Think Big or Stay Home

One of our favorite slogans is one we saw on a t-shirt years ago. It was worn by a guy who must have been a bodybuilder — or else he was absurdly muscular for no good reason. The t-shirt read, “Get big or stay home.”

This is not a bodybuilding blog. It’s not even a single post about bodybuilding or weightlifting. And while we don’t think executives in smaller-tier insurance companies need to get bigger, they and their companies would benefit if they started thinking a little bigger.

Ante Up

When we were kids, our families had one car. We had one television set. It displayed in black and white. We had no cable service. We had no Internet. We had no cell phones. And we had land-line phone service with just one phone in the house.

Fast forward: Most families have a car for every driver in the house. They likely have smart TVs in every room, most if not all of which have LED LCD displays. Along with cable and Internet services, most homes have streaming devices like Chromecast, Raspberry Pi, Synology Diskstation, Google TV, Amazon Fire TV, Apple TV, Plex, and others. And everyone walks around with smartphones that, by the standards of even 10 years ago, are portable supercomputers.

Why is that relevant or important? It’s relevant and important because the rest of the world has moved on with technology and accepted the additional, initial costs associated with its increased capabilities. Those costs become entry cards, table stakes, and business investments in the adoption of contemporary living.

Has that happened in insurance? Not so much.

The Future is Here

Insurers are people, too. To stay relevant and competitive, they have to move forward. They have to adjust and adapt. That doesn’t mean they have to lead any technological charges. But they do have to adopt the technological capabilities and the processing functionality that will enable them to develop and introduce products more quickly, deliver service to policyholders more responsively, and react to market opportunities more nimbly.

Will there be incremental cost to adopting that technology? Yes. Just like there is with car payments, cable and Internet bills, streaming services, and data plans. But the more important question is this: What will it cost if you don’t adopt new technologies?

The new reality arrived with the future. Smaller-tier insurance-company executives and their boards have to accept this new reality or accept irrelevance.

They don’t have to get big or stay home. But if they don’t think bigger, they run the risk of getting smaller.

Feeling a Little Behind?

You need to replace your core administration system, but you think you need too much customization. You know you’ll fall behind competitively if you don’t replace your system, but you think the customizations you want will cost too much. Are you sure?

We’re not necessarily anti-customization. But we do think customizations — their perception of their benefits and advantages — may be matters of perspective. This may seem like an extreme example, but please consider the following exchange:

Ed: I’d like to put a manual transmission in my car.

Fred: But it has an automatic transmission.

Ed: Yeah. But I want it customized.

Fred: It’s going to cost a lot of money.

Ed: Never mind. I want to shift the way I want to shift. And your price is too high now anyway.

Speaking of Shifting …

What if Ed had taken a slightly more objective perspective? What if he’d been willing to take a look at the way he went about the business of driving? What if he’d realized he could decrease the cost of going about that business, get to his desired destination more efficiently, and save himself some time and effort if he’d been willing to drive the car the way it was intended to be driven? We may never know. Neither will Ed.

From his perspective, it was better to re-engineer the tool than to consider the reasons for which it was built the way it was and to use it the way it worked best. It was more important to Ed to turn his car into something it was never intended to be, rather than to accept it as it was, to understand its advantages, and to reap its benefits.

Another Interpretation

If you have the tendency to view software the way Ed viewed his car, we have a suggestion: As you head to NAMIC this year, try thinking about another interpretation of the acronym this way: Not All Methods Involve Customization.

If you do that, your experience at NAMIC might be more fruitful. You might find things you didn’t expect to find, including new perspectives. And you just might find yourself driving toward competitive success in a whole new vehicle.

At the very least, maybe you’ll be able to see the possibilities once you’re able to see out from behind the eight ball.

A Word About Culture: Part Five

This is the fifth and final post in a series inspired by a Harvard Business Review (HBR) article, “The Hard Truth About Innovative Cultures”, that posited these five characteristics of effective corporate cultures:

  1. Tolerance for Failure but No Tolerance for Incompetence
  2. Willingness to Experiment but Highly Disciplined
  3. Psychologically Safe but Brutally Candid
  4. Collaboration but with Individual Accountability
  5. Flat but Strong Leadership.

