At In2Leadership: Defining Incremental Change Versus True Innovation

“Innovation” may be the latest industry buzzword, but what does it truly mean for insurers?
By: | April 19, 2024

Every company wants to be innovative, but few truly understand what that means.

And within an industry undergoing an evolution, like insurance, the term is tossed around freely, and often misused as simple improvements are misclassified as innovations. It’s used to signify a change in process, a new way of thinking, a different leadership team or an improvement to a workflow — but in many cases, these adaptations are far from innovative.

The question then becomes, what is true innovation? And once we define it, how do we unleash it in productive ways to advance the industry?

A session at the recent In2Leadership conference hosted by the CPCU Society in Phoenix, Arizona unpacked this trending topic. Professor Euvin Naidoo, distinguished professor of practice in global accounting, risk and agility at Arizona State University’s Thunderbird School of Global Management, led the interactive hour-long discussion.

The audience of insurance professionals, CPCUs, students and academics learned from the latest research and thought leadership to understand more about the components of innovation. The insurance industry has made lots of moves in recent years, through both disruptive innovations and incremental changes, and the session taught the participants to understand the difference using practical examples.

Incremental Changes or Disruptive Innovation

“Innovation is improving gradually for the better,” explained Naidoo. “Disruptive innovation improves dramatically that which we didn’t know we needed to make life better.”

Using these definitions, Naidoo explained that the Blackberry could be considered an innovation, while the iPhone is a disruptor.

Innovation is solving a problem everyone runs into with solutions no one has yet considered, challenging the status quo along the way. Sometimes, as Naidoo pointed out, innovation is surprising, creating unexpected benefits and outcomes.

The term “disruptive innovation” was coined by Clayton Christensen. It describes the process wherein a product may start out serving basic needs through simple applications and eventually displaces existing competitors through its ongoing evolution. The new innovation disrupts the status quo — and the irony is that the disruptive technology is now ripe for disruption itself.

In the risk and insurance sector, this disruptive innovation cycle continues to change the industry as new entrants to the market offer different technologies. Naidoo pointed out that new technologies and innovations stretch capabilities in various ways, challenging individuals and organizations.

Portrait of Euvin Naidoo

Euvin Naidoo, distinguished professor of practice in global accounting, risk and agility, Thunderbird School of Global Management, Arizona State University

One key point from the discussion was how to think about innovation in distinct ways. Sustainable and incremental innovation refers to the innovation we do every day in business — those small changes that eventually add up.

These incremental changes may improve efficiencies or reduce costs, and, according to Naidoo, every business must learn sustainable and incremental innovation to succeed.

Naidoo cited the Toyota Corolla as an example of a product that has been improved by sustainable and incremental changes over the years that it has been in production. The vehicle has become more streamlined, more fuel-efficient and incrementally better with each model year. And this is no accident — Toyota has a long history of continuous improvement with its lean methodology.

Disruptive innovation is the second type of innovation to consider, and this type of thinking may be challenging for many businesses; Naidoo pointed out that “very few businesses are able to at the same time plan and think about the disruptive innovation that’s taking place that can sweep the rug from under your feet.”

In the case of Insurtechs, their very existence is often intended to disrupt through the introduction of new products, services and workflows.

Crossing the Innovation Chasm

Along the innovation journey, companies will go through a growth curve with highs and lows. The low point, or the innovation chasm, is a challenging point for many start-ups — and some fail to navigate the chasm successfully.

Companies that see initial success will face challenges as adoption and excitement levels drop. Crossing the chasm successfully means continuing to innovate with products and services that delight customers again.

Facebook is an example of a company that made it through the chasm, while Myspace and Friendster play the role of companies that failed to cross the innovation chasm. Blackberry is another example of a company that did not make it past the chasm, while its competitor, Apple, successfully crossed the chasm.

Companies that reach the peak of popularity have to reinvent themselves to enjoy a new lift. It means taking risks and never resting on past successes as they push to the next curve. Sometimes, Naidoo noted, companies reach a certain point and say “All is well,” as opposed to “How can I explore?” and that shift in philosophy spells the difference between a disruptive innovator and a company focused on incremental change — or no change at all.

An interesting suggestion from Naidoo was to consider how companies in the risk and insurance industry are looking at their own futures. Some companies may consider themselves too big to fail and too successful to innovate if they hold a large portion of market share and have been successful with past initiatives. But that limiting perspective restricts forward thinking and change — and the company may be left behind as other competitors innovate around it.

Another way to view innovation is to observe how different companies handle the same difficulties. “How are companies doing it differently if they all face the same challenges?” questioned Naidoo. Considering all of the various pressures currently in play for the insurance industry — like regulatory and litigation issues, inflation, climate change and the evolving role of technology — insurers must evolve, and sometimes that means disrupting the norm.

Naidoo left the class with these final words of wisdom: “Focus on sustainability and incremental growth but also prepare for the big disruptions, rather than panic.”

In2Risk Promises More Leadership and Technical Sessions

The next time the CPCU Society gathers will be for In2Risk in Orlando, Florida, from November 7 to 9. All industry professionals, students and academics are invited to attend the conference for in-depth risk and insurance sessions, leadership discussions and networking events. Registration opens soon. &

Abi Potter Clough, MBA, CPCU, is a keynote speaker, author and business consultant focused on Insurtech, leadership and strategy. She has over 15 years of experience at a Fortune 500 company with expertise in P&C claims operational leadership, lean management consulting, digital communications and Insurtech. As the past chair of the International Insurance Interest Group of the CPCU Society, Abi remains involved in many international initiatives and projects. She has published two books about change management and relocation. Abi can be reached at [email protected].

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