It is an absolute certainty that you will have heard statements like “in the future companies will be tech companies or they will not be anything at all”. You will have heard terms like Big Data, Internet of Things (IoT), Artificial Intelligence, Blockchain, Industry 4.0, Automatization, Digitalization and/or Robotization, which have become part of the common vernacular. New roles and positions like Chief Innovation Officer, Chief Digital Transformation Officer, Chief Smart Data Officer or Customer Digital Experience Designer Officer are proliferating across the world of recruiting. All of these things seem to have become very common nowadays, around the world, regardless the industry or the market you are working on. Undeniably, change is all around us. And this change is absolutely global, traversal to all societies, industries, markets and cultures and it is here to stand and even to accelerate its vertiginous pace more and more in the years to come. The true challenge, however, from my perspective, is how to drive all of these changes towards adding real value to the final customer. In the end, the only thing that truly matters is if you can deliver a better value proposition to the client. If you can add value to your client.

With this particular goal in mind, the true challenge of a digital transformation is to reduce or to eliminate either all internal and/or external frictions. And make no mistake here. Human labor can be – most of the time and depending in which part of the value chain you are working on from a design standpoint— the biggest friction of all. As relevant as many other hidden costs and annoying last moment fees you have to apply to your customer to compensate them. And when it comes to digital transformation, it is not always about coming up with a revolutionary idea. Sometimes it is only about making the same thing in a very much simpler, effective, faster and cheaper way. And again, reducing all kind of friction along the way. Amazon, Alibaba, Netflix, Airbnb, Booking, Uber and a thousand of other “new” companies like these are quite good examples of this concept. The world’s most valuable retailer has no any single piece of inventory (Alibaba). The most popular media owner creates no any byte of content (Facebook). The world’s largest movie house owns no any cinema (Netflix). The world’s largest accommodation provider owns no any real estate property (Airbnb). The world’s largest taxi company does not own any single car (Uber). The largest phone companies own no any infrastructure (Skype, WeChat). And we can keep naming companies and examples on and on. Moreover. A real and meaningful digital transformation it is not about adding some web pages or a few apps over old-fashion almost obsolete existing pieces of code nor over already existing onion-layers of processes rather a way to come up with new ways of doing businesses. Sometimes, the impetus is to come up with a completely different way of doing not the very same thing you did before or to start doing something, no matter how strange or awkward to you. To connect someone who needs anything with someone who can provide it. Sometimes you can satisfy that need and you become the provider of the solution. At other times, you can be the connection in between. The trick here is not become another middleman in the value chain adding more frictions and costs but eliminating them all.

As this, digital transformation has to be understood first as a profound understanding of the targeted consumers’ new needs and behaviors. Secondly as a complete redesign and re-conceptualization of the service or even the product you are already providing, or the one you might be able to provide from now on. Last but not least, it’s all about the users’ experience you can offer as well. These three things all together configure your new value proposition.

The result of this ought to be a complete redefinition of all your processes, products, and the foundation where upon which they all exist.

Most important, it necessarily implies a complete organizational redefinition, with people with a different mindset willing to embrace a new and different strategy. Overall, it has to be understood at all levels of the organization that a truly digital transformation should lead to a rethink and probably restatement of the mission, the vision and therefore the strategy of the company. In this way, paradoxically, technology even though it might be one of the most important pieces over which everything else is based on, becomes no more than a tool. A way to achieve your goal. Something that, whilst remaining extremely important, should support all the changes you want to implement and serve you through the important and major strategic and cultural changes where the front-runners will lead the company through the digital transformation. So, even when, in the end, the company will evolve to become a tech company – FinTech, InsurTech, HealthTech, Xtech– with plenty of processes heavily automatized and digitized, the base for the transformation would be these new people with new capabilities and mindsets, absolutely different from the ones we have in today’s companies. Potentially fewer people, but with a completely different skill-set. In this sense, we are talking here about a person who is driven by a new strategic vision and purpose and driven by different cultural values, highly critical thinkers with a diverse communication skill set, natural status-quo’s fighters, curious, exigent, self-demanding and aiming for high standards. New people, with new abilities to come up with a singular strategy, an altered organizational model designed to come up with a new vision about what doing business means, deciding which product and experience they want to deliver.