In the prior post, which covered collaboration and accountability, we stressed the importance of giving people responsibility — plus authority — for their given tasks. As we wrap up this series, we address the subject of leadership and share our thoughts on the way our organization works best and why.

The Buck Stops Everywhere

To summarize the HBR article’s point #5, which is consistent with much of what we wrote in our last post:

In culturally flat organizations, people are given wide latitude to take actions, make decisions, and voice their opinions … [they] can typically respond more quickly to rapidly changing circumstances because decision making is decentralized and closer to the sources of relevant information … Lack of hierarchy, though, does not mean lack of leadership … For employees, flatness requires them to develop their own strong leadership capacities and be comfortable with taking action and being accountable for their decisions.

In all likelihood, there isn’t one person in our organization who’d say it lacks leadership. At the same time, most if not all of the people in the organization would say they’re comfortable with the extent to which they’re given rein to manage their responsibilities with authority, to call the appropriate shots, and to let their thoughts be known. While ownership is an overused term, all of our people are encouraged to own their jobs. And they’re recognized and rewarded for doing their jobs well.

Connecting the Dots

Logically, all five of the points in the HBR article are related. In this series of posts, we’ve suggested the ways in which those points are related sequentially (each point feeds off the previous point) and operationally (each point strengthens the functional interactions within the organization and of its people). Writing this series has given us the opportunity to grant ourselves some objective distance from the organization, to appreciate the things we’re doing well, and to connect the appropriate dots.

We hope you enjoyed reading this series as much as we enjoyed writing it.

A Word About Culture: Part Four

This is the fourth post in a series inspired by a Harvard Business Review article, “The Hard Truth About Innovative Cultures”, that posited these five characteristics of effective corporate cultures:

  1. Tolerance for Failure but No Tolerance for Incompetence
  2. Willingness to Experiment but Highly Disciplined
  3. Psychologically Safe but Brutally Candid
  4. Collaboration but with Individual Accountability
  5. Flat but Strong Leadership.

In our last episode, we pondered the role of respect in psychologically safe but brutally candid environments. In this episode, we contemplate the importance of coupling collaboration with accountability.

Free To Do It Well

The article from which this series derives has this to say, in part, about combining collaboration with individual accountability:

People who work in a collaborative culture … have a sense of collective responsibility. But too often, collaboration gets confused with consensus. And consensus is poison for rapid decision making and navigating the complex problems associated with transformational innovation. Ultimately, someone has to make a decision and be accountable for it.

While the people in our organization do, indeed, possess that collective sense of responsibility, we facilitate the success of their efforts — collaborative and individual — by ensuring our people are given responsibility and authority. Making people responsible for things — without giving them the authority to make appropriate decisions about them — sets those people up for failure.

Giving a competent person responsibility for achieving something — but giving decision-making authority to another person (who may be less competent, less responsive, less knowledgeable about the responsibility, or simply more detached from it), puts both of them in ineffective, inefficient positions. That’s why we make sure our people are free to do their jobs well.

If We Don’t Succeed, Our Customers Can’t Succeed

The other reason, of course, for assigning people authority for their responsibilities is that, as an organization, we want to be as responsive to our customers as possible. We do believe that two heads are better than one (collaboration). But we also believe good decisions made promptly are preferable to perfect decisions (which aren’t possible) made later. That’s why we strive to maintain an environment in which our customers succeed because we succeed.

Our customers and our employees seem to think that works pretty well.

A Word About Culture: Part Three

This is the third post in a series inspired by a Harvard Business Review article, “The Hard Truth About Innovative Cultures”, that posited these five characteristics of effective corporate cultures:

  1. Tolerance for Failure but No Tolerance for Incompetence
  2. Willingness to Experiment but Highly Disciplined
  3. Psychologically Safe but Brutally Candid
  4. Collaboration but with Individual Accountability
  5. Flat but Strong Leadership.

Last time out, we presented our take on experimentation, uncertainty, ambiguity, and the necessity of discipline. This time, we examine the nature of psychologically safe, brutally candid environments.

