Other parts of this series:
- Insurers are grasping the need for ecosystem partners in the new sharing economy
- Insurers must re-examine all their business operations to capitalize on the power of digital ecosystems
- Insurers must move now to secure a presence in digital ecosystems and be ready to seize new opportunities
- Insurers must balance the needs of their traditional businesses with the demands of new digital ecosystems
- Insurers can learn a lot from how Google is balancing the demands of its traditional and emerging businesses
- Insurers need to be alert to the role of the Internet of Things in the rise of digital ecosystems
- Insurers must be ready to compete in markets that will be increasingly disrupted by digital technology
- Insurers must change from being providers of products to digital ecosystem orchestrators
A host of smart start-ups have been quick to recognize the enormous potential of digital ecosystems. Firms such as Uber and Airbnb have built incredibly successful businesses on these intermeshed digital environments where multiple suppliers, offering a wide range of services, can engage with huge numbers of consumers.
In the insurance industry new companies such as Metromile, Bolt, Drive Factor and Snapsheet have harnessed a variety of digital ecosystems to deliver innovative products and services. All these solutions, which range from telematics-based auto insurance and quote aggregator services for small businesses to mobile claims settlement, have significant revenue potential.
The enormous promise of digital ecosystems, however, is far from limited to tech-savvy start-ups. Big, well-established companies are also beginning to tap into the potential of digital ecosystems. American Express, General Electric, John Deere and Walgreens are all rolling out new products and services across different digital ecosystems. Some of them have invested heavily in these new environments.
As I mentioned in my previous blog post, the shift to digital ecosystems impacts the whole business, not just sales and distribution. And it impacts substantially. For big corporations to take advantage of digital ecosystems they must transform the value chain throughout the organization. This is difficult and demanding. But it’s vital.
Our work with some of the big global organizations currently deploying digital ecosystems reveals some key steps that are essential for the successful roll-out of these environments. These insights are particularly useful to large insurers. Many of them are well entrenched in markets that have changed little for more than a century.
Seek optionality – Insurers need to start moving their businesses onto digital ecosystems now. Waiting on the sidelines to see what’s going to succeed or fail is a poor strategy. It takes a substantial amount of time and resources to establish an effective presence in this new environment. If carriers delay their migration until the market is more settled, they’ll be too slow to seize opportunities or to team up with the best partners. If they rush, however, they could misread the potential of new markets and misjudge the value of ecosystem partners. It’s best to move swiftly but cautiously. Carriers can then learn how best to conduct business in these digital environments. More importantly, they’ll keep their options open. When opportunities arise, they can respond quickly.
Gain first-mover advantage – By moving quickly into new digital environments innovative insurers can secure an early advantage over their competitors. And it’s an advantage that is not easily lost. Early entrants can quickly dominate digital environments, learn vital lessons about the new business, and provide services that are not easily matched by later arrivals. This enables them to capture and hold a big slice of the market. Airbnb, LinkedIn and Amazon Web Services are great examples of companies that quickly secured the high ground in emerging digital markets.
In my next post I’ll examine some further initiatives that are essential for a successful roll-out of digital ecosystems. Until then, follow this link. I think you’ll find it interesting.