Competing in a world of sectors without borders
Article Synopsis :
Customers are increasingly demanding products they understand that fit their own specific needs. In order to achieve this, insurers are launching many more products and collaborating with competitors in order to satisfy these demands.
This is developing a range of ecosystems that will in the future define the emerging global economy, according to McKinsey.
Companies that fail to develop a foothold in these new ecosystems will miss out on huge opportunities. McKinsey’s estimate is $60 trillion in annual revenues by the year 2025 or a third of all business.
Not every company can build their own and so they must find an existing new environment. Even so, insurers will need to develop IT capabilities for this new environment that connect their businesses to platforms and third-party services. New skills must also be acquired for managing these ecosystem relationships which could reach a scale never previously encountered.
New ecosystem paradigm
Digitisation is forcing the boundaries of the traditional industry to be redrawn. That doesn’t mean all businesses will become fully digitised – we will still want to go to certain shops and steelyards won’t ever exist only in the cloud. Yet companies will be far more interconnected than ever before and the drive for data will change the way it does business.
Business is placing the customer at the center of everything it does in order to improve the experience, but also generate data that makes the business more responsive and therefore efficient and profitable.
Customers will expect better – seamless – service and broader offerings from their trusted brands. Apple Pay, Tencent, and Alibaba have all expanded into new areas. Amazon has expanded into groceries and is seeking to build partnerships in healthcare and drugstores.
Diversification, diversification, diversification
This is happening across multiple sectors around the globe, including the following:
- Financial institutions such as CBA moving into housing and B2B services’
- mBank into the B2C marketplace;
- PingAn into health, housing, and autos;
- Telcos Telstra and Telus in the health ecosystem;
- Starbucks into digital content, mobile payments and preordering;
- GE in a bid to make analytics a core element of the group;
- Ford sees itself as “a mobility company and not just as a car and truck manufacturer”.
To be successful, a business must do a number of things, says the McKinsey paper:
- Adopt an ecosystem ‘mindset’;
- Follow the data;
- Don’t just get closer to customers, but build relationships with them;
- Don’t be afraid of making partnerships.
Business without frontiers
Businesses who consider they offer niche services in particular geographies will find that ecosystems respect neither sectoral nor national borders.
But, says McKinsey, it’s not too late to put your house in order if, until now, you’ve viewed digitisation – and insurtech in particular – as something of a passing fad.
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Digital Insurer's CommentsWe’ve been saying it for some time, but now is the time to decide what your role in the future of the industry is going to be.
You may not have many – indeed, any – competitors now, but the way ecosystems are making it easier for new entrants to piggyback others skills and experience as well as technology means that situation could end at any time.
This year, your resolution should be to answer these questions once and for all.
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