According to a Wall Street Journal article, New York Department of Financial Services Superintendent Benjamin Lawsky has asked 134 insurers in the state to provide information about IUL illustrations....
By Linda Koco
CHICAGO – It’s a myth that starting to innovate with an open canvas or white space will generate the biggest and best ideas, according to Marla Capozzi, leader of the global innovation practice at McKinsey & Co.
“The reality is that constraints drive creativity,” she said.
She made the points in an interview with InsuranceNewsNet in advance of her presentation here today at the annual Retirement Industry Conference. The meeting is co-sponsored by LIMRA-LOMA Secure Retirement Institute and Society of Actuaries.
The insurance and financial industries have already unveiled numerous retirement product and service innovations in the past year, but they are looking to step up their game even further as more and more baby boomers approach and enter retirement.
Companies sometimes try to start innovative thinking with a “very big open topic,” Capozzi said. An example would be a retirement company saying, “Let’s innovate with mobile technology.”
But they need to include constraints, too, she said. For instance, the company might begin with saying “We believe the greatest value is the users’ ability to transact via a mobile device.” The company could bring in other technologies too, and seat the discussion within the industry context.
Then, she said, ask: “What is the problem?” Perhaps the problem has to do with users’ current inability to interact via mobile, or with advisors not being able to reach more clients with mobile, or with carriers trying to use mobile throughout their multi-channel system for retirement business.
The problems will depend on the company and environment, but the approach of establishing constraints will sharpen the focus. Creating constraints spurs the creativity that can spark meaningful innovation, Capozzi emphasized.
That’s should happen in the very early stages of innovation, she said. That’s when idea generation starts to occur.
Two of the most effective tools to use for that purpose are “reframing and asking different questions” in combination with “challenging orthodoxies,” the consultant said.
Reframing and challenging
She said reframing happens when innovators look at the problem in different ways. For instance, she said, they might start out by asking, “How do I help people plan for retirement and stick to it?”
But then, the developers might think about what they already know, something like, “most people can’t plan effectively for retirement.” That might raise questions around what people need to help them set and attain goals. This might lead to other questions, such as, “How do I help people achieve multiple goals during their lifetime that interconnect, such as school, family, home, vacations and on through retirement, etc.?”
They might also approach the discussion by recognizing that the concept of retirement is changing dramatically, she added. That’s where challenging orthodoxy could help, she indicated.
An orthodox view of retirement is that people stop working when they retire, Capozzi said. Yet more people are working during retirement or want to do so. This has led some people to say that they don’t know what retirement means anymore. This is impacting their ability to, or interest in, planning for retirement, she continued.
This opens the door to innovating around “a completely new mental model of retirement,” the consultant said.
“In reframing, you come up with a different view of the problem, and then start asking what value proposition do consumers need under that new model. Then compare that to the advice, products and services that you provide today,” she continued. That could prompt questions about what products and services would deliver the new value proposition. In that way, “reframing and asking different questions that challenge orthodoxies can set you on the best trajectory for innovation.”
For example, Capozzi recalled how a credit card company started challenging the established practice of punishing people for “bad” behavior, such as through assessing fees for late payments. The developers began looking at rewarding customers for good behavior.
As discussions ensued, the decision was reached that “punishment was not the hallmark of the company’s operating model,” she said. Out of that came a new set of products consistent with that approach, and increases in customer acquisition followed.
Changes of that magnitude do pose challenges for organizations, Capozzi allowed. For instance, the credit card company found it had been adding more and more features to its cards, under the belief that more features are better than fewer features. However, the developers found that the multiple features were confusing to consumers.
To change that meant making changes to the operating system that could affect processing, revenues and other aspects of the business. But that too is part of challenging orthodoxy, she indicated.
When challenging orthodoxies and core beliefs, it helps to remember that other players in the industry may not have the same core beliefs, Capozzi said. So they may move ahead in an area where other companies hold back.
We tried that before
Innovative teams do sometimes come up with ideas that have been tried before, ideas that ended in colossal failure. Capozzi believes teams should consider them anyhow.
“Sometimes, the market was not ready for the innovation three or four years ago, because of the technology, the consumers and/or the ecosystem weren’t ready,” she said. “For instance, the iPod didn’t take off until iTunes launched. That can happen in the retirement industry too.”
Her suggestion is to find out why the effort failed in the past, and identify the factors that have changed over time. “The timing of an innovation is often the least talked about topic, but it can be the most important,” she said.
Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda may be reached at [email protected].
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