Smile When You Say That

By the strictest terms of the article’s point #3, we’re not sure our organization qualifies as psychologically safe or brutally candid. Here are those terms:

Psychologically safe environments … help organizations avoid catastrophic errors [and] support learning and innovation … candor is critical to innovation because it is the the means by which ideas evolve and improve … [people] must be willing (and able) to constructively critique others’ ideas without being abrasive … providing and accepting frank criticism is one of the hallmarks of respect.

We do encourage open, honest, and thorough exchanges of ideas and opinions, knowing our people are competent, willing to take risks, and highly disciplined. But we expect respect and its reciprocation to be precursors to any such exchanges. If all of us in the organization don’t have respect for each other first, it’s not likely to be earned (or back-filled) by providing and accepting frank criticism. Put another way, we engage in frank criticism at Finys because we respect each other.

Two-Way Streets

By the same token, we expect open, honest, and thorough feedback from our customers. Both parties are more rewardingly served when our customers tell us what we need to hear, rather than telling us what they think we want to hear. We try to create environments for them in which they’re comfortable providing that kind of feedback, in which they realize their greatest opportunity is helping us help them. And we take the time to know them, to respect and appreciate their needs, before the word, contract, ever gets mentioned.

Whether we’re talking about employees or customers, if the respect is mutual going in, we all win.

A Word About Culture: Part Two

This is the second post in a series inspired by a Harvard Business Review article, “The Hard Truth About Innovative Cultures”, that posited these five characteristics of effective corporate cultures:

  1. Tolerance for Failure but No Tolerance for Incompetence
  2. Willingness to Experiment but Highly Disciplined
  3. Psychologically Safe but Brutally Candid
  4. Collaboration but with Individual Accountability
  5. Flat but Strong Leadership.

After distinguishing between mistakes and failures in the first post, we continue the series with an examination of experimentation and discipline from the perspective of our own organization.

First Things First

The premise of the article’s point #2 is summarized here:

Organizations that embrace experimentation are comfortable with uncertainty and ambiguity … They experiment to learn rather than to produce an immediately marketable product or service … [but they] select experiments carefully on the basis of their potential learning value, and they design them rigorously to yield as much information as possible relative to the costs. They establish clear criteria at the outset for deciding whether to move forward with, modify, or kill an idea. And they face the facts generated by experiments.

It’s fair to suggest we face facts first: We don’t know everything. We can’t predict everything. We can’t control (the outcomes) of everything. So, we approach every act of experimentation with discipline, informed by the years we spent as developers before founding Finys. Those facts — and the fact that our customers rely on us to make their businesses run better — compel us to approach new features or capabilities not as experiments but as trials based on previous empirical experiences: If this did that, we expect a particular variant of this to yield something new that’s a correspondingly particular variant of that.

Faith In, Faith Out

We choose to reward the faith our customers place in us by approaching every act of experimentation with all the discipline and all the knowledge we’ve acquired to date. We begin with clearly articulated and unanimously shared objectives. We celebrate the experiments that accomplish what we thought they would. And we nuke the ones that don’t. We won’t reward the faith of our customers by playing fast and loose with their businesses or their futures.

Uncertainty and ambiguity are parts of life and living. But facing facts with discipline is an effective way to foil failure.

A Word About Culture: Part One

A recent edition of Harvard Business Review carried an article entitled, “The Hard Truth About Innovative Cultures”. At first, we thought it was about Greek yogurt. Then we read it and learned it’s about the five characteristics of effective corporate cultures. Here they are:

  1. Tolerance for Failure but No Tolerance for Incompetence
  2. Willingness to Experiment but Highly Disciplined
  3. Psychologically Safe but Brutally Candid
  4. Collaboration but with Individual Accountability
  5. Flat but Strong Leadership.

This is the first in a series of five posts in which we will examine each of those characteristics from the perspective of our own organization.

Fine Lines

Any discussion about the relationship between failure and intolerance has to start with distinctions and balance. The article says this:

A tolerance for failure is an important characteristic of innovative cultures … And yet for all their focus on tolerance for failure, innovative organizations are intolerant of incompetence.

