What Business Are Insurance Companies REALLY In?
Theodore Levitt wrote a famous paper on the subject of marketing myopia in the 1960s at the beginning of the modern marketing movement. After rereading an excerpt, it became clear to me that the insurance industry can benefit from a little “Lasik surgery” in this regard. Having spent many years in the insurance business, it’s easier to see this from the outside looking in.
Marketing myopia occurs when company leaders define their mission too narrowly, resulting in business nearsightedness or shortsightedness.
Hindsight Is 20/20
Levitt describes a few classic examples of industries that shrank or faded away because of marketing myopia. These include the well-examined buggy whip industry, and also railroads, Hollywood, oil and others. While not all extinct, each suffered and/or came close to the brink at one point. Levitt and others have suggested that more visionary thinking would have defined their purpose more broadly such as:
|Industry||Myopic Purpose||The Real Purpose|
|Buggy Whip Manufacturer||Making Buggy Whips||Transportation “Starter”|
|Dry Cleaning||Safe, effective cleaning of wool garments||Making clothes ready to wear|
On the flip side, Levitt cites a few examples of industries that have thrived for centuries by remaining thoroughly customer focused. These include nylon, glass and aluminum (DuPont, Corning, Kaiser and Reynolds). He also points out a valid argument: These are unfair comparisons due to relative product diversity, which is the precise way myopic errors are committed. Levitt says it isn’t about opportunity, it is about “managerial imaginativeness” and audacity.
From Myopia To “Out Of The Box” To “Out Of The Jar”
Facing significant scrutiny, regulation, commoditization and ho-hum growth, can the insurance industry broaden its purpose before it’s too late? We typically hear the purpose defined as manufacturing and selling insurance products for lives, property, disability, health, dental, legal and various “exotic risks.” I’ve heard many define things slightly more broadly as “protection,” but could there be an even broader purpose? What do people REALLY want when they acquire insurance?
How about the lifestyle continuity business? I define this as the avoidance or reduction of disruption that occurs when something tragic or very inconvenient happens along the path of daily life for a definable segment (individuals, families, generations, businesses, organizations, communities, networks, countries). By redefining the insurance industry in this broad manner, what new product, service or business model possibilities open up? Can you think of any?
If you can’t, it may be time to put on a pair of glasses.