- 10+ years in Strategy, Innovation & Consulting:McKinsey & Company (3 years); Dalberg International Development Consulting (2 years); Zurich Insurance (since 2009).
- Co-founder of Innovation Unit at Zurich
Insurers have become obsessed with startups: New technology can create superior risk insights and pricing, a better and faster customer experience 24/7, and more cost-effective processes. Startups are attracted by high margins, intermediated distribution and technology shortfall in insurance.
Apart from few notable exceptions (e.g. Lemonade), insurance startups typically cover only parts of the insurance value chain. From the perspective of a large insurer, the key competitive threat thus comes from those global peers that bet on the right technologies and are best able to integrate startups efficiently. This is why all leading insurers are investing heavily into building innovation ecosystems – often including Corporate Venture arms, incubators/accelerators, and innovation labs. However, it is still early days, and we are only slowly beginning to see new ventures that generate bottom line impact. More often than not, the expected benefits from integrating startups fail to materialize. At Zurich Insurance, we launched a strategic effort to identify key success factors of working with startups. I was fortunate enough to be part of a team that spent time in Silicon Valley with venture capitalists, startups and universities, as well as with our internal senior management to design an innovation concept for Zurich. My learnings are:
1. FOCUS ON A CONCRETE BUSINESS PROBLEM
Corporate innovation efforts are often structured around executive visits to leading tech clusters to explore the “art of the possible”. The risk is to get “blinded by brilliance”. There are limitless impressive startups with great ideas, but often trying to find concrete insurance applications results in mere “nice to haves” as opposed to true game changers to the existing business model. In addition, many great ideas are simply not fit for the realities of a given business. Unless there is a critical business problem with a clear business owner, innovation efforts will not overcome the first hurdle of resistance. And there will always be resistance – integration requires departing from the old way of doing business in a radical way, shifting resources, and changing corporate cultures.
2. BET ON PARTNERSHIPS AS A WIN-WIN
Insurers do not need to invest in equity stakes in every startup they collaborate with. In reality, there is no exclusivity when it comes to access to new technology. Rather, value is created from finding a successful business application (see point 1.) and integrating it successfully. Furthermore, capital is abundant in leading tech clusters, so what startups are really looking for is an opportunity for global scale up. A partnership can be an effective way of creating fast impact at limited risk, and it provides the strongest incentive to both parties.
3. THINK AND ACT LIKE A STARTUP: START SMALL, FAIL FAST, SCALE UP FAST
Working with startups requires adopting their mindset: Start small and with very little investment (thousands rather than millions of USD) in a specific pilot market. Allow for accelerated decision making processes (e.g., circumventing the types of procurement and IT processes that have typically been put in place for multi-million dollar legacy projects). Be prepared to fail fast, knowing that most prototypes/pilots will not make it to implementation. Where successful, scale up fast.
4. MAKE BUSINESS/ MARKET FACING UNIT ACCOUNTABLE
Creating accountability within the business is arguably the most important success factor for innovation. The corporate strategy & innovation team or a head-office sponsored incubator are too removed from local markets to implement projects on the ground, i.e., where they bring bottom line impact. Putting the business in the lead from Day One is the only way to ensure relevance and acceptance of new ventures.