Fast, simple, streamlined: How insurance and financial-services firms facing disruption can innovate and thrive

July 17, 2019

Executive summary

In an era of disruption, financial-services firms — and insurance companies in particular — need a shift in their approach to strategy. Developing and implementing a successful strategy in a nonlinear, fast-moving world can be easier than you think — if you focus in an active, iterative way on three core elements:

Portfolio: Which of your businesses deserve funding — and which don’t

Innovation: How well your organization is set up for experimentation and success in new ventures

Stewardship: How you direct resources toward your most important capabilities, to steer the business into the future

Your whole approach to strategy should focus on these three elements — and nothing else. Forget traditional notions of strategic planning. Out with the slavish adherence to operating models and organizational design. Ignore the relentless pressures to upgrade every platform and system. Put all your strategic activity in service to those three elements: portfolio, innovation, and stewardship

Resist thinking of strategy in terms of governance and top-down control. Instead, think of yourself and your top team as innovative stewards of the right mix of business lines, equipping the organization with what it needs to deliver profitably. Simplify your thinking in this way, and the rest — including how you deal with technological disruption — will fall into place.

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Does your strategy have a shot?

In today’s fast-moving business environment, leaders are constantly bombarded with calls to update, upgrade, and optimize everything, including product design, analytics, and customer service and technology platforms. Cutting back on high-profile initiatives whose value may have withered can be seen as impolitic. If you don’t follow every best practice that your competitors have, the implication is you could be sabotaging competitive advantage.

Banking and insurance are not immune to disruption, so keeping abreast of change is critical. Moreover, your major areas of capability in financial services are circumscribed by customer needs, product life cycles, distribution requirements, and regulation. There’s simply less opportunity to set your company apart.

But it’s easy to lose sight of a basic truth: There’s no payoff in fine-tuning capabilities that won’t differentiate your company. Strategic success requires a streamlined response. Companies need to focus their energy, attention, and resources on the things that will give them a competitive advantage. Leaders need to focus on the business portfolio to be sure investments are being directed to the businesses that will deliver the essential capabilities. Instead of worrying about table stakes business models, processes, infrastructure, and systems, concentrate on how well the organization is set up for innovation. Rather than managing by maintenance, think about stewardship — about steering the business toward the future.

This means having a longer-term view that properly establishes the platforms essential to supporting the strategy. In that way, you can prioritize the most urgent capabilities on a continual basis to fulfill more short-term market demands.

To determine whether your strategy has a shot at being implemented, ask yourself (and other members of your top management team) these questions:

  • Do you have the scale and resources to support all the businesses you are in?
  • Can you articulate your strategy in a way that sets you apart to customers and distributors?
  • Are you directing scarce resources in the right places to create those capabilities that will set you apart?
  • Are the strategic technology platforms in place that will let you build that differentiation?

If you didn’t answer “yes” to all four questions, you need to change your approach to strategy. Remember, as facts on the ground change, you need to keep strategy sharp and implementation aligned. You can do that only if you are willing to play a limited number of cards and play them well.

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Fast, simple, streamlined: How insurance and financial-services firms facing disruption can innovate and thrive

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