Now that I’ve captured your attention and imagination with the title of today’s post, let’s delve into a topic at hand: that of corporate innovation. Traditionally being associated with the Research and Development (R&D) departments of hardware and medical institutions, corporate innovation has recently seen an explosion of interest among broad array of corporates. And rightly so, as we saw the innovation being the secrete sauce that powered a rapid rise of a new breed of world’s most valuable companies: Google, Apple and Facebook are just few prominent examples.
“Innovation distinguishes between a leader and a follower.” – Steve Jobs
If you’ve read some of my past posts, we went on a journey from identifying challenges and constraints that global insurance industry, their adverse impact on a customer proposition, and right to the rising tide of InsurTech startups that is looking at aggressively tackling these problems. Now feels like the right time for us to start the next actionable leg of our journey of how insurance industry can actively inject some of that secrete innovation sauce to zap itself back to relevancy.
What Is Innovation?
Word Innovate takes its roots from Latin in-novare [into-make new]: make changes in something established, especially by introducing new methods, ideas, or products. Essentially meaning to re-invent itself.
Its important for us to also draw a difference that an invention is usually a “thing”, while an innovation is usually an alteration that causes change in behavior or interactions. Hence, an invention leader like 3M can get bogged with applications of their cool inventions and quickly lose its relevancy while innovation leaders like Google will power ahead to reshape our world.
Are Corporates Inherently Anti Innovative?
Now that we all agree that innovation is an alteration, it also becomes easier to understand why startups are inherently more innovative. If we take an analogy of startup being an agile speedboat that can change its direction quickly and continue to hunt for best opportunities, the corporates are an equivalent of a large cruise ship that takes hours to change the direction its heading and momentum typically carries it for a long time shaping its destiny.
So is the conclusion than, that corporations are beyond help and should simply step aside and wait while startups eat their lunch.. and then dinner? Well of course NO! While typically there’s a high correlation between the corporate size and diminishing ability innovative, the future is up for the shaping and it’s absolutely possible to inject the innovation DNA into corporates. We don’t have to go far to hunt for examples, lets “google” how Google sustains its innovative culture, as a perfect illustration.
The Eight Pillars Of Google’s Secret Innovation Sauce
So how does a massive company like Google, with its army of employees (57,100 as of today) sustain its startup mindset and keeps its innovative engine chugging along?
- Have a mission that matters
- Strive for continual innovation, not instant perfection
- Think big but start small
- Look for ideas everywhere
- Share everything
- Spark with imagination, fuel with data
- Be a platform
- Never fail to fail
And while it all sounds relatively straight forward and easy to plunk it into one’s corporate mission, the reality is that its exceptionally difficult to adjust the corporate cultural momentum and start living any of these pillars.
Corporate Startup Engagement (CSE)
As the pace of digital innovation gathers pace and completely reshapes adjacent industries like banking, transport, and retail, insurance leaders are starting to see the writing on the wall for our industry. The rapid growth of Insurtech over the last two years really ramped up the pressure on the industry to find ways to innovate. Hence, more and more insurance corporates are attempting various models to introduce innovation within their firms.
What’s also became apparent is that insurance industry doesn’t have the culture nor talent necessary to quickly become innovative. The most promising strategy, learning from the Fintech which had a four year headstart, appears to be Corporate Startup Engagement (CSE). CSE aims to match the naturally present strengths of corporates (scale/footprint, customer base, domain expertise, capital, regulatory licensing) to startups (agility, passion, customer proximity/empathy, tech-savviness, new prospective, high tolerance for failure and experimentation).
Following are broadly the 7 innovation models that currently exist around the corporate universe. I’ve evaluated them across the 10 dimensions and share a very brief overview for each of them below.
While each of the models has its advantages, a combination of the following three models will inject a most powerful cocktail of innovation and will help to propel industry forward:
- Venture Builder: for rapid unconstrained experimentation and solving relevant business and market problems that could move the needle;
- Venture Capital: best model of engagement with startups that have gained initial traction and are deemed to have strategic “fit” with the business;
- In-House Transformational Program: to warm up the culture to be more flexible and receptive to working with startups. This will ensure the innovative concepts from VB and VC are embraced rather than sabotaged.
- In-House Transformation Initiatives: Cultural transformation through Design Thinking Workshops (human-centric design methodology learning) and Hack-a-Thons (programming and data coding springs). Helps to expose talent to consumers and building empathy and awareness of experience gaps. When used in combination with later stage innovation structures, identifies internal innovation champions and helps to position organization to successfully integrate startups and innovative concepts;
- In-House Innovation Labs: Implement transformation within core business through developing digital solutions aiming to solve specific problems; Usually runs ups against significant internal resistance which quickly kills any chance at innovation.
- In-House Accelerators: Import innovation by scouting and attracting early stage startups broadly in the domain of the industry. Puts them through a three month program, giving them $20-$50k in return for 6-8% equity stake, helping them overcome proof of concept challenges; Typically aimed at first time entrepreneurs;
- Partner Accelerators: Use consulting partners as a scout for transformation ideas which can be imported to solve problems within core business;
- Independent Accelerators: Use purpose built accelerator to scout and attracting early stage startups broadly in the domain of the industry; Puts them through a three month program, giving them $20-$50k in return for 6-8% equity stake, helping them overcome proof of concept challenges; Typically aimed at first time entrepreneurs;
- Venture Capital Funds (VC): Create a new fund which invests in startups that have both the growth potential as well as potential strategic fit to the core business; Utilizes VC model scouting, evaluating and funding high potential startups;
- Venture Builders (VB): VB identifies set of comprehensive opportunities/challenges relevant to the business, scout for startups elsewhere that have successfully solved the problem or tapped the opportunity, either look at integrating existing startups or develop the tech concept in the VB. Concurrently run 5-8 concepts/startups aiming to build prototypes, validate and scale with a market/business or fail concepts as quickly as possible and move to next concept;
Love Is In The Air: Welcome To The Era Of Co-Innovation With Startups
Corporate innovation is a critical element of re-shaping the insurance industry to maintain its competitiveness. An effective hands-on collaboration with startups is the critical underlying theme of the innovation and a combination of innovation models is the best way to go to get us there.
As as always I’d love to hear your thoughts.
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ABOUT THE AUTHOR:
Having worked at various departments in both life and general global insurers, with his last two roles being COO of AIG Indonesia and VP Claims Operations of AIG APAC — George Kesselman is a highly experienced global insurance executive with a strong track record of management and leadership across Asia. In his relentless passion and pursuit to transform insurance, George cofounded an industry-wide innovation ecosystem in Singapore. Through InsurTechAsia, he aims to effectively attract, cultivate and rapidly scale entrepreneurial ideas in insurance; and ultimately contribute to the next wave of global revolution in insurance.
InsurTechAsia: a community of insurance practitioners, entrepreneurs and industry stakeholders across Asia. We are building a strong insurance innovation ecosystem in Asia for entrepreneurs and industry stakeholders by creating opportunities where the right mindsets, skillsets, and networks will develop. Are you passionate about making a change to the insurance industry?
Google The Eight Pillars of Innovation: https://www.thinkwithgoogle.com/articles/8-pillars-of-innovation.html
Corporate Startup Engagement: http://knowledge.insead.edu/strategy/corporates-and-start-ups-engage-or-else-4500