The Reality of Product Innovation in an Established Organization

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The Reality of Product Innovation in an
Established Organization
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Innovation and Insurance
Innovation - something new or different Insuranc
e risk mitigation/protection an OXYMORON?
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Traditional ApproachTo Develop An Insurance
Product

• Developed by technical areas (underwriting,
  actuarial, claims)
• No market research conducted
• Typically - One size fits all
• Long cycle time to develop
• Build it and they will come mentality
• Marketing Department not involved until product
  is completed
• Sold by an Agent (Insurance is not bought, its
  sold)

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According to LIMRA

• Four out of five companies have dedicated product
  development teams
• For half of these, team members work exclusively
  on product development
• Usual Team Responsibilities include
• Research
• Product Development
• Managing current portfolio
• Product Implementation

Preliminary results from LIMRA 2007 Life
Insurance Product Development Research
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According to LIMRA
Area with Primary Accountability for Product
Development
Preliminary results from LIMRA 2007 Life
Insurance Product Development Research
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LIMRA Key Findings

• 87 of companies implemented new approaches for
  the design of new products which included
• Formalized development process
• Enhanced testing process
• More tightly controlled sign-off procedures
• Improved communication
• Outsource IT function
• Quality assurance testing done by business
  analysts
• Moved tasks from Day 1 to Day 2

Preliminary results from LIMRA 2007 Life
Insurance Product Development Research
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Conclusions

• The insurance industry is turning more of its
  attention to product development.
• BUT ..
• The focus is on process/procedures (pricing,
  filing, underwriting, etc..)
• Product development is still driven primarily by
  the process people
• Stop thinking insurance, stop thinking
  process/procedures and start thinking consumers
  and innovation. (D. Jackson and S. Johns-Chin)

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The New Paradigm
The world is changing incredibly fast
The only constant is change

• Key Drivers of Change
• Systems/Technology
• Web
• Demographics
• Marketing channels
• Regulatory
• Economy
• Financial Services Industry

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Drivers of Change

• Systems/Technology
• Data modeling
• STP/e-signature
• Communication - Cell/Blackberry/Laptop/Wireless

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Drivers of Change

• Use of the Web
• Information/Advice/Price comparison
• Buy Retail
• Internet Communities

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Drivers of Change

• Demographics
• Multi Generational Society
• Multi segmented within the generations
• GI Generation/Boomers/Gen X, Y Z
• Culture
• Multi-cultural/Multi-lingual

• Population Distribution From 1990-2000
• Population growth of 32.7 million people
• Largest share of population increases are in the
  South and West
• Majority of Americans (54) live in the 10 most
  populated states

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Drivers of Change

• Marketing Channels
• Email
• Automated calling
• SEO
• Banner Ads
• Social Networks

• IM
• DRTV
• Direct Mail
• Telemarketing

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Drivers of Change

• Regulatory
• Gramm-Leach-Bliley (GLB) Act privacy
• HIPAA
• Pension Protection Act
• Do-Not-Mail
• Do-Not-Call
• Do-Not-email

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Drivers of Change

• Economy
• Global
• Credit crunch and the Mortgage Industry
• Retirement incomes are largely dependent on stock
  market
• House Rich

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Drivers of Change

• Convergence of financial services industry
• Branch Banking/Credit Card Companies
• Cross-Sell
• Premium Billing Vehicles
• Competing products

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NYLs Response to the New Paradigm
EQUALS
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What Is New Horizons?

• A formal employee innovation program designed to
  develop new businesses for New York Life
• An opportunity provided to employees to help
  develop their skills and careers and make a
  difference in product development
• A competitive process designed to produce sound
  ideas, turn those ideas into development plans
  and develop those plans through research and
  analysis
• An initiative to keep the company competitive and
  in the forefront

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How does it work?
Phase 1 - Ideation
Phase 2 - Develop
Phase 3-Refine
Phase 4 - Fund
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New Horizons Phase 1
Ideation

• Form Diverse Teams
• Project focus specific topic (channel, product,
  market processes or technology)
• Brainstorming
• Draft High Level Business Plans
• What is the fit with companys vision and
  strategy?
• How will it improve the companys competitive
  position?
• What are the benefits and challenges?
• 2004 49 new business ideas
• 2006 Over 40 ideas from 17 teams

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New Horizons Phase 2
Develop

• Evaluate ideas and select the Strongest
• Strategic Business Skills Development aka
  Business School Boot Camp
• Develop Full Business Plan
• Consumer Research
• Project cost resources
• 2004 9 ideas
• 2006 11 teams with 12 ideas

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New Horizons Phase 3
Refine

• Present ideas to Executive Management Team And
  Management Advisory council
• Refine Business Plan based on feedback and
  management buy-in
• 2004 4 ideas
• 2006 6 teams with 7 ideas

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New Horizons- Phase 4
Fund

• Present at Venture Fair - NYL executives vote for
  their top picks
• Executive Management team selects Winning Plan(s)
  for funding
• Winning plans move into Business Unit for
  implementation.
• Awards
• 2004 Result 2 products
• 2006 Result 2 teams with 3 ideas