To strike the appropriate balance, we tend to distinguish mistakes from failure. We tolerate honest mistakes resulting from clear thought, sincere intents, and unforeseen eventualities. We don’t tolerate failures resulting from thoughtlessness, carelessness, or recklessness. And we take to heart a conversation we once heard over lunch at an industry conference:

Person 1: I heard one of your people made a huge mistake.

Person 2: Yep. It cost me $50,000.

Person 1: Did you get rid of the guy?

Person 2: Why would I do that? He didn’t piss off the client. And I just paid $50,000 for his education.

As far as we’re concerned, failing to try is a bigger indicator of incompetence than making an honest mistake in a sincere, well-thought-out effort. And lessons hard-learned are often the most effective.

A Calculated Gamble

There’s no such thing as perfection. We neither demand it nor expect it. But we do expect conscientiousness. We do expect honesty, integrity, and thoughtfulness. And we do expect people’s best efforts, even as we recognize anyone’s best efforts may fall short on occasion. It’s the gamble you take in business, in hiring, in being willing to trust and observe before you judge.

That approach has worked for us since 2001. And it’s kept our culture active, even though we’re not in the yogurt business.

Changing our approach now might be a mistake … or worse.

Technology Emerges … Unless it Doesn’t

We came across an article the other day on a site called, The Frisky (we’re not making that up). The article was called, “11 Emerging Insurance Technology Trends to Watch in 2019”, and it featured, wouldn’t you know it, an infographic. It also made this prognostication:

$2 Billion will be invested into emerging insurance technologies known as “InsureTech” … to completely disrupt the way consumers buy insurance and initiation [sic] claims.

That statement stands in stark contrast, of course, to the oft-stated contention that the insurance industry operates in the technological equivalent of the Stone Age. So, where’s the middle? And is there truth in it?

The Truth is Where You Find It

The fact is the insurance industry doesn’t exist to introduce or pioneer technology. But you’d never know that from reading most of the industry literature. That would have you believe driverless cars, programmed with nanotechnology and controlled by mobile devices, were being monitored by drones carrying wearables, running applications from the cloud, connected to the Internet of Everything and fulfilling Richard Brautigan’s promise that we’ll be “All Watched Over By Machines of Loving Grace“. Not so much.

As implausible as it seems given the fact that the speed of consumer adoption of technologies far outpaces entire industry adoptions of technologies, even the retail industry is having trouble adjusting to mobile. You can create technology. But that doesn’t mean it’s ready to emerge. You have to solicit the input of the people for whom it’s intended. You have to keep it up to date and functionally capable. You have to monitor its usage. And you have to resist surprise and frustration if the tried, true, and deeply entrenched do not go gentle into that good night — especially since practicality has a considerably longer shelf-life than sensationalism.

Consider this: When’s the last time you read an article about the number of insurance companies still working on green screens? Many insurers still do. When’s the last time you heard anyone admit to still using a dial-up modem? Some people still do. When’s the last time you heard anyone in any industry say anything other than their technologies were emerging, disruptive, or innovative? And why do you think that is?

It’s because talk is cheap. It’s also less expensive and more practical than chasing the rainbow and betting the ranch on emerging technologies.

Practical Is As Practical Does

And speaking of practical, is any industry more practical than insurance? Insurance has to be practical by definition. If you’re in the business of reserving the premiums of your policyholders against potential losses, what else could you be?

Yes. Like every other industry, insurance needs to keep its eye on emerging technologies. But its first look has to be at reliable ways in which to serve its constituents, minimally risky ways in which to deliver its products and services. If insurers spent their time and attention pursuing emerging technologies, how much would be left in which to satisfy and retain their policyholders?

We love our clients. They’re in the insurance business. That’s why we’re in the technology business.

For our clients, technology will continue to emerge as it can.

The Future of Insurance

With everyone from consultants to analysts, from trade publications to software vendors, from insurtechs to FOMOs writing about the future of insurance, we started thinking we might be conspicuous by our absence. So, in the interest of living on the bleeding edge of insurance prognostication (don’t worry … we have lots of styptic), here are our modest contributions to the burgeoning breadth and bulk of literature on the topic.

