Three Dos And Don’ts For Insurance Innovation (Part 1)
As seen on LifeHealthPro
The word innovation seems to be on the lips of many more insurance industry executives today than it was even three years ago. C-suite executives are declaring innovation to be a top priority, and many are taking steps to embed innovation into their organizations. If you are one of those people, this article is intended to help you learn from the experience of others.
What follows is a list of dos and their corresponding don’ts with an explanation or framework to help bring it to life.
(1) Do recognize that innovation is a new skill that needs to be built. Don’t assume that identifying the “out-of-the-box” thinkers is the answer.
According to Daniel Pink in his book “A Whole New Mind,” we’ve entered the Conceptual Age, wherein skills of creativity are at a premium. This is on the tail of the Information Age, when technological skill was the primary focus. While the need for innovation skill doesn’t negate the continued need for technological and information competency, we must recognize that the skills needed for innovation are lacking in large organizations.
People need to be trained in those skill areas. They include customer focus, collaboration, risk-taking and creative problem-solving. For your leaders, it also includes new kinds of leadership skills and experience with building out the innovation infrastructure. These new skills are different from those of yesterday and should be brought into an organization similar to the way that Stage-Gate or Six Sigma has been emphasized in the past.
(2) Do understand that innovation is about building and maintaining a portfolio of new ideas. Don’t make it about finding the next big idea.
It is important to recognize that the competency of innovation is about placing bets in a variety of places, with varying degrees of risk in each. We classify ideas into four categories based on how sure we are about the market need and how much of the capability to implement the idea already exists.
Each category has to be managed differently, budget decisions need to be made differently, and success is measured differently. The innovation leader’s job is to know when to invest more, stop investing or hibernate an idea — and how to invest the right amount to get to the next stage of understanding.
A portfolio approach, similar to an investment portfolio, is about diversification. That means knowing that some ideas will fail and others will succeed; but on the whole, the approach will grow the company’s revenues over time.
(3) Do dedicate the right resources to innovation. This includes both people and budget. Don’t assume you can take a handful of people and make innovation 20 percent of their job and ask them to sell innovation to business unit leaders.
Innovation requires a different kind of focus than that of running an existing business. While it is unrealistic (and unnecessary) to dedicate a large team to innovation, it is important to dedicate a leader and a small team (say two to three) to set up the innovation priorities and infrastructure and build out the portfolio.
They should bring in subject matter expertise from the businesses, with some of those folks partly dedicated to innovation. This team should also be given a budget to work with, not just to pay their salaries, send them to innovation conferences, and do site visits to innovative companies. The team should actually prototype and launch new ideas.
Yes, that means millions of dollars. Understandably, millions can’t come from the air. It is helpful to think about innovation as feeding the future of what you will market and how you go to market. Therefore, a logical place to shift budget dollars is from marketing/advertising, strategy/acquisitions and research/product development. These budgets are typically substantial, and repositioning even 10 percent gives the innovation team the power to succeed. Additionally, business unit leaders are more likely to co-create with the innovation team rather than do their own thing.
Next month’s column will feature a few more dos and don’ts. If you are looking for more in the meantime, check out this video.