Solutions looking for a problem

“We’ve spent £2m+ to develop this, why is no one using it?”

This is an actual quote, proving a painful point: many large organisations fixate too much on internal challenges. Meaning their focus and attention is not where it should be, namely:

The problems of customers.

Enter Corporate Charlie again, who you know by now as our symbolic Corporate CEO…this time of an insurance company.

(Ps. In the next post we’ll give Charlie a bit of a break and shift our attention to Startup Sam… so stay tuned.)

For Charlie, as most insurers, claims costs are the crux. Which makes a lot of sense.  Ranging anywhere between 65% and 95%, these costs comprise the lion’s share of an insurer’s cost base. Making it the one thing they can’t ever get wrong.

So naturally, obsessing over managing claims costs is the logical thing to do. However, as is the case most often, hyper fixation can create a dangerous blind spot. The intense focus, combined with the high risks and the possibility of an atrocious aftermath, results in claim costs dominating the psyche of many insurance leaders.

In turn, this hyperfocus on claims can find its way into the organisation’s efforts, presenting the topic as a priority. Very often ideas would start with “How can we reduce claims costs?”. Now there is absolutely nothing wrong with the question per se… 

Until it creeps its way into the efforts and ideas that are meant to innovate.

Back to the story of Corporate Charlie.

They had a great idea to reduce claims costs: putting telematics devices into the car of every customer. This would make it possible to assess any damages and potential wrong-doing in a matter of seconds. There would no longer be the need to physically send out an agent to assess the damage every single time. Coincidentally, Charlie’s company would receive ‘first notice of loss’ - something that is seen as a holy grail within the insurance world. Bottom line: this would dramatically cut costs, this is a great idea, and sky's the limit.

Or so they thought.

Of course the hard truth of the matter is that consumers are extremely sceptical and reluctant to have any insurance company look over their shoulder tracking their movements, speed, and behaviour on the road. Even worse, the costs of such devices are prohibitive both to the insurer and the consumer.

But there is another blindspot in Charlie’s team… 

Because it’s so hard to get buy-in to proceed with new ideas or projects, once it’s started, the project can not and shall not be stopped. The pain and loss experienced is intense, and weakens people’s resolve to try again in the future. It’s much easier to just settle down into your role.

I’ve personally been involved in various forms of corporate innovation. Everything from setting up digital labs and garages, incubators, accelerators, partnering with startups, to building internal ventures and even joint ventures. My observation is that organisations need to be much more specific about where to innovate on what:

• For incremental improvements on internal problems - internal innovation is great
• For cutting edge or deep tech innovation, you’re probably better off running your own R&D labs
• For new business model innovation, it’s best done outside. The internal biases (as I’ve explained over the course of this newsletter) are too strong to think clearly about how to fundamentally do things differently.

Be clear on your innovation strategy, know not only what trends or themes to observe, but also how you want to execute.