Twenty years ago when it was time to travel, we picked up the telephone — a land line, mind you, not a cell phone — to contact our travel agent who made plane, car rental and hotel arrangements. If you operated in a cutting-edge business environment, your itinerary may have arrived via fax. My, how the world has changed! Online booking has replaced the role of the travel advisor (whose offices were once as ubiquitous as Starbucks), and mobile usage has surpassed traditional phones. A decade from now, I predict a similar evolution will have transformed the employee benefits industry. The manner in which we operate today will be obsolete. Change is already under way. One of the key elements of this change is that employees, not employers, will control the benefits process.
The phenomenon at work is “disruptive innovation,” a term coined in 1997 by Harvard Professor Clayton Christensen. According to his website, this refers to a “process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves ‘up market.’” As a result, those leading the revolution eventually displace established competitors or ways of doing business. My supposition: the competitive dynamics that change the smaller employer market segment will eventually transform all market segments.
This is interesting stuff — and I, for one, don’t plan to sit on the sidelines and simply watch this play out. Tomorrow’s principal players will be the ones who transform this theory into action today.
The tech advantage
Like so many recent developments — travel and telecommunications included — those who best leverage technology will have a market advantage. Yet our industry will require other components to achieve success. We must validate our relevance as middlemen and advisors, yet change our business model to more effectively address the needs of end-users, employees and their families. And, to attain preference, we must provide a superior customer experience.
Let’s turn back to those other industries I mentioned for some lessons in game-changing disruptive innovation. With web-enabled technology, travel providers initially eliminated the usefulness of middlemen. When consumers gained the ability to directly book with Delta, Hertz and Marriott, the commissions that once fueled travel agencies’ revenues began to shrink, then disappear. (Sound familiar?) Today, successful travel agents live in a largely transparent, fee-based world. Yet other creative intermediaries found a way to reemerge: hence the rise of Travelocity, Expedia and Kayak. By aggregating and comparing prices from multiple sources, these companies provide a valuable service. Keep in mind, this all came about in a consolidating “carrier” environment with readily apparent geographic dominance. The human touch