Paul Ricard
Hi, everyone, and welcome to Oliver Wyman’s Reinventing Insurance podcast. I’m your host, Paul Ricard. Today, I am delighted to welcome Taddy Hall, who’s a senior partner in Lippincott’s Innovation Practice. Welcome, Taddy.
Taddy Hall
I am thrilled to be here, Paul. Thank you.
Paul
Taddy, today we’re going to be talking a little bit about what it takes for insurers to come up with groundbreaking insurance solutions and offerings. But before we get into this, would you mind introducing yourself in a few words?
Taddy
Few words? Wow. OK, sure. My name’s Taddy Hall, and I’m a senior partner at Lippincott. I mostly work with clients on experience innovation. So, you think of experience innovation as the layer at which product innovation, service innovation, and business model innovation come together to actually make a difference in customers’ lives, typically on projects that are either discontinuous from their legacy businesses or involve restarting and reactivating businesses that may have stalled in their growth.
Paul
And you worked across the world, if I’m not mistaken, right?
Taddy
Yes. So, I think, as you probably know — for 25 years or more, I worked very closely with Clay Christensen at Harvard Business School, who was a dear friend and a mentor I miss daily. And that led to doing a lot of work consulting, researching, speaking all over the world. And I also work for a nonprofit organization called Endeavor that works with high-impact entrepreneurs around the world. And so, between those two things, I’ve ended up working with companies large and small, as well as a number of different governments, about building entrepreneurial ecosystems.
Paul
So, you know a thing or two about experience innovation, which is basically what you’re telling me.
Taddy
Yes, I like to think so. I know a lot about very little. There are many things I know nothing about. But I do know something about creating growth businesses.
Paul
Awesome. Well, today, we’d like to talk a bit about all these themes, and in particular, how insurers can maximize their chances to come up with truly innovative products, offerings, and experiences. Maybe I would love your take first on why that is even a challenge for insurers?
Taddy
The longer that any particular business model has profitably persisted, the more well-worn the grooves become. Though it’s hard for insurance companies — but hey, it’s hard for everybody.
Paul
When it comes to dealing with something entirely new, dealing with new trends, dealing with disruption, that’s where it becomes hard, because I’m just not equipped internally to address that.
Taddy
Something that gets said a lot, which I think is not true, is that large companies are bad at innovation, that they’re not any good at it, and small, nimble, agile, clever startups. And that’s just not true. The data and the history show something very, very different, which is that established companies are outstanding innovators when it comes to certain kinds of innovation. They’re relentlessly effective at efficiency innovation, right? So, those are innovations involving new tools, new technologies, new processes, new approaches that systematically take cost or waste or inefficiency out of the system. And they do that day in, day out, and they do it very, very well.
Established companies are really good at sustaining innovation. It’s a virtual certainty that next year’s Honda Civic is going to be a little bit better than last year’s Honda Civic. And the way that your iPhone integrates with the audio system or the steering or the work required to change the spare tire, there’ll be a million little things that are better.
And that’s super important stuff. And it's stuff that every established company should be doing: efficiency innovation, and sustaining innovation. The challenge is that there’s a third kind of innovation – what we often have referred to as market-creating innovation. And that’s where you open new markets, you create new businesses, you change the basis of competition by introducing a new value proposition, or you introduce a new business model that can be profitable in segments or tiers of the market that were no longer profitable or attractive.
Paul
Is it more crucial than ever to master that third type of innovation than it was before?
Taddy
Well, people who are a lot smarter than I am will tell you with a high degree of confidence — and you can hear it from enough people that you start to believe it — which is: the pace of change is only accelerating and that the pace of change today is actually the slowest that it will be for the rest of our lifetime.
And you look backwards, and you can cast your eye forwards in some of these technologies that are just coming to the fore, and it’s pretty easy to believe that. And so, it’s not a leap to say, look, if that’s what’s happening at the technology level, it’s really hard to believe that somehow, I’m going to be immune to that wave of change. And so, the short answer to your question is: Yes, it’s more urgent than it ever was, and the half-life of any established business model is likely to be less than it was not only a hundred years ago, but 10 years ago.
Paul
Let’s dig into market-creating innovation and what that means, and what it takes to get there. You’re one of the creators of the Jobs to be Done theory, with the late Clay Christensen.
