genuinely pay attention, your customers will tell you what they will pay for.
- Victory will go to the slow and steady. No, victory will go to the deliberate and focused. That may not sound like a huge distinction, but it is. We have found through our work at our IE Advisory unit that the key is to define strategic areas of opportunity, then to adopt an innovation process based on clear boundaries. Don’t think outside the box; think inside the box, once you’ve sharply defined the right box. John Wooden used to tell his basketball teams to be quick, but don’t hurry. There’s a difference.
- It’s not us, it’s them. When an insurtech fails to deliver the expected impact, the tendency is to blame the startup for malfunctioning technology, a lack of industry knowledge or entrepreneurial hubris. But the industry has, in many respects, been its own worst enemy. The sloooowness of incumbent “innovation” processes can grind early-stage companies into non-existence—they can’t wait for your next quarterly innovation review; they’re trying to make payroll on Friday. Some incumbents major on pilots or proofs of concept, with no real objective—we call this death by POC. Others just use the try-out process to learn as much they can about an entrepreneur’s ideas, about tech features and functionality and about possible applications, with no real intent to engage with the early-stage company. The problem is very likely you, not them.
- We’ll see the ROI—one of these days. If your innovation team has been at work for a year or two and you have not generated measurable revenue, I mean of a magnitude that nears the cost of your innovation effort, you need to make a change. If your innovation consultants have not generated measurable revenue from the innovation process they helped you implement within a year of their engagement, you need a new adviser. I’m not saying there’s a technological magic bullet, but there is an innovation process that can deliver measurable growth, and rather quickly.
- We are the best at that already. Not likely. A famous Bain study from about 15 years ago found that 80% of executives thought their company had the best product in the market—and that 8% of customers agreed. Stop kidding yourself. Whatever it is, you are not the best at it—Silicon Valley, not known for its modesty, nonetheless subscribes to a saying from software pioneer Bill Joy: “No matter who you are, most of the smart people work for somebody else.” You should adopt that attitude, too. If you don’t, you create a barrier that prevents you from seeing opportunities. Look at Amali Solutions, which developed technology that draws amazing efficiencies out of the subrogation process. The payback on purchasing the technology is less than a year. Beat that. But carriers can’t see past their existing subrogation processes. They don’t realize that all they have to do is bend over, because there are dollar bills on the ground all around them. There are lots of insurtechs out there that, like Amali, are built to pull hidden value out of an obsolete supply chain, so, if anyone in your organization tells you to ignore a technology or idea because you’re already the best, you might start looking for the person’s replacement.
- We are sticking with what we do. You will at your peril. If you are in claims administration or the management or settlement business, we have a news flash for you: Technology is going to cannibalize your core business—not completely of course, but a lot. You had better figure out how to generate additional sources of revenue.
- We are the oldest and biggest. You will be the oldest only as long as you are in business. You might be the biggest today, but by what measure and for how long? Oh, and Sears and Kodak say, “Hi.”
- We have time. Maybe, maybe not. When A.M. Best announced earlier this year that it would include an innovation assessment in its financial rating methodology but said it would phase in the weighting of the assessment, a lot of carriers adopted a we’ll-cross-that-bridge-when-we-come-to-it attitude. The phase-in sounds to me a lot like those parents who count to three and then wonder why their kids wait ’til “three” to actually move. We have been huge supporters (and in some ways participants) in A.M. Best’s effort because we believe, as they do, that failure of incumbents to innovate is a threat to their long-term financial resiliency. But we don’t see any reason for A.M. Best or for any incumbent to count to three. Let’s get moving.
- The supply chain is what it is. Every supply chain is always vulnerable—ask HP how it did when Dell’s hyper-efficient supply chain hit the PC world two decades ago. Don’t ever assume that the way things are done today is they way they will always be done. The job to be done in insurance is to provide insurance policies for businesses and consumers, right? Wrong. The job is to provide financial security, to mitigate risks, to help clients head off losses, etc. If you believe we’re just in the business of manufacturing policies, then you’re dead; you just haven’t made it official.
Innovation is a never-ending journey, with defined ports of call along the way. Let’s not keep running aground on the same shoals. We’ll still make mistakes, but let’s make new ones.