(Image credit: Adobe Stock.)
Innovation labs in the insurance sector are struggling. This is bad news for established players which increasingly rely on such functions to help them respond to a rapidly evolving market. Yes, innovation is the key to success. But too often, the innovation lab is remote and exclusive, producing ideas which rarely see the light of day. What’s the answer? It shouldn’t be innovating at all but enabling stakeholders in the broader organization to do so.
The bottom line is that if they’re doing their job properly, innovation lab teams will end up rendering themselves obsolete within a few years.
When Innovation Fails
Innovation is important, but too often it’s not done right in the innovation lab. Why? Because insurers try to make innovation something distinct from the main organization, rather than an organic whole. The result is a “them and us” mentality and ideas which fail to scale or demonstrate ROI.
Many try to take responsibility for all innovation. Some try to centralize it. Most try to make it their job to innovate. But that only works up to a point. Proof of concepts, neat prototypes and even a handful of limited pilots are all very well. But they don’t make the impact organisations need. Two main reasons stand out.
The first is that innovation teams are too often ill-equipped to take proven ideas to scale. They hold on to the reins too tightly, failing to unleash the thoroughbred they’ve trained. Second, innovation teams are generally much smaller than the main organization, and thus have limited capacity or visibility into the opportunities for innovation. In short, there are too few of them and they work too far removed from the coal face to make a success of their endeavors. By making innovation their sole preserve, they restrict the amount of innovation that could be created.
A new approach
The good news is that there is a way forward. Consider a world in which insurance innovation teams are trainers, rather than doers; equipping their colleagues to innovate rather than trying to hang onto innovation for themselves. Capacity would increase; more ideas would be taken to scale; and better innovation would result.
There are many ways in which innovation lab teams could add value in this way. First, they can provide stimulus and intelligence; insight into market trends which can trigger creativity. This could be something as simple as approaching the claims function with information on new technologies, and asking key members how they could be used to benefit the business.
Next, they can provide mechanisms to enable ideation—everything from new tools and techniques to workshops and events designed to stimulate innovation among colleagues. Innovation experts also have a vital role to play in steering their colleagues through the innovation process itself; showing them how to take an idea through from user experience and architecture to development, design, financial modeling and so on. The “playbook” concept is key here, designing a model for innovation that others can follow once they’ve left. Training and coaching should also fall within the remit of the innovation lab. Finally, innovation experts can help with ownership: ensuring that the person who has an idea is kept closely involved as it develops.
A Three-Year Journey
This whole process will ultimately take two to three years to complete. Sometimes the push will come from the top down with buy-in from the CEO, and sometimes the rest of the organization will see and want to replicate a successful model in the rest of the organization. Whatever happens, you must remember that the innovation lab team, if it does its job effectively, will ultimately make itself obsolete. That’s not as controversial as it might sound, because by then they will have made the company at large an organization full of entrepreneurs and innovators.
This is an issue that has repercussions well beyond the confines of the insurance sector. Why? Because insurance is the bedrock of a functioning, stable society. Whether you’re a national government, a small business owner or a home buyer, insurance instils confidence and peace of mind. It’s no coincidence that in many developing economies insurance penetration is only in the single digits.
In short, insurance is a force for social good. So it must be able to equip itself to respond effectively to changes in consumer behavior and market demand. That means a whole new approach to innovation that may take some getting used to.