Taddy
Jobs to be Done is a little bit like… It reminds me of working with Procter & Gamble. It’s like everybody at Procter & Gamble somehow worked on Swiffer. The number of people who claim paternity over Jobs to be Done is not a small population. But yes, I think I can stake some claim there. And this is just dating me. It’s what, 16 years ago and 2005 that Clay and I, and Scott Cook, a longtime collaborator and friend who’s the founder of the software firm Intuit, wrote the first Harvard Business Review article that articulated Jobs to be Done.
Disruption, as Clay accurately described it, is a theory of competitive response. What we found is that it’s not the attributes of the offering or the characteristics of the individual that predict whether a person will buy a given product or hire a given service. What actually predicts it is the specific circumstance in which that individual, whether it’s in a personal or professional context. What is the progress that an individual seeks to accomplish in a given circumstance? What is their current struggle, and what’s the experience they’re trying to seek? In other words, what is the job to be done that they encounter in their personal and professional lives?
And it’s that unit of analysis, right, a circumstance of struggle, a circumstance in which an individual is trying to make progress either in their personal or their professional lives, that is the relevant unit of analysis when it comes to innovation work. Not the product attributes, not the characteristics of a person.
And the last thing I’ll say on this is that all is quite intuitive, but it’s not how innovation journeys start in companies. We almost always start with some technology or some résumé of product performance characteristics, or we see a market that we define based on the characteristics of the population associated with that market, and we use that as our North Star. But that’s not really the most useful unit to work with when we think about innovation.
Paul
I’ll do a little bit more specifics with you here.
Taddy
Sure.
Paul
But instead, you want to focus on that energy for progress and dive into very, very specific experiences that people are having.
Taddy
The innovation starts with a person who’s got energy for progress. And I can give you so many stories of so many different products in very pedestrian categories, where the touchstone for an idea that seems so banal on the surface, but turned into a multibillion-dollar business, started with a simple observation of somebody doing something that we simply couldn’t understand.
The brand of Mountain Dew Kickstart, which is now a multibillion-dollar brand that is incremental to the Mountain Dew core business and to their Rockstar Energy business, really started positioned squarely on that job of transitioning and helping people have successful mornings.
Paul
Right.
Taddy
They innovated off that. They actually made a version for evenings as well. But the point persists, and it translates generally, which is that most managers ignore those anomalies, number one. And number two is they don’t even look for them.
Paul
Usually, we’re starting to hear, Where’s the large market opportunity? But here, it’s almost, let’s actually drill into these anomalies and understand the “why?” behind them. And from this, then identify potential opportunities for new products, new offerings, new services, and new innovations.
Taddy
When it comes to market-creating innovation, we use the wrong tools. We look in the wrong place, the wrong way, right? We actually need to look at things differently.
Paul
Right.
Taddy
Marcel Proust had this wonderful line that I’ll mangle, but it’s, “The true voyage of discovery comes not from seeking new sights but learning to look with new eyes.” And I swear that is the truth of most successful innovations. It’s not about some otherworldly adventure off into the hinterland. It’s simply about training ourselves to look often at phenomena that we’ve seen a million times, but to look at those and to have the ability to see things that we’ve never seen before.
Paul
So, Taddy, what type of market-creating innovation have you seen happening in insurance, or do you think is yet to happen in the insurance world?
Taddy
Even something that seems totally saturated, say, life insurance. The percentage of the population that doesn’t have life insurance. A good friend of mine started a company that was very, very successful in emerging markets when he realized, you know what? The people who are most in need of life insurance are the least likely to have it. What he realized was, you have to develop a business model that can be profitable, giving the life insurance away. So how would you do that? Well, you know what? If you bundle the life insurance with prepaid cell phone cards, and so cell phone carriers that are competing against each other offer insurance as a benefit, or banks that are trying to attract customers, if they can offer insurance essentially as a perk. And so he developed myriad ways to introduce insurance products quite profitably, and I think he’s serving something like 80 million customers who’ve never had any kind of insurance product before.
Paul
But to your point — today, 40% of adults in the US don’t have any sort of life insurance. And basically, what you’re saying is these non-consumption areas are the perfect starting place for market creating an innovation. What are the anomalies that we find in these people’s lives that we can then draw inspiration from to prototype new ideas into existence, basically?
