Implementation may require new management methods, processes
When an insurance company embarks upon an ecosystem strategy, the goal is to increase revenue opportunities by launching partnerships or entering into new services or products that are adjacent to current insurance offerings. Companies initiating their ecosystem strategies can bring about impacts to the organization’s operating model on multiple levels. As partnerships and new products are launched in the market – generating fee- and service-based revenue – some of these approaches will be outside the traditional insurance value chain. The ecosystem strategy likely needs to be managed outside of the traditional insurance model as it can complicate a company’s operating model. As a result, implementing an ecosystem strategy may require adopting new management methodologies, technologies, processes and employee behaviors to enable the operating model changes necessary for success.
“The relationship aspect of our industry is driving companies to contemplate ecosystem strategies,” said Andrée Bourgon, Grant Thornton practice leader for Insurance Strategy & Transactions. “‘Ecosystem’ is about increasing the relationship, increasing the services, increasing our attractiveness to clients, all while generating additional value.” Companies have an opportunity to gain more than just additional revenue. They can add layers of stronger roots to insured and client relationships, building stronger, more satisfying and longer-lasting connections.
Insurance companies should be thoughtful about the types of products and services that would benefit their clients and carefully consider how to operationalize the ecosystem strategy. Whether an insurance company decides to acquire an established business or a start-up inside or outside of the industry, or if it decides to partner with a respected service provider or launch its own new offering, thorough planning around operational impacts and managing new partnership relationships is essential. These four factors can help make the ecosystem approach successful:
- Identify the ways operations could be impacted. In the past, insurance companies grew largely through acquisition to expand their geography, diversify their product mix or add distribution channels, all of which fit into the existing operating model. However, with today’s ecosystem growth options, integrating or partnering with an organization with a significantly different business model creates additional complications. These challenges require examining every aspect of the businesses – including control, enabling and supporting functions and revenue teams. Establishing a clear understanding of the impact on each department is critical to ensure they all function together effectively.
A corporate partner may have a different technology system and approach to data security and use. Start-ups may not have sophisticated record keeping or traditional revenue streams, and they may not be profitable. Building an ecosystem is about more than delivering added revenue – it is about satisfying and increasing retention and bringing value into the insureds’ lives.
- Plan for the changes in advance and invest in the knowledge and technology needed. Managing a partnership or acquiring or launching a new business is not easy. Figuring out what it will take to operationalize the ecosystem strategy is important, and the decision to devote time, effort, money and people to successfully execute the strategy is an important management commitment.
Contemplating techniques outside of the traditional business model may push company leadership’s comfort zone. It may also require hiring people with skills unlike those found within a traditional insurance organization. “Depending on how you intend to grow your organization, a company may need people who understand supply chain and logistics, manufacturing, digital strategies and retail – the list is long for adjacent industries that could be pulled into an ecosystem strategy. It’s a different thought process and it’s a different skill set from those who grew up in the insurance industry,” said Bob Cummings, Grant Thornton practice leader for Insurance Transformation.
It is important to consider the impact on operations, and understand the finances of the new products, services and partnership management responsibilities. Factors include learning how the ecosystem strategy will drive growth for your company and add value for your clients. In addition, determining an approach for data-sharing with partners, including how to safely share and transfer data is important. Finally, it is critical to be crystal clear about procedures from the beginning to ensure all members in the partnership receive their anticipated value and avoid any feelings of disparate benefit.
- Bring the right employees into the plan early on. It is important to identify the operations, technology and finance employees that can help sculpt the strategy for operationalizing the ecosystem strategy. Build a compelling case for change, communicate a vision, make employees feel they are part of the team and work together to resolve any issues that arise.
“Decades of research have shown that deliberate and proactive engagement and information-sharing is really critical to succeed with an ecosystem strategy,” said Jennifer Morelli, Grant Thornton practice leader for Business Change Enablement.
- Company culture is a critical factor. A company’s culture encompasses the behaviors, beliefs and norms in the way it conducts business and the way its employees carry out their roles. Deploying an ecosystem strategy could involve a partnership with a long-established publicly traded organization and a small startup. The cultural differences would be evident in that scenario, and it is easy to imagine the disruption that could occur. A proactive approach planning on how to best manage cultural differences is important, and in the context of an ecosystem strategy, realizing that adapting to the different cultures – versus changing one company’s culture – will be required.
An ecosystem strategy is an important element to any insurance organization’s growth strategy that crosses organic and inorganic opportunities. And while the “ecosystem” strategy sounds like an excellent plan, operationalizing the strategy becomes critical for success.
For more information on this topic, watch Grant Thornton’s webcast replay, “Managing insurance ecosystem growth impact on an operating model.”