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The Case for Creative Disruption

October 2011. The Case for Creative Disruption. Craig Weber Senior Vice President Head of Global Insurance Group cweber@celent.com. A member of the Oliver Wyman Group. Agenda. Welcome Logistics Disruption in Insurance. Disruption (big “D”) Primer. STRATEGY.

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The Case for Creative Disruption

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  1. October 2011 The Case for Creative Disruption Craig Weber Senior Vice President Head of Global Insurance Group cweber@celent.com A member of the Oliver Wyman Group

  2. Agenda • Welcome • Logistics • Disruption in Insurance

  3. Disruption (big “D”) Primer STRATEGY Tradeoffs in performance of activities that define a business model (Porter) INNOVATION Breaking those tradeoffs(Raynor, Christensen) DISRUPTION A theory of innovation, where: • Technology changes the “productivity frontier” • Success in fringe markets sets the stage for “up-market march”

  4. FOR The non-price attributes of “insurance” are gaining prominence Tools to deliver better performance are now available More, better data Competitive pressures US$2.5 trillion AGAINST Traditions Regulatory demands Non-captive distribution Project overload “The numbers are the numbers” Corporate, personal risk aversion “Disruption!? In insurance?”

  5. 94% Yes. Creative disruption has value and should be fostered. 2% I don’t know. 4% No. Creative disruption has limited value and should be minimized. Do they buy into the value? For insurers, do you think there is inherent business value in fostering creative disruption? Source: Celent report planned for December, 2011: The Case for Creative Disruption in Insurance

  6. Where the value lies How much potential value could be generated in the following areas by an active, effective program aimed at creative disruption? Source: Celent report planned for December, 2011: The Case for Creative Disruption in Insurance

  7. Agree Strongly Disagree Strongly 1.00 2.00 3.00 4.00 5.00 6.00 7.00 Self-assessment of support for disruption How would you rate the following statements about disruption and change? Leadership 4.46 Culture 3.99 Technology 3.83 Source: Celent report planned for December, 2011: The Case for Creative Disruption in Insurance

  8. Agree Strongly Disagree Strongly 1.00 2.00 3.00 4.00 5.00 6.00 7.00 Self-assessment: Leadership As a company, we value new ideas. 4.88 Our corporate strategies balance operational and strategic issues. 4.60 Our leaders are willing to break things thatneed breaking in order to make our business stronger. 4.27 Our C-suite execs consistently support disruptive ideas from front line staff. 4.10

  9. Agree Strongly Disagree Strongly 1.00 2.00 3.00 4.00 5.00 6.00 7.00 Self-assessment: Culture We take a holistic view of the business case for IT investment that incorporates both hard and soft benefits. 4.44 We have good awareness of our corporate culture, and if it impeded progress toward our strategic goals we do what it takes to change the culture. 4.12 Across the enterprise, including both IT and business staff we’re good at managing change. 3.79 We have specific structures in place to address corporate culture issues. 3.62

  10. Agree Strongly Disagree Strongly 1.00 2.00 3.00 4.00 5.00 6.00 7.00 Self-assessment: Technology We manage our portfolio of IT projects well, balancing operational and strategic objectives. 4.29 We maintain a good mix of legacy skills (for maintenance) and more modern skills (for new development). 4.26 We typically have the necessary system development capacity to explore new ideas. 3.44 When we need to change gears in terms of supporting new technologies or business models, we typically can do it quickly. 3.35

  11. Celent view of Disruption (big “D”) • Necessary part of competing. Betting on the status quo is not viable, long-term. Nor are purely incremental improvements. • Led from the top, supported from the middle. The c-suite drives it, managers sell it, the front lines execute it. • In balance with operational concerns. Project outcomes (see framework next slide) will tend to land in all three rings. But most companies need at least a handful in the Disruption ring. • Mostly a mid-term opportunity. Managing technology and culture change is never a quick fix.

  12. STATUS QUO Improvement Innovation Disruption A Disruption Framework Risk Management & Compliance Complete audit trail and versioning of illustrations Multi-media, real-time service User Experience Business Model Enablement Direct to consumer purchase via mobile 1 week product development and implementation cycle Lower cost per inforce policy by 10% Market & Product Agility Partnerships Cost Source: Celent report planned for December, 2011: The Case for Creative Disruption in Insurance

  13. STATUS QUO Improvement Innovation Disruption A Disruption Framework Celent 2011 Model Insurer Components Risk Management & Compliance User Experience Business Model Enablement Market & Product Agility Partnerships Cost

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