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Dealing with disruption

While fending off more innovative competition, established businesses are also seeking advantages from disruptive technologies.
Tuesday, September 20, 2016 - 05:50

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"The (insurance) industry was ripe for disruption as healthcare spend has risen considerably faster than compensation, but employers are not provided the return on investment data to combat worsening employee health." - Ms Koo

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"Innovative products, services and processes are continually being created to make things more relevant and convenient for the end-user. What’s perhaps different now is the rate of disruption, which is getting faster, thanks to the advancement of technology." - Mr Ong

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"What can disrupt others in an industry can also become a source of unique advantage to the one that got ready for the event faster and better than the rest. The things that drove success in the past won’t continue to guarantee success in the future." - Mr Agarwal

DISRUPTION is the latest buzzword in the business world, as innovative startups re-write the rules of the game across the commercial landscape. The most high-profile cases have been Uber in the taxi business and Airbnb in hospitality. Yet, even professional services such as accountancy and insurance are facing their own versions of disruption as new business models upend existing ones.

Having initially been caught off guard by the speed at which their industries were being transformed, established players are now preparing to defend their territories from the upstarts, even as they seek to create their own competitive advantages from disruptive technologies.

While business disruption is not a new phenomenon, it has historically developed and evolved over a long period of time. During the industrial revolution, for instance, craftsmen were replaced by production lines, to enable faster production of goods at lower prices. This met the needs of customers, who were constantly demanding quality goods and services at a more competitive pricing.

"Innovative products, services and processes are continually being created to make things more relevant and convenient for the end-user. What's perhaps different now is the rate of disruption, which is getting faster, thanks to the advancement of technology," says Ong Pang Thye, deputy managing partner, KPMG in Singapore.

Reflecting the rate of disruption on the US corporate scene, only about one in 10 of the companies on the original Fortune 500 list in 1955 made it to the 2015 list. Indeed, many of the biggest companies today, such as those who operate social media networks, did not even exist 20 years ago.

Mr Ong notes that in the accounting profession, offshore work would have not been possible in the past. But with improved communications technology and security, parts of the auditing process can now be done electronically from another location, and at any hour of the day. Clients can also enjoy round-the-clock attention globally, and with quicker results delivered.

"So while technology enabled the change in the delivery, the end game is still the needs of the customer," says Mr Ong, who is also a councillor at CPA Australia.

Meanwhile, Prashant Agarwal, director of Edge (group innovation) at AIA, argues that with the tools and access available to them, the real disruptors are the consumers. To deal with today's consumer, established companies such as AIA must evolve with their requirements and expectations immediately. Yet, having size alone may not be enough to thrive in this new age of disruption.

"While established companies will have the benefit of pre-existing scale, it is important to remember that companies like Facebook scaled to more than 1.6 billion (users) in a dozen years. This scale, therefore, will not protect larger companies forever," says Mr Agarwal.

To navigate the fast changing landscape, experts have urged companies to continually review their strategies, as well as business and operating models, to meet customers' needs, or risk being displaced by more nimble competitors.

This involves encouraging a culture of getting feedback from customers, embracing an open mindset about new ideas within or outside your industry, and keeping an eye on how the latest technology can affect the business.

For instance, progressive businesses are leveraging technology such as artificial intelligence and machine learning to derive data-driven insight to generate value for their customers. This approach automatically sets up companies to be more aware, and therefore, