What do Apple, Alibaba, Amazon, Bank of China, JP Morgan, Facebook, Google, Intuit, PayPal, EBay, Docusign, Slack, General Motors, and Zhong An have in common? Digital ecosystems that connect them to millions of customers. According to McKinsey, $60 Trillion in revenue will flow through Digital Ecosystems like these by 2025. That includes Insurance.
If you haven’t put digital ecosystems at the top of your strategic priority list yet, it’s time. Here are some thoughts to get you started.
What’s a Digital Ecosystem?
Before we dive into strategies for innovators, let’s level set on what digital ecosystems are. We’ll start with Gartner’s definition, “A digital ecosystem is an interdependent group of enterprises, people and/or things that share standardized digital platforms for a mutually beneficial purpose, such as commercial gain, innovation or common interest.” To capitalize on ecosystems insurance innovators must develop solutions and business models composed of multiple companies working collaboratively and competitively. It also means building or participating in digitally interoperable frameworks and providing solutions that can individually or in concert with others, create value for ecosystem customers.
The Customer-Centric Mandate. A powerful cross-industry trend is redefining the business and product landscape. That trend is providing personalized, contextual and blended services to customers rather than stand-alone products. We are seeing this trend across consumer and commercial markets. AirBnB, Uber and Food Delivery services are examples of this in the consumer space. Jet engines that are paid for by hours of uptime operation is an example from the commercial side. Insurance innovators are just starting to respond to this trend by including health and fitness monitoring and programs as part of life and health insurance and communicating with devices in the home to prevent loss. There is much more coming.
Digital Ecosystems Abound. Digital ecosystems are forming and rapidly maturing across every industry, and every lifestyle, and every size and type of business. They are fast becoming the gateway to reach customers, develop partnerships, reduce the cost of operations, and accelerate the development and deployment of solutions on a global scale. Perhaps even more importantly, they accelerate customer-centric innovation by making it far easier to develop solutions that combine multiple services that cross and or blur industry boundaries uniquely tailored to the needs of individual customers. These enviornments are rich with soutions and data that innovators can use to create new personalized solutions.
The Innovators Mindset for Digital Ecosystems
The Customer
So where does the innovator or for that matter, anyone who wants to remain competitive start when developing an ecosystem strategy or mindset? In a market driven by customer-centricity, the customer is the obvious answer. But in the world of rapidly maturing digital ecosystems, that’s a big task. Multiple questions need to be answered. Who is the customer? How is digitization changing their values. What are they trying to achieve? How are they changing how the customer achieves their goals? Where can you as an innovator add value? What related services, data, and solutions would make creating that customer value easier and more powerful?
Business Processes and Value Chains
Despite all the focus on digital, we are still transitioning from a legacy world. A world in many cases of siloed and even paper-driven processes. That includes the value and supply chains that help providers connect with and support the end customer. Digital ecosystem enabled solutions will disrupt, redefine these existing processes and value chains and replace them with those that are far more efficient and effective.
For the innovator, the question is how well do the current processes and value chains align with and support a more holistic approach to helping the customer achieve their goals? What needs to change as digitization reshapes their values, goals, and world? Where is there waste or friction in the system? How could processes, value chains, and capabilities be digitally reorganized, redefined, or re-invented to better align with a more holistic approach to meeting future customer needs? What data would be of greatest value in understanding and delivering these new business processes and value chains? Who within the new value chain can use that data when, to augment, speed and optimize value delivery across the value chain and business processes?
Digital Ecosystem Selection
As indicated earlier, digital ecosystems abound. So for the insurance innovator, the question is, Which ecosystems will enable me to most effectively reach and deliver value to the customers I’m innovating for? To answer that question requires gathering, mapping, and analyzing, information about the ecosystems, the platforms, solutions, and data within them.
Which ecosystems are most closely aligned with my customers? Which contain capabilities and data that are most supportive in helping customers achieve their goals on a more holistic level? What are the dominant platforms? How open are they? What are the business models within them? Can I develop sustainable business models and value propositions that will work within their constructs? Who are the potential solution partners within the ecosystem? Are they interested in and capable of partnering to develop integrated solutions?
Ecosystem Partner Selection
In the world of digital ecosystems, connections are key. When selecting partners, the network effect is a critical consideration. The more connections the partner has to customers or partners you are trying to reach or create relationships with the better. There are some precondistions. Precondition 1. They partner be creating value for the customer that is reasonably aligned with solutions you intend to offer. Precondition 2. They partner must be capable from a business, technical, and brand image standpoint to support your solution.
Strategies for Insurance Innovators
Digital Ecosystems offer an array of strategies for insurance innovators. For the largest organizations such as carriers and reinsurers with immense resources and digital capabilities, the options are essentially wide open. They range from developing global customer-segment specific ecosystems with other large companies like the ones at the beginning of this post to developing platforms that play in multiple ecosystems, to developing customer solutions that can be easily adapted to participate across multiple ecosystems.
For mid-tier companies developing global ecosystems is likely not practical. Participating in them is. However, if the mid-tier company is dominant in a market or line of business in its region or nation, developing a more localized digital ecosystem is a possible. Enabling those ecosystems to tap into the larger global ecosystems should be a primary consideration. The easiest place for these companies to start is developing solutions that can play across multiple ecosystems.
For smaller companies, the best place to start developing solutions that play within and across other ecosystems.
For InsurTechs and vendors the options range from developing platforms that enable others to more effectively create and or connect to ecosystems and ecosystem partners to developing specific customer-facing or insurance process solutions.
Long Term Digital Ecosystem & Innovation Success
As discussed above, the keys to the long term success of any ecosystem strategy is the ability to create sustainable value for the end insured and ecosystem partners as the digital economy and the ecosystems that fuel it continue to reshape our world and our industry. Whether you are developing ecosystem solutions or assessing ecosystem partners, those two criteria must be core to your decision making.
Innovation strategies and the digital ecosystem solutions that follow that are based on these principles will impact every type of insurance and every insurance business process. With them will come the efficiencies of global scale and global innovation. To compete successfully will require an integrated and partnered approach to digital ecosystems and innovation. The time to start is now.
