5 min read
Why Insurance Must Make Innovation a Business Function
By: Erik Mitisek on Sep 1, 2021 8:16:02 PM
Innovation and insurance may finally have their moment together. That is, of course, if the industry not only embraces technology, but proactively integrates ways to encourage creativity, openly share ideas, and drives digital transformation.
All businesses know innovation is key for both survival and growth. However, strict regulatory controls and a natural aversion to risk has led insurance to lag behind other sectors. It is only until recently, external competitive and consumer pressures have forced agents, brokers, and insurers to reexamine how they innovate.
Today, most companies are not built to sustain long-term innovation. The biggest hurdle to organizational innovation is often a lack of clarity and structure. If your business is ready to leap forward but is facing an innovation barrier, it is time to view innovation as a business function, just as you do accounting and marketing.
Definitions matter. Even for organizations committed to innovation, they can miss the mark if they do not accurately understand what the term encompasses. Once you do, great changes can happen. Such as Canada, which recognized the word’s significance and went so far as to change the name of Industry Canada to the Ministry of Innovation, Science, and Economic Development.
Innovation is the act of implementing new or improved products, services, processes, or methods.
Research and development, often confused with innovation, is the first part of innovation – discovery. From there, discoveries move on to be nurtured and cultivated, eventually entering the final stage of implementation. Or, as former Harvard Business School processor Theodore Levitt simply stated, “innovation is doing new things.”
Laying the Foundation for Innovation
It can be an exciting time when an organization decides to take actionable steps to innovate. Companies who commit will first need to build an innovation team. This team should be separate from operations and include members from all departments and levels of your organization. While you will need operations support to implement innovations, you need to give innovation room to breathe, as a focus on operations alone can push your team back to the way things have always been done.
As employees are being selected for your innovation team, management needs to lay a solid foundation to provide the four elements necessary to guide and direct the members of your team.
Vocabulary: There is no shortage of high-level concepts when it comes to your digital transformation. Coupled with different processes and working styles among your multidisciplinary innovation team, miscommunication can become an issue. Set terms and definitions early so you can communicate smoothly along your innovation journey.
Objectives: Innovation doesn’t just happen out of nowhere. Instead, innovation is driven by the need to accomplish long-term goals. Establishing clear directives can include anything from reducing processing times to targeting new opportunities. Whatever goals are set, they must be clearly stated so your team knows where to focus their efforts.
Processes: The path to innovation is rarely linear. Therefore, it is important to create plans to chart how your team will communicate and document concepts, determine which ideas to build upon, and when to implement new solutions. Decide when and how meetings will be conducted, and what the outcomes of these meetings will be. It’s also important to separate innovation from operations. Operations is focused on keeping things running as they should, and it can smother innovation efforts.
Resources: Once directives have been set and processes established, organizations will need to provide personnel, funding, and time for teams to execute. As with any other business function, the needs of your innovation team will vary over time. How meaningful and impactful new solutions become reflects the amount invested by companies who commit to innovation initiatives.
Creating a Culture of Innovation
Creating a culture of innovation requires consistent, meaningful executive engagement. So who oversees your organization’s innovation? If innovation is integral to the long-term success of your company, then an innovation advocate needs to be a part of the CEO’s management team. There are a variety of titles to choose from:
- Chief Strategy Officer
- Chief Innovation Officer
- Head of Strategy and Innovation
The role can also be incorporated into existing positions like the CMO or CIO. Regardless of the title, the position must carry the same level of authority as their c-suite counterparts to be taken seriously both internally among the staff, and externally for the vendors with whom you may engage.
Your innovation advocate will also be responsible for creating a culture of innovation where positive change is encouraged. There are three measures advocates must take to accomplish this:
Provide safety: Employees must feel safe and free to share opinions. Employees who feel psychologically safe will be able to generate more innovative ideas.
Allow autonomy: Teams tethered to meeting quarterly metrics may focus on the least impactful innovations just to meet predetermined objectives. By tipping the balance in favor of autonomy, genuine breakthroughs are more likely to occur.
Reward failure: Failure must be normalized for employees to understand it is part of the process of innovation and not something to be feared.
It was consultant Gillford and Pinchot in the 80’s who coined the term “intrapreneur.” An intrapreneur is an inside entrepreneur working within a company. And by establishing a culture of innovation, employees with entrepreneurial skills will be able to flourish and help their organization take sizable leaps forward.
Measuring Innovation's Impact
A solid foundation and a supporting culture are essential for innovation to take root within an organization. But for innovation to truly thrive requires the results to be tangible and measurable.
Often the results of change can take months or even years to manifest. Executive teams understand the big picture and how innovations will affect the company in the long term. It may be more difficult for employees from different departments and levels to grasp their solution’s impact. Therefore, it is the responsibility of the organization’s innovation advocate to provide feedback to the team.
As your company begins to feel a culture of innovation envelop the organization, and new solutions come to fruition, belief and excitement of what “could be” will begin to build. The result just might be your business reaching heights never imagined before.
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