Other parts of this series:
- Insurers must up competitive agility to counter rising disruption
- Three-point business strategy gives insurers a competitive edge
- Insurance execs must ask tough questions about competitive agility
- Insurers must be wary of pitfalls on the path to competitive agility
- Correct methodology crucial for carriers seeking competitive agility
A combined focus on growth, profitability and sustainability enables carriers to outperform competitors.
Insurers that adopt an integrated business strategy, which simultaneously stimulates growth, profitability and sustainability, are set to significantly outperform their competitors.
Our research shows that companies that focus on all three of these key facets of their businesses have far greater potential to drive up revenues and profitability than firms with a more concentrated approach. We found that only about a quarter of the 350 companies we surveyed are using integrated strategies to dominate their markets. Around 28 percent of the firms are struggling to survive because they’re following failing business strategies.
Insurers, as I mentioned in my previous blog post, have typically warded off challenges from competitors by accelerating growth, improving profitability or strengthening the sustainability of their businesses. They’ve channeled their resources towards one, or perhaps two, of these areas. However, digital disruption is fast undermining the efficacy of such responses. It’s forcing insurers to become far more agile and transparent. Traditional business strategies are too static, rigid and limited to properly respond to these changes.
Successful insurers in future will use digital technology to aggressively grow their businesses, nimbly manage their costs, and openly demonstrate their commitment to sustainability. They’ll build strong digital backbones that will enable them to move resources across their organizations quickly and effectively to out-maneuver rivals.
Our Competitive Agility Index shows that insurers that achieve even a modest improvement across the three critical business drivers I’ve mentioned are likely to generate significant returns. Conventional measures of competitiveness, such as market capitalization and total shareholder returns, tend to neglect the impact of digital disruption. They often overlook, for example, the growing importance of business sustainability and the value of building trust with customers.
We applied the Competitive Agility Index to assess the future growth and profitability of a wide range of companies. Often firms with healthy market capitalizations and good shareholder returns achieved only modest ratings on the index. This was usually because their business strategies were too narrow and didn’t integrate a broad variety of critical assets and resources.
Insurers that adopt an integrated approach are likely to benefit quickly. We found, for example, that a one-point improvement in an insurer’s rating on our index could result in a six percent increase in earnings before interest, taxes, depreciation and amortization (EBITDA). This substantial boost in profitability is within the reach of many insurers.
In my next blog post, I’ll discuss some of the key questions insurance executives need to face when steering their companies to greater competitive agility. In the meantime, have a look at a few of these links. I’m sure you’ll find them useful.