Prediction #1: Some Stuff Will Change

Given the evolving nature of technology and the ever-increasing rate of change, we can expect a veritable plethora of things to become increasingly prevalent. With IoT and Big Data bombarding us with more and more information for which we have to try and find uses, we’ll figure something out. With IoT and Big Data feeding telematics devices and precipitating usage-based insurance, we’ll see more individualized rates as standard personal-lines products, in particular, become ever-more commoditized. And with GPS and insurtechs breeding the pursuit of leisure in driverless cars, there are sure to be emerging market opportunities in life insurance, if not funeral insurance.

Prediction #2: Some Stuff Will Never Change

Given the immutable nature of an industry as highly regulated yet non-standardized as insurance, technology will never be adopted as fast as the consultants, the analysts, the trade publications, the software vendors, the insurtechs, and the FOMOs say it will. State DOIs and the NAIC will reduce the number of regulations by which insurers must comply right about the time Pee Wee Herman establishes the first colony on Mars. Implementations will still have to be conducted deliberately, carefully, and expertly. And software will still need to be tested to make sure it works as well as the consultants, the analysts, the trade publications, the software vendors, the insurtechs, and the FOMOs say it will.

The Moral of the Story

The ball on which we’re all supposed to be keeping an eye is the present. We can keep the other eye on the future, of course. But there’s work to be done right now. The prognosticators will continue to make a living by prognosticating. If there weren’t a market for it, they wouldn’t do it. But the rest of us in the industry still have to do what we do in the best interests of policyholders, or we’ll all be out of business.

Who’d have thought ignoring The Next Big Thing might be the future of insurance?

The Hamster In the Black Box

Every once in a while, we like to take a look back at the insurance industry’s technical literature. It reminded us that, at a time in the not-too-distant past, it was impossible to pick up anything — trade publications, marketing collateral from vendors, reports from the analyst community, et al. — without reading about Service Oriented Architecture (SOA). It seemed as if every developer and his dog were employing and touting SOA to the nth degree.

Our exploration also led us to some architectural relatives of SOA, which we’ve listed here, in part, with their respective definitions:

  • SOA. Service Oriented Architecture is a style of software design that provides services (discrete units of functionality, accessed remotely, acted on and updated independently) to various other components through a communication protocol over a network.
  • SAP. Service Application Programming. We’re going to leave this one alone.
  • SOAP. Service Oriented Application Programming is a clean approach to software development that combines architecture, application development, and protocol programming.
  • SOUP. Service Oriented Utility Programming describes the attempt to program utility into application development; that is, to create a solution for which there is an existing problem, rather than vice versa. Utility, in this context, is sometimes used synonymously with objective.
  • SOUP TO NUTS. Service Oriented Utility Programming Tapping Objectified Neurons Under Total Secrecy is an approach to enterprise programming that’s so covert not even the people who know about it know about it. SOUP TO NUTS was also known by the abbreviation TCP: The Complete Package.

We certainly found our discoveries amusing, if not terribly enlightening. But it caused us to think a little more deeply, particularly when we found a reference to black box in reference to SOA.

What Difference Does it Make?

The reference we found defined black box as:

a device, system or object which can be viewed in terms of its inputs and outputs (or transfer characteristics), without any knowledge of its internal workings. Its implementation is “opaque” (black).

That prompted us to wonder about what seems to us to be the relative unimportance to the user or the consumer of any specific technology and/or its nature. To be more specific, we wondered what our prospects might say if we asked this in one of our introductory conversations: “If our system comprised a hamster, running on a wheel in a black box — but it was easy to use, processed your business efficiently cost-effectively, and improved your results — would you care?”

We never ask that question, of course. And we’re quite proud of our technology, its facility, and its adaptability. But it did make us think about the possibility that all of us might be better off if we focused on objectives and outcomes, rather than on techniques and technicalities.

If we did that, decision-makers might be able to view all technology as just a hamster in a black box.