My colleagues at the Accenture Institute for High Performance, Larry Downes and Paul Nunes, have just published an interesting and thought-provoking book, Big Bang Disruption: Strategy in the Age of Devastating Innovation. It’s a must-read for businesspeople generally, but in many ways it’s of particular relevance to the financial services industries because we are so vulnerable to the trends the book describes.
In a sense, the various financial services industries exists only because it’s so highly regulated. For example, money’s value is now entirely notional since the gold standard was abandoned, and the value of the world’s cash reserves greatly exceeds the amount of money actually printed. Without tough regulatory oversight, the whole financial system falls apart—as numerous financial crises have shown us. This makes the sector a target for disruptive innovators.
I’d like to spend this and subsequent blogs exploring what the implications of these disruptive trends are for insurance. In particular, I will be arguing that regulation offers a way for insurers to surf the disruption wave.
But first, let me try and summarize what the book is saying.
What’s most striking about the title is the phrase “devastating innovation.” One is so programmed to thinking that innovation is by its very nature good, that this combination strikes a very discordant note. Innovation is devastating, we learn, when it is profound enough to change the very basis of an industry, and when it comes like a bolt of lightning out of a blue sky.
Downes and Nunes argue that whereas previously innovations entered a market as inferior or more expensive products/ services, now they are better and cheaper from the moment of inception. The key driver here is the abundant availability of core technologies very cheaply via the cloud, and increasingly powerful and ubiquitous mobile devices.
In brief, the raw materials of innovation—computing power, efficient supply chains, information—are now available to anybody at a reasonable cost. And thanks to global collaboration platforms, new products can be tested very rapidly. Gone are the days of expensive, slow and proprietary R&D projects.
The other big change in the nature of innovation is its speed, as we’ll discuss next time.