Pioneer or follower: The importance of setting objectives for your innovation strategy
May 8, 2018 Chris Sandilands
In a recent blog post we discussed the maturity of different emerging technology ‘s-curves’ in insurance. We argued that certain technologies are now ready for ‘rocket fuel’ in insurance – AI, geospatial analytics, insurance platforms and automation (although this is not an exhaustive list). The technology works, the product-market fit has been identified, and some InsurTech companies are getting traction.
But what does this mean for incumbents and their innovation strategy?
The need for strategy
Many corporate innovators see strategy or planning as anathema to their creativity. Strategy is “old thinking”, not compatible with an Agile world.
We disagree. We believe that companies need to set clear objectives for their innovation strategy to ensure that they achieve real impact. At the highest level, a company needs to make two decisions:
- Does the company, as a whole, want to be a pioneer or follower in its industry?
- In what areas does the company want to be a pioneer?
Surprisingly few companies have a clear view of where they want to be pioneers, and how this impacts the way they think about and organise their innovation activities.
Here are five things you need to consider before allocating responsibility for innovation in your company.
Pioneers and followers
Pioneers have taken a deliberate gamble that they can create competitive advantage by adopting technologies or business models early or have a belief that inaction would create a competitive disadvantage that cannot be overcome by ‘following fast’. In fact, if neither of these conditions are satisfied for a particular research idea, pioneers should question whether a watching-brief would not be the action with the best risk/return profile.
Pioneers will be looking not only at technology and business models that are ready for the ‘rocket fuel’ but also ones which are still finding the product-market fit. Their belief in the first mover advantage means that they need to be bringing things to market in the industry, not only accelerating proven models.
Pioneers could be either large insurers and reinsurers (such as those developing blockchain through the consortium B3i) or niche players looking for advantage in their area (e.g. Euler Hermes). Either way, they need to move fast when they see an opportunity or their research will be futile.
It is impossible even for pioneers to lead in all areas. They must therefore choose in which areas to focus their innovation activities – for example a technology, a value chain element, customer segment.
Followers are more cautious. They monitor the market and quickly invest when an s-curve takes hold, or when they see an opportunity to build on top of the established s-curve – for example a niche AI proposition harnessing the broader learnings of the pioneers. For these insurers market intelligence is key, as well as the opportunity to move fast when they need to follow.
Most importantly for followers, there is seldom a reason for them to look beyond technologies and business models outside the ‘rocket fuel’ bucket.
For both pioneers and followers, an operating model that allows innovation to be executed is critical. As we say in our 2018 InsurTech Impact 25 report, “there are no prizes for identifying a trend”. The only prize is for those who “engage effectively and profitably” with the winning InsurTechs.
We don’t see a role for insurance incumbents in making the technology work. This is the role of non-corporate VCs. (Corporate VCs can be helpful funding ideas through the product-market phase in their industry – but this is a topic for another post.)
How does my company’s innovation capability compare?
A framework we like to assess organisational innovation capability is the Innovation Value Chain, developed by academics from University of California, Berkeley and London Business School. The framework looks at innovation as a process, not just a scouting or ‘ideation’ step.
We have adapted the Innovation Value Chain to insurance and you can use our online assessment tool to see how your company compares to peers.
How Oxbow Partners can help
- Innovation Strategy: We help insurers, reinsurers and brokers develop and execute innovation strategies. In 2016 we advised Munich Re on its Digital Partners strategy and helped build the technology architecture and processes using our Agile Strategy methodology. This allowed us to help them launch the business in under 8 months.
- Market insight: We provide insurers and brokers with regular market insight. Our quarterly reports are used by several insurers as Board and ExCo meeting preparation. For some clients we provide a focused InsurTech and innovation product.
To get in touch, email a Partner direct or use our office email address.
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