Avoid your Risk Manager if you Want to Be an Innovator!

I have three sons and I have constantly repeated to them in their formative years that they should celebrate their successes and learn from their failures. Initially, they saw this in sport, where they were free to party with the other kids when their team had won but were also able to reflect with me on how they could improve after a loss. Increasingly, this seeped into other aspects of their lives and now they live by the Henry Ford maxim: “The only real mistake is the one from which we learn nothing.”

I was thinking about that attitude to failure during a recent session with an insurance customer who was doing what all insurers have done since the beginning of time – assessing the risk of an innovative idea that we were pitching to them. Our advice was to make the business more agile, try new things, make mistakes and refine until you get it right. Then start the cycle all over again, using the data you got from your trials to make better decisions. The insurer was horrified at the idea of deliberately setting off on a journey, without being absolutely sure of the outcome, the ROI, the implications for the business and whole series of other factors. “The Risk Manager will have a field day” was the exact response.

“The only real mistake is the one from which we learn nothing.”

I compared that to the attitude of modern vibrant, successful innovators that we work with in other industries and I was saddened. I know this sounds a little odd but I am actually rather proud of working in the insurance industry and defend it against a reputation of being boring, every chance I get. But at that moment my heart sank.

I look at PayPal, one of Pega’s customers who recognised that they have to keep the pace of change going if they want to maintain their position as an innovator and disruptor. They are paranoid about sitting still. Already with 148 million customers, in Q1 this year alone they added the equivalent of the population of Scotland as customers. They constantly manage AHT down and first call resolution up. Releasing software has gone from 1-2 times per year to 2 per month. They create 58 new products and manage 200,000 marketing campaigns every year – yes you read that correctly 58 new products and 200,000 marketing campaigns per annum! They are now in a continuous, agile change cycle.

Warner Brothers, like all media companies, are plagued by counterfeiters and concluded that the only way to beat them was to outpace them. By refining control of their supply chain for merchandising using Pega they can put their products in stores before the counterfeiters can even get into production. As well as more easily meeting the retailer’s SLAs, their revenues are up and their customers are happier.

I know that insurers reading this will say that they do not have a burning platform compelling them to be agile companies. To these people I say – consider Honeywell. For decades, they dominated the dull and boring programmable thermostat market until overnight Google became their main competitor with an app. Believe me tech companies are eyeing the insurance market, constantly probing for new ideas for the next breakthrough (just like comparative web sites did a few years ago).

Come on insurance, ditch the dull, defensive, risk-adverse thinking and start your journey to the new agile, trial, error and refinement world. If you don’t, someone else will destroy you.