When the rate of change on the outside exceeds the rate of change on the inside, the end is near. – Jack Welch
The #1 Strategy For Beating Disruptors
Necessity is often the mother of invention.
At the dawn of the 20th century in the north country, after winter took hold and the snow got deep, getting anywhere was a challenge. The potential of a motorized vehicle that ran on top of the snow was great, but the engineering challenges were daunting.
Some northlanders put two descriptive words together to name these experimental machines: Powered Toboggans. Today we call them snowmobiles.
Believe it or not, those famous bicycle builders from Ohio, the Wright Brothers flew at Kitty Hawk 5 years before the first snowmobile made its debut. Part of the challenge was that to be useful, a snowmobile had to run for more than 59 seconds and go further than 852 feet.
The original examples of these snow machines were barely functional, but they showed the promise of the concept, and many garage tinkerers got to work. Today, a small handful of companies have built international businesses selling snowmobiles and their progeny.
Northern Minnesota is home to two of the iconic names in snow transportation, Arctic Cat and Polaris. In the 1970’s, Arctic Cat was the industry leader, with innovative and market leading features. Both companies barely survived an industry downturn in the 1980’s, since then their fortunes have diverged.
Polaris emerged first and a bit stronger, and their growth rate has been about double that of Arctic Cat since.
The sale of Arctic Cat was just announced last week. It is being sold to the diversified manufacturer Textron for $ 247 million. Not half bad. However, in comparison Polaris is valued at $ 5.7 billion. Small differences compounded over time generate big rewards. This is the same principle that builds your 401k.
Talk (and writing) of disruption is all the rage these days. So what should established incumbents in the insurance industry do?
- Cower in fear?
- Business as usual?
- Exit ASAP?
How about this:
Make continuous incremental improvements.
Why This Strategy Works
An analogy has been offered up for the business world which is particularly insightful for software development firms . It provides some insight into business in general; and in our case, insurance. Your business is the equivalent of a pedestrian, trying to climb up an escalator that is actually going down.
Your business works hard, climbing the escalator. Progress is slow. You keep your head down, making sure that you don’t miss a step.
And if you slow down, or stop, you go backwards.
Raise your eyes; look left and right. Stretching into the distance are your competitors. Each is climbing their own escalator, some faster, some slower.
Some have stopped climbing, and are busy counting their money as they head backwards. Others are sprinting, desperate to make it to the top before they tire.
However, rather than climbing one long escalator, your business is climbing an unending progression of escalators. When you get to the top of one, you aren’t finished. You just start climbing the next.
Think of each of these escalators as a unique business process, marketing, or technology initiative.
Today, your escalator is addressing a sales management issue; tomorrow it is developing a content marketing strategy. Next month it is all about implementing a client service web site and complimentary mobile app.
Here’s the catch. As a reward for getting to the top of any escalator segment, you get one very powerful capability: you get to increase the escalator speed for everybody else. Fast climbers are rewarded just as fast adapters are.
How do disruptors fit into this analogy?
Unfortunately, they don’t start at the bottom of the first escalator like a typical business. They get to jump onto the middle of your escalator (potentially even onto one that is higher than the one you are climbing now) because of their advanced tools and strategies:
- Short term changes in exposures like when a homeowner rents their home out to others while out of town for a week
- 100% mobile based homeowners
- On demand insurance
- Usage based insurance
- Telematics based pricing
Once they reach the top of their escalator, they’ll turn up the heat on yours. Standing still and enjoying current business success means moving backwards. The only way to reach the top is by stepping faster.
Long Story Short
As Jack Welch, the former CEO of General Electric so aptly put it in the lede, our businesses don’t operate in a vacuum.
Polaris and Arctic Cat were essentially equals 35 years ago. Today their fortunes are wildly different. All due to the compounding effects of continuous changes, relentlessly applied.
Reaching the top of the escalator, cranking up the speed, and continuing to take steps.
Here are some ideas on worthy projects:
- Increase the agency’s knowledge of your carriers products
- Improve Sales Process
- Increase the marketing budget
- Commit to and active content marketing strategy
- Learn to use a drip marketing tool
- Revamp your agency website to be more supportive of the new buyer journey
- Commit to improved customer experience
- Implement customer self service
- Commit to more fully utilizing your agency management system
The challenge is that you shouldn’t be committing to one of these items. You should commit to all of them.
However, you need not commit to all of them at once. Just as a journey of a thousand miles begins with the first step, so too does this project. Start with a small portion of any one of these (or others more applicable). Get it finished, internalize, and start another.
Continuous incremental improvements.
We are in an era of unprecedented change, both external to, and within, the insurance industry. That’s the rate of change on the outside. Unless you are climbing ever faster, at some point you’ll be at the bottom, looking up and wondering what happened.