3 more dos and don’ts for insurance innovation (part 2)

Last month’s issue featured three dos and don’ts with corresponding explanations for executives exploring innovation in the insurance industry. As promised, here are three more.

(4) Do recognize that your innovation leader needs a different kind of support. Don’t evaluate his/her success the same way you evaluate the success of your business unit managers and leaders.

Running an established business is very different from running innovation. Established businesses are measured by revenue, expenses, growth, etc. Additionally, they know exactly what will happen when you raise commissions, lower prices or add more distribution. Innovation disciplines do not have the same levers of control.

That doesn’t mean everything is a crapshoot. Innovation leaders must use different levers, de-risking what is naturally risky. Their levers are about navigating the future, not replicating the past.

They need support in determining areas of market focus that are most important. Then they can work to uncover new market opportunities, quantify and choose the strongest unmet needs, and ideate new ways of solving them. They must be given the research tools and customer experience design support to prototype, test and learn.

Your innovation leader is out to establish new business lines; therefore, success is first measured by what is learned and what significant barriers are eliminated. Once the business becomes established, it can pull the same levers that existing businesses do.

(5) Do adopt new decision-making processes. Don’t apply the same process as you would for “business as usual” items.

You can’t fund and resource every opportunity that comes along, so you establish a business case template that people can fill out with both costs and benefits. And they can use the business case to present to a funding committee so they can compare “apples to apples” and choose projects based on the best return on investment.

Funding innovation doesn’t fit neatly into that framework. The reason is because innovation isn’t an apple. Revenue predictions can be made with the right consumer research; however, a function of the demand will be awareness, which has a built-in, variable cost (e.g., advertising and distribution). Prediction of all costs associated with a new idea is nearly impossible because there is a significant amount to be learned during implementation.

So the decision is not whether to fund a project; rather it is to fund or not fund the next decision point. If an idea tests well based on quantitative consumer research, then the next decision is to fund the work necessary to learn something important about the implementation.

Perhaps the work is needed to determine the relative importance of a key feature or a palatable price point. If you learn that the idea is still feasible, press on. If not, then stop funding it and move to another idea.