Taddy
You said something key: prototype, right? Because you’re not going to go out there and find the answers. Even the notion that insights exist somewhere out there in the world is not the right way to think about it. It’s like the raw material is out there in the world for us to harvest and then co-create. It’s those weak signals of people doing things we don’t expect, of exerting energy to make progress in ways that we hadn’t anticipated. That’s what you can get out there and harvest, and then you can get the kernel of an idea. And yes, then you can start to develop that into a value proposition and a proof of concept and then an MVP. And it takes time.
Paul
I’m sure there are a lot of people listening to us now that are still pretty skeptical, and they think, yeah, that sounds great, but this won’t quite work out for me, or this won’t quite work out for my company. And so, what are some of the lessons learned that you would share to make sure that people set themselves up for success?
Taddy
Most large organizations are full, brimming with great ideas. The challenge is that ideas go through a shaping process. So many ideas that might have the potential to be transformational and market creating get shaped into a sustaining or an innovation role. The most common cause of failure is that not by one fell swoop, but by a thousand little cuts motivated by efficiency, what started as this green shoot on its own essentially gets co-opted and contorted to conform with the established processes and performance metrics.
I think the other thing is sometimes we say, hey, we’re not good at this market creating. We’re going to put this off in a lab or some independent… Right?
Paul
Right.
Taddy
And the problem with that is it just becomes like an executive playpen where little tiny things bloom and blossom, but they never achieve the scale that can only be achieved by being either really fully funded and capitalized as an independent business over a long period of time, or being brought into the core in such a way that either this new idea can be energized as an entirely new growth engine, or it can serve as a powerful accelerant for some sustaining innovation.
Paul
Right.
Taddy
Getting that balance right between separation without abandonment is an understandably incredibly difficult challenge that managers of large businesses face.
Paul
Yes, these are great points, Taddy. And that’s definitely something we’ve been talking about a lot on this podcast, where developing and maintaining a discipline of innovation really requires you to be deliberate about how you stand up these new ventures and scale them over time, and requires you to adjust your management style, your management attention, your objectives, and key results over time. That’s certainly not an easy feat.
Well, Taddy, thank you very much for your time today. It was great talking about all these things with you. Maybe before we wrap, do you have a few final words of wisdom to share with our audience?
Taddy
We live in a world of lots of data. And in fact, the world we see is often a construct of the data that we consume. The data we need as innovators is rarely the data that is just collected as a byproduct of our ongoing innovations. I mentioned Scott Cook. He was on the Amazon board when it was just a fledgling startup. And Jeff Bezos was the CEO, of course, at the time. And they had a promise that they would make when you bought a product on Amazon that they would tell you when it was shipped. And Jeff said, nobody cares when the product’s shipped. They just want to know when they’re going to get their book, their CD, their movie. And Scott tells the story about how everyone on the board is like, we don’t have control over that. We have no idea how we’re going to get that. And Jeff didn’t care! He said, we’ve got to create that data.
And Scott tells a story of the effort and the expense and the time that was invested to create the data they needed to be able to tell people when they would receive products, not when they were shipped. And I think as innovators, we often are trapped in the — I don’t want to say lazy excuse — but we rely on the data we have, as if it had perfect verisimilitude to the external reality.
And the more that we hold onto those models with great humility, knowing how imperfect and how partial they are, the more we create space for our curiosity and our explorer’s mindset to go off and say, hey, what else is out there? What are all the opportunities that don’t just show up on these reams of reports and papers? Because the data to create the future hasn’t been created yet.
Paul
That was pretty good. That was not so bad for a word of wisdom! Well, Taddy, that was really an honor and a privilege being able to talk to you today.
Taddy
That was really fun.
Paul
That was Teddy Hall, who’s a senior partner at Lippincott. I’ll put a little plug for your book, by the way, which I had.
Taddy
Oh, thank you.
Paul
Competing Against Luck, which obviously you co-wrote with Clay Christensen and a few others. Very fun read, actually. A lot of funny anecdotes that build on a lot of stuff we discussed.
Taddy
Oh, thank you.
Paul
Thanks, Taddy. That was Taddy Hall, senior partner at Lippincott, joining us today. For more information about the Reinventing Insurance series, make sure to visit www.oliverwyman.com/reinventinginsurance. Thanks for listening, and I will see you next time.
This transcript has been edited for clarity.