So, even though there is no a “magic recipe” for this, it is easy to foresee there are really only a handful of ways moving forward. One is going through the path of marginal innovation. This occurs when some parts of the processes, some parts of the legacy systems and some parts of the organization are improved, digitized or automatized and, therefore, some marginal gains are obtained. This often happens when the digital transformation is not consensual at all levels of the organization or is not a consequence of a strategic process and a top-level decision rather than some cluster-random initiatives which forces organizations to live in the past alongside the pretended future. These “technological patches” act as obstacles to real change and work as invisible anchors. This creates the perfect excuse to maintain the status-quo and stop and prevent further critical changes. After all, do you really think the same people who created the company, processes and products in the first place would be able to think differently first and then change everything in a heartbeat, and create a new company, a new business?…

Others – please read the article “The Growth of the InsurTech Ecosystem Will Be Collaborative” by Hugues Bertin (1). –, insurance companies for instance, will merge with InsurTech companies and will gain their experience and expertise. In this way the acquired tech company has the potential to change the internal culture of the mother company by incorporating entrepreneurial people. Attracting and retaining new talent is not a minor issue here: it is more attractive for a 25-year-old to work in an InsurTech ,rather than in a traditional old-fashion insurance company. Cultural clash is an important thing to consider in these cases as there are many bibliographies in favor of this strategy as many other against it. In the meantime, there will be other companies that will embrace digital transformation at its most and probably will either be born digital (i.e. Lemonade keeping the example in the insurance universe) or will split their line of businesses completely even knowing one will cannibalize the former in the end (i.e. Iūnigo). From my point of view, only the companies that fully understand the new needs and the new cultural and behavioral changes’ trends and can get the most out of them, transforming themselves in the process. These are the only ones that will prevail. Coming back to the insurance universe, and this is my personal opinion–, GAFA —Google, Apple, Facebook and Amazon— and BAT —Baidu, Alibaba, and Tencent, GAFA rivals in the East— have a very uncommon position to win the race against traditional insurance companies. On the one hand, they are extremely well known by millennials which, by the way, are going to be the users of tomorrow. My 25ish years old daughter for instance, would never buy an insurance product from one of the insurance companies I used to work for in the past. But she is already willing to buy an insurance product from any one of the GAFAs, even though there is not one available yet from them. That is the power of those brands for this generation.

On the other hand, they do have -in capital terms- more than required. As this, capital is no longer an entry barrier as it used to be in the past. These companies also have the appetite for winning it all. Or do you think the “everything store” concept does not apply to them as well? In their race to verticalize their markets and build up an entire proprietary eco-system of related and non-related products, all of them building around their own brand, insurance is just a tiny piece of it.

They also have all the data, the knowledge of the users and all the smart data needed to efficiently “read” their needs and convert them in to desirable products.

Moving from the insurance field to the health care field for instance, GAFA companies have at this very moment more information about US citizens than even US health care companies own about their own patients (2). The last usual statement about insurance companies working in extremely regulated environments, even though real, works -for me- as a double edged sword. Normally regulated environments work as a natural barrier to entry and the moment one company attempts to do something different and “in the cracks of the rules”, traditional companies often call the regulator to enforce the order. Problem is most regulators are far behind the curve of technology advancements’ knowledge and its pace of change while becoming more and more unaware of users’ needs and trends. These might overwhelm them, while converting these agencies in to sort of obsolete structures with nominal but not real power. At the end of the day, one company may decide to pay an outrageous fine which will not represent more than one or two or three days of operation. And keep going on. So, in my view, traditional insurance companies are not protected at all and probably the strategy of absorbing or merging or investing in the development of InsurTech companies would not defend the way that they think it might. According to a Munich Re’s study (3) , 5 out of 7 digital giants will be disrupting themselves by 2020.

Something to think about, isn’t it? In the meanwhile, which is your approach to digital transformation?

1 The Growth of the InsurTech Ecosystem Will Be Collaborative – Hugues Bertin, January 2020

2 Google’s ‘Project Nightingale’ Gathers Personal Health Data on Millions of Americans – Search giant is amassing health
records from Ascension facilities in 21 states; patients not yet informed. By Rob Copeland, The Wall Street Journal – Nov
2019.

https://www.wsj.com/articles/google-s-secret-project-nightingale-gathers-personal-health-data-on-millions-of-americans-
11573496790

3 Thomas Bonaty – June 2018 – Tech Trend Radar 2018 – Technology drives future business opportunities.
https://www.munichre.com/topics-online/en/digitalisation/future-technologies-tech-trend-radar-2018.html

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