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
Insurers that are well prepared for the disruption sweeping their industry are building strong strategic partnerships to help them overcome the upheaval ahead.
To survive in an increasingly unpredictable and volatile business environment, insurers need strong strategic partners.
Companies that try to get to grips with the powerful forces of innovation and disruption on their own are going to be highly vulnerable. They could quickly be put out of business by sudden shifts in their traditional markets. The average lifespan of big companies has shrunk dramatically in the past decade. And it’s going to get even shorter. Firms on the Standard & Poor’s (S&P) 500 index in 1958, for example, had an average lifespan of around 60 years. Today it’s less than 20 years. If this trend continues, 75 percent of the companies that were on the S&P 500 index in 2012 will be out of business by 2027.
Market disruption is one of the main causes of this alarming mortality rate. Once-stable markets are being quickly and unexpectedly overturned as digital innovation produces products that are better, cheaper and more pleasing to customers than earlier devices and services. Companies caught off guard can soon become obsolete. They’ll be victims of the sudden, devastating change we term “big bang disruption”.
In times of crisis it’s essential to find strong allies. Our research shows that organizations best-prepared for disruption are forging key strategic partnerships to help them withstand the upheaval ahead. They’re teaming up with academic institutions, start-ups, customers, companies from other industries and even competitors to ensure they remain relevant when their traditional markets are overturned. The old mantra, “disrupt or be disrupted” has given way to a new credo, “partner or perish.” Strategic partnerships offer greater protection at less risk than bold attempts to become market disruptors ahead of rivals.
Digital ecosystems provide the platforms on which many disruption-ready companies are building critical business partnerships. We found that 55 percent of the companies that describe themselves as disruption-ready are in ecosystem partnerships. Only 24 percent of the other firms we surveyed are securing such digital alliances. As I mentioned in my previous blog post, we canvassed chief strategy officers (CSOs) at 561 companies, from 11 countries, operating in a variety of industries, to find out how organizations around the world are preparing for disruption. The main areas of co-operation for disruption-ready companies are marketing, customer relationship management and distribution. Among disruption-ready insurers collaboration is greatest in improving product quality, product innovation and customer relationship management.
Furthermore, companies well-prepared for disruption are reaching beyond their traditional industry boundaries to find key allies. They tend to have a far broader range of partners than their less ready counterparts. Disruption-ready insurers, for example, are teaming up with customers, innovation specialists and advertising agencies. Such partnerships are at the heart of these companies’ business strategies and are expected to fuel much of their growth over the next five years.
In my next blog post, I’ll discuss how platform businesses can help insurers build the strong alliances they need to weather growing disruption. In the meantime, take a look at these links. I think you’ll find them worthwhile.