In last week's Six Things, when I wasn't simply luxuriating in the notion that I had just given a talk in a palace ballroom on an island in Prague, I laid out my basic theory of what happens when an industry goes digital: It gets stripped down to its essential parts, which can then be rearranged in any number of ways that need not have anything to do with the way things had always been done.
The example I used was photography, whose analog form involved a dedicated camera, film, chemicals, special paper and maybe little yellow boxes from a Kodak one-hour lab, but whose digital form just consists of an image and a way to share it. I noted that, while the digital form of photography sucked almost all the value out of Kodak, it allowed images to be incorporated in new ways in Facebook/Meta, TikTok, Pinterest, YouTube, texting and a host of other apps whose value far exceed what Kodak's used to be.
I then said that insurance, stripped down to its essentials, consists just of a customer, a yes/no mechanism that determines whether a payment is to be made, and capital -- and that, as the industry becomes increasingly digital, those three elements may take on very different forms, whether through embedded insurance, parametric insurance, direct access to capital markets or any number of other possibilities.
But enough with the back story. That was last week. This week's question is: How can you organize your thoughts about the possibilities that will open up to you as the industry keeps digitizing while avoiding being Kodak-ed?
The answer is a tool called a future history.
The concept stems from a book that Chunka Mui and I wrote, Billion Dollar Lessons, on what can be learned from corporate failures. Jim Collins had done books on the lessons to be learned from major success stories, about how to be like those guys, but we reasoned that there was lot to be learned, too, about how NOT to be like THOSE guys. After we had 20 researchers spend two years looking at 2,500 corporate failures, we concluded that 47% of them stemmed from strategies that could have been identified as brain-dead ahead of time -- no, one of the world's biggest cement companies was not, in fact, actually a home products company that should start making and selling lawn mowers.
Our solution was what we called a devil's advocate -- someone whose job it is just to gather and surface all the potential problems with a strategy. We have found through our research and consulting that executive teams include people who are aware of all the vulnerabilities, but big issues can get swept under the rug as executive teams try to make the CEO's vision work and shy away from challenging him or her. Such challenges can be career-limiting moves.
Once you have identified the key vulnerabilities, though, how do you best present them? That's where the future history comes in.
We reasoned that people respond well to stories. They're how we talk to each other. Stories are memorable in ways that individual facts are not. They connect the dots, too. X led to Y, which led to Z.... B didn't happen, so C and D couldn't, either....
So, we suggested that people pick a date well into the future, perhaps five years, and write a story that assumed that their strategy had failed. You set a dateline of, say, June 14, 2027, write a lede about something dramatic -- senior staffs often suggest starting off with the CEO being fired, though CEOs are often less enthusiastic about that idea, for some reason -- and then produce a "history" of the strategy's failure. Customers didn't do what you expected. Competitors were surprisingly aggressive. A key technology didn't work. You didn't, in fact, know anything about making lawn mowers or have the distribution network to sell them (this being the sort of observation that would have saved that major cement company from filing for bankruptcy and being acquired).
With that future history in hand, you see the pitfalls more clearly and can either realize that you have no way to get around them or can navigate your way past the perils.
You should do a more optimistic -- and more fun -- version of a future history, too. You take out a clean sheet of paper and imagine the perfect form of your business five or 10 years out, Then you write a "history" from the future date that describes how you got there from here. That sort of future history lets you start making plans now that are required if you want to hit that future home run -- if I want to be here in year 10, then I need to be here in year 5 and here in year 3, so I'd better invest a few small sums this year to start exploring the space. You can also see when you're getting off track, if some key development in technology or in the market doesn't come to pass as planned.
I'd suggest using both optimistic and pessimistic future histories from time to time to help make sense of a digital world of insurance in which the core elements -- the customer, the yes/no mechanism and the capital -- are freed from their current forms. What if you could use digital channels to reach any customer, anywhere, any time? But what if competitors, perhaps ones you've never seen before, could reach yours? What if that yes/no mechanism could largely exist without human intervention, greatly increasing your efficiency and letting you serve new customers? But what if that mechanism no longer needs to be in-house and renders your claims operation moribund? Etc.
If you're interested in seeing examples of future histories, you can check out the website for a book Chunka and I wrote recently with a longtime colleague, Tim Andrews. I won't make you buy the book, called "A Brief History of a Perfect Future: Inventing the World We Can Proudly Leave Our Kids by 2050" -- though you're welcome to; it's really good, Instead, you can just click here, enter your name and email and get three free chapters of the book, which include examples of both positive and negative future histories.
Please let me know if you have any questions. I've seen these future histories help major organizations sort through strategic complexity and save them tens of millions -- and perhaps, in one case, even billions -- of dollars. I hope the tool will help you prosper, too.
Cheers,
Paul