In 2008, Blockbuster CEO, Jim Keyes, famously noted “Neither RedBox nor Netflix are even on the radar screen in terms of competition,” he said. “It’s more Wal-Mart and Apple.” Rather than embracing innovation of nascent technologies and business models, Keyes saw his company fall into bankruptcy.
The insurance industry sits on $1.5 trillion in assets but has largely been slow to embrace disruptive change.
Since 2008, large corporations have taken additional steps to avoid the fate that Blockbuster has suffered. These companies have begun to implement a number of strategies to help them better compete in today’s market, keeping in line with best practices to help them become more innovative. A prime example is the insurance industry: while the industry sits on approximately $1.5 trillion in assets in the U.S. alone, it has largely been slow to embrace disruptive or even incremental change. In the past two years, insurance corporations have sped up startup engagement and have become determined to create an innovation shift in the industry.
An old and inundated industry, insurance companies often find themselves scratching their head asking themselves, “Where the hell do we begin to innovate?” or “How are we supposed to integrate this new technology into our file cabinet when we don’t even have a CRM!” With staff that often have 30 years of in-field experience, it is a tough task to help them appreciate the importance of digital transformation. Apart from mergers and acquisitions, there are a myriad of ways to innovate. Large companies are only able to innovate when they receive buy-in from the very top of the ladder, and only then will innovation reach the forefront of the organization’s agenda. Many factors must perfectly fall into place in order for a large company to truly transform itself into an innovation leader: a corporate venture arm, a dynamic company culture, and strategic partnerships that are built to last. We greatly appreciate the insight we received from our partners USAA, Nationwide, and Munich Re for the input below.
Corporate Venture CapitalLarge corporations often equip themselves with an equity investment arm in order to engage more deeply with the entrepreneurs in their ecosystem. USAA was one of the first insurance companies to create a venture arm in 2010 through its investment in TrueCar, a car buying and pricing information platform. Since this success, USAA has invested in over ten startups, embedding a culture of innovation throughout their organization by rolling out an innovation lab.
The total number of investments by insurance companies has drastically increased year over year according to CB Insights. Other insurance companies have followed suit. Nationwide launched its own venture arm last year and has already partnered with six startups, validating the startups through pilots and proof of concepts.
Innovation LabsInnovation labs evaluate the pain points in an organization by developing in-house solutions through research and development. Importantly, they keep up to date with the latest technologies that may have an impact on the growth and scale of their organization. USAA takes this to the next level and gives their engineers an opportunity to create ideas that will build a pipeline of transformation from within. Mick Simonelli, the Enterprise Innovation Executive Leader at USAA, focuses on embedding the innovation culture within the workplace. “This program approaches innovation in one of three ways – an open employee engagement program, continuous (incremental) innovation, and revolutionary, where ideas may have a higher risk of failure and not necessarily ROI-based, or may even run contrary to the business leadership’s desires. That does not stop them from pursuing the ideas, because challenging convention is the name of USAA’s innovation game.”
Culture MattersInnovation through investments and labs are only one side of the coin. Cultural paradigm shifts within large corporations are hard - values, beliefs, and behaviors don’t change quickly. According to Robert Mozeika from Munich Re, “Every company has a certain culture and a certain behavior in the company. You need to use that to find the best way to adapt. You can’t read a book and say this is the model we’re going to follow,” Robert continued. “I often hear executives say we should act like Google and I cringe when I hear that because you’re a large insurance company and you’ll never be a Google and their culture but you need to find the pieces that work in your company.” Putting innovation at the heart of the strategy and giving associates the take on their own projects to unleash their creativity is a wise move. 3M became one of the first companies to tell their associates that they could spend 15% of their time on their own projects. In order to inspire creative thinkers, organizations need to light up an entrepreneurship spirit within. Intuit followed suit and created an inspiring innovative culture. Scott Cook, the co-founder of Intuit, simply states “it was the way we make decisions.” When it comes to influencing decision making, younger associates have to jump through hoops with the hopes of interacting with the CEO. But Intuit took a different approach and asked the question how they, as leaders, can eliminate these barriers. So they put a system in place where associates get the chance to execute an idea by running an experiment to test it out - a clear signal of entrepreneurial spirit within a large corporation. Nationwide has also been promoting a similar method when it comes to creative thinking. They have set aside financial resources to create hackathons and idea jams which influence an innovation culture. “We have a large number of in-flight core and adjacent innovations and believe that the enabling infrastructure we have put in place, such as governance, associate engagement, and innovation methodologies, will produce transformational innovations as we go forward,” expressed Jen Sloey, Director of Innovation at Nationwide.
Tapping into new ecosystems and leveraging their network effect can broaden the scope of both in-house innovation labs and venture arms exponentially. For an industry as broad and rooted as insurance, one that touches many other industries, understanding new and novel technologies is paramount. In a previous article, we mentioned the different technologies that can be of critical in shaping the industry’s future.
These sort of partnerships include working with a myriad of different investors, innovative ecosystems, and incubation or acceleration programs. Namely, the latter allows corporate executives to be involved with an idea or technology at its inception and far before their competitors. Additionally, early involvement and engagement with startups allow companies to have a greater influence on the company’s direction and growth. At Plug and Play, this is the sort of success seen with large corporations. We launched our Insurance Innovation Platform in May 2016 with four insurance corporations and now have over 35 corporate members in less than year. The bottom line: There are many approaches of structuring internal innovation. The question is, what structure will work for your company?