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Variation on a Theme
Consider a scaled down approach

• Focus on one specific business or market segment
• Create a diverse team
• Provide 2 days of training
• on the targeted assignment
• mini business boot camp

Results Completed Stage 1 with 7 ideas. Ideas
vary from innovation in process, to new product
and new markets.
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Learnings
6 Keys to Success

• Diversity
• Open Environment
• Incentives and Rewards
• Training and Resources
• Corporate Commitment
• Timeline/Schedule

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Keys to Success

• Diversity drives innovation
• Strongest correlation of innovation success is
  the number of ideas you try and try to make
  happen
• Diverse teams way out perform homogeneous teams
  over the long term
• Allows you to step into the intersection of
  disciplines, cultures, and domains in which one
  can specialize through education, work, hobbies
  or other life experiences.
• A Self nominating process will help ensure team
  members have appropriate level of enthusiasm and
  commitment
• An Interview will mitigate potential team dynamic
  issues

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Keys to Success

• Fostering an open environment allows for true
  brainstorming
• Produce as many ideas as possible
• Produce ideas as wild as possible
• Build upon each others ideas
• Avoid passing judgment on each others ideas
• Facilitator must have a well formulated problem
  statement
• Individuals brainstorm and make a list of their
  ideas prior to meeting as a group helps
  eliminate blocking.
• Keep the team on the smaller side - larger groups
  generate fewer ideas

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Keys to Success

• Incentives/Rewards
• Rewards have a long history of successfully
  producing productive behavior
• Define success not just around results but also
  take quality and effort into account
• Innovator should receive the fruits of their
  labor
• Competition

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Keys to Success

• Training and Resources Success depends on the
  providing the right tools
• Training in
• Business Plan Development
• Market segmentation
• Innovation techniques
• Presentation skills
• Out of the box thinking
• Working with different personalities
• Access to studies/data/research
• Flip charts - to avoid distraction

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Keys to Success

• Corporate Commitment
• Communication
• Empowerment
• Access to key executives
• Time for people to participate - Carve out time
  from current job
• Dedicated Resources -Must have a point person
• Allocation of Funds

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Keys to Success

• Timeline/Schedule
• Build in periodic reviews/vetting process of
  ideas
• Timeline and Schedule must be reasonable and
  defined with some built in flexibility
• Accountability for delivery of assignments

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Other Innovation Approaches
There are 3 additional innovation approaches that
we at NYL have utilized or are in the process of
implementing.
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Other Innovation Approaches

• Suggestion Box
• the genesis of NYLs New
  Horizons Program

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Other Innovation Approaches

• Dedicated Innovation Resource
• Charged with product, market, channel development
  and competitive analysis
• Marketing background diverse market experience
• Alien in their midst
• Share information, experiences,
  insights, ideas and instigate
  discussion
• Manages the process

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Other Innovation Approaches

• Inter-Business Unit Forum
• Bring together New Product Development personnel
  across sectors, business units and/or marketing
  channels
• Share information, experiences, insights, ideas
  and leverage learning opportunities, including
  research

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NYLs Philosophy

• Create an environment conducive to innovation
• Develop future company leaders
• Borrow from existing company resources
• Leverage diversity within the organization

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From Theory to Reality
Theory is great, but give me some real life
examples
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Real Life Examples
Family Protection Plan NYL Young families
Senior Life Insurance FSL/Everest Boomers and
the Silent Generation
Breadwinners ADD Hartford/Affinion Head of HH
(Wage earner)
Attributes/Needs/Risk
Attributes/Needs/Risk
Attributes/Needs/Risk

• Paying for final expenses and bills
• Mobile
• Funeral Planning
• Relieve family of the emotional burden of a
  managing funeral

• Income Protection
• Pay Taxes
• Legal Issues/Questions
• Managing credit

• Budget Conscious
• Young children
• College Planning
• Changing protection needs

Product Benefits
Product Benefits
Product Benefits

• Level Term
• Covers entire family
• College savings - Upromise
• Provides changes in coverage- face amount
  increase every two years
• Convertible to Whole Life

• Small Face Whole Life
• Pays within 48 hours
• Funeral Planning tools on-line, over the phone
  or hard copy
• Assistance/advice/advocacy to family at time of
  need

• Pays ADD benefit in a monthly payment stream
• Tax Planning and Assistance
• Legal Services simple will and face-to-face
  consults
• Credit Reports

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In Conclusion

• Product Innovation is best brought about by
• Promoting a continuous cycle of exploration and
  learning
• Leveraging Diversity
• Working across the organization will allow you to
  avoid the usual excuses
• Weve never done it like that
• Its in the Regs
• We did it like that before and it didnt work
• A new insurance product is the combination of
  consumer benefit, risk, process, claims, offer,
  marketing techniques and unique features
• (D.Jackson - Making Sense of New-Product
  Development LIMRAs MarketFACTs Quarterly/
  Spring 2006)

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The Company You Keep The Company You Keep
The Company You Keep