Crafting the right innovation philosophy, and getting the people dimension right
This article is part of our report “Insurance Innovation Blueprint: How to design predictable and effective innovation capability in insurance”. In the report we look at the ‘how’ of insurance innovation and explore the most effective way it can work.
We also look at structures, capabilities, ‘Building Blocks’ and how they all come together. This is, like any kind of model, an over-simplification. When it comes to the real world, there are more nuanced aspects. These border on the philosophical in nature, and include considerations such as talent, ambition and how an organization defines success.
We will not go deeply into this here, as these are topics better discussed on a case-by-case basis than written about in general terms. Ultimately, we would recommend that you get in touch so that we can talk through these topics in detail. What we will do here, though, is introduce, at a high level, the concepts that need to be taken into consideration.
Getting the innovation basics right
Innovation efforts can often get tangled up by definitions. It is easy to tie ourselves in knots over what we mean by innovation and where it starts and finishes. For instance, we’ve seen situations where Digital Transformation teams clash with Innovation teams over who should ‘own’ a particular initiative. Unproductive, in our view. Rather, there should be a recognition that Digital Transformation is innovative, but is not the only type of innovation. It should thus be supported, not hindered, by the Innovation team. If the Digital Transformation team is taking specific responsibility for it, then that’s great. Collaboration is key, here.
Measuring innovation success
There are sometimes more questions than answers when it comes to the value of innovation and whether it is a waste of money or if it generates returns. The perception of waste often stems from the way innovation success is measured. It is not measured using P&L terms, or at least when it is, the results are largely hypothetical and therefore suffer from low credibility. More commonly, innovators use leading metrics, which are metrics that point to a future outcome, as distinct from lagging metrics that examine historical data. In the fuller report, we speak of ‘harmonizing’ metrics, for maximum ‘understandability’ by the wider business: if P&L metrics are best understood, then try to demonstrate innovation outcomes in P&L terms, rather than risk obfuscation and cynicism.
Reporting lines and corporate structures
In our day-to-day work at Ninety, we find insurers’ innovation teams of different shapes and sizes with different reporting lines. Furthermore, they might be located within particular functions or business units, too. There are different ways of structuring and reporting, and each has its own reasons and rationales. But, it is critical to get these things right for innovation to be effective. In particular, we see the need to have some type of dual reporting: a ‘practice’ type of reporting line (innovation technique, innovation capabilities, etc.) and a ‘portfolio’ type of reporting line (P&L owners, strategic imperatives, etc.). Where these two are properly blended, good innovators can throw themselves at core business issues.
Managing the people side of innovation
Innovation is fundamentally a human activity. It is done by people and for people, so, naturally, it is subject to human quirks, dynamics and frailties. These can have both positive and negative effects. Humility is sometimes lacking. Accountability can often be avoided. Some innovators struggle to build bridges, and rather create divisions. Selecting people with the right personality traits is as important (perhaps more?) than selecting those with the strongest innovation experience. The other key dimension to get right here is incentives; particularly in the world of venture build. We humans are the greatest helpers of innovation, but can also be its greatest hindrances.
Never lose sight of the fact that all of us lead busy lives. Those working ‘at the coalface’ in an insurance organization will often be too busy with their day-to-day workloads to think much about innovation. More than 90% of the time, that will not be an excuse, just a fact of life.
Don’t discount the individual’s personality. Broad-brush ‘boxes’ and categories are fine for modelling and brainstorming, but it is dangerous to generalize too much or make assumptions about types and categories of people. Everyone is different.
Remember that HR has a part to play here. If all these people considerations tell us anything, it is that the HR function has a vital role in innovation.
We have another 30 pages of insight and detail available to insurer clients under each of these headings (and more), for whom we are running Healthchecks, supporting their AM Best innovation rating process, or helping them design more effective innovation capabilities. Do reach out to find out more.