Other parts of this series:
- Smart insurers are adopting new business strategies to ensure they thrive on rising disruption
- Strong partnerships provide insurers with the best protection against growing industry disruption
- Platform businesses give insurers a strong bulwark against rising disruption
- Mindset shift helps insurers unlock the value of their platform businesses
Platform businesses enable insurers to form the vital alliances they need to strengthen their defenses against rising disruption. They also create plenty of new opportunities for growth.
Platform businesses, pioneered by firms such as Facebook, Amazon, Uber and OpenTable, provide insurers with a great opportunity to secure the alliances they need to thrive in the emerging digital economy.
Such alliances will give insurers a strong bulwark against the rising disruption that is upending their traditional markets. Furthermore, they’ll enable insurance providers to deliver greater value to their customers and also reach consumers in new markets. One way to think about platform businesses is to view them as similar to the affinity businesses of the past. Think about the retired persons’ organization (AARP) and the success insurance companies have experienced partnering with this organization. New platform businesses can bring similar benefits, particularly access to a vast customer base that is already “connected”.
One of the other key strengths of platform businesses is that they encourage organizations to concentrate on the activities they perform best. They can then rely on an array of strategic partnerships to share risk and protect market share. This will guard them from sudden, far-reaching changes in their markets that could wipe out companies locked into traditional business models.
Organizations well prepared for the disruption of their markets have been quick to recognize the benefits of platform businesses. Our research shows that 88 percent of disruption-ready companies have made significant investments in platform businesses and plan to continue such spending in the future. Only 42 percent of companies less well prepared for disruption have attained such levels of investment in platform businesses. Among insurers, 49 percent of companies have made, and will continue to make, big investments in platform businesses. The research spanned 10 industries and 11 countries and comprised interviews with 561 chief strategy officers at companies with an annual turnover of more than US$1 billion.
A particularly important finding of our research was that many organizations that are investing heavily in platform businesses are not achieving the full benefit of such commitment. Out of the 40 percent of companies that are making significant investments in platform businesses, only 14 percent of them are securing high value from this spending. These few “highest value achievers” are obtaining at least five of the six major benefits of platform businesses (see illustration below).
Most insurers, as well as many other organizations, need to improve substantially the value they’re getting from their investments in platform businesses. Those that have yet to commit to these increasingly important digital business environments should recognize the enormous advantages they offer. Platform businesses give insurers not only a sound defense against industry disruption. They also provide them with a powerful mechanism to transform their organizations and generate revenues from a wide variety of new sources.
In my next blog post I discuss how insurers can better unlock the value of their platform businesses. Until then, have a look at these links. I’m sure you’ll find them helpful.