Want Innovation? Don’t Aim at Distribution

Having spent the better part of the last decade learning, practicing and in many ways participating in the creation of innovation as the new discipline in business, I’ve come to the conclusion that distribution is not the place to focus if you want truly transformational innovation.

That’s not to say it isn’t important and that focusing on it won’t improve the customer experience and/or efficiencies; however, there is only so far that you can take your advantage when you consider that distribution is a how, that depends on a what, for whom and why. It’s the 4th car on the insurance innovation train.

Insurance Innovation: First why, then who, what and how.

And everyone else is focused on it too. Technology is already eating enough of the middle man (or middle woman) so that the role of cultivating demand, providing advice and education, and delivering and servicing the product will robotized end-to-end in the not-too-distant future. Therefore, being a first mover on robo won’t have that much of an advantage.

Then there is the school of thought that sounds like this: “…but there will always be some people who want to work with a person.”

I agree with this statement, but not for the reason that appears on the surface. While some consumers may prefer the personal touch, you can dig deeper to find that the reason is because they need something unique. Their profile is not mainstream. They fall out of the funnel. They don’t fit the suit.

It is for this reason that there are still travel agents on the planet.

This brings us back to the first, second and third cars on the train. The why, who and what.

Let’s take them in reverse order.

What (#3)

The what is a product or service that you are offering. In most cases for insurance today, it is a product that pays a sum of money to pay for damages if a particular risk event actually happens.

Services are less common, but they can also help mitigate risk (think about roadside assistance or the Geek Squad). Services then become an area that is open for insurance companies to consider. Some have, but struggle to monetize the opportunity. This is the cause for very quick abandonment. However, the few companies that continue to see this as an innovation opportunity — such as USAA which provides a wide array of non-insurance services to its members, or Fraternal Benefit Societies that give back to specific communities, or some of the Farm Bureau based carriers who provide benefits such as onsite help for weather related disasters — recognize that while these services may not directly create revenue, they are part of what they need to do.

That is, if they really buy into the why.

Who (#2)

The who is the person or persona of the group of consumers that have a risk. That risk could be one that is well understood or it could be one that is emerging, perhaps borne out of an unintended consequence of new technologies, with obvious ones being cyber risk, identity theft and climate change. 

But think about emotional risks that come from the gradual progression upward on Maslow’s Hierarchy of Needs. Hmmm, are emotional risks your problem? Can you imagine offering products or services that mitigate the risk of the loss of one’s social currency or reputation? Perhaps not fulfilling on their potential as a human being? These could definitely be your problems.

That is, if you buy into the why.

Why (#1)

Finally, let’s talk about the why. By now it seems that there isn’t a person alive that hasn’t heard Simon Sinek’s TED Talk or read his book, "Start With Why." Why? Because it’s right every time, no exceptions. This is the area for innovation that is both the richest in possibility, and also the easiest to forget. The reason? We are so often focused the 4th, 3rd and 2nd cars of the train. And the why is not complicated, nor does it constantly change.

The why is that human beings will always need to de-risk the things they cannot control.

As it relates to opportunity in de-risking, let’s face it, we understand and can control for many risks today that were not controllable even 50 or 100 years ago. Workplace safety, automobile safety, home security, health, you name it. We now intimately know how to reduce risks that are typically associated with auto, home, life, health and many forms of commercial insurance, which now blurs with personal risks due to the gig economy. However, if you consider the why of what the insurance industry does, aren’t we more about the prickly, uncertain and therefore uncontrollable risk? If not, why not? If not, who else is?

What next?

This brings us back to the transformational opportunities. Over the years of working with various C-suite executives who have insisted that they want to disrupt the industry, transform the business and revolutionize insurance, my colleagues and I have realized that what some really wanted was to find new, more creative ways to improve the results of the businesses they were already in. There is absolutely nothing wrong with that.

However, we must label it properly. Innovative thinking is about making bigger improvements in what you are already doing. Innovation, on the other hand, is about finding new, untapped opportunities, and then working your butt off to figure out how to fulfill on them. Sticking your neck out. Taking career risks. Innovative thinking and innovation are both important and use the same skillsets, but they are applied differently, and with different expectations, measurements and time horizons. Most importantly, they require different types of executive commitment and intestinal fortitude.

If you are looking for innovative thinking, you are committed to the how, the what and hopefully the who. If you are looking for innovation, you are committed to — and deeply believe in — the why of your company or organization, and you're willing to fight for it.

By the way, if you commit to the why of the industry, and more specifically your company, find the new, emerging risks, know who has them and figure out ways to mitigate them, then your how, your distribution, by definition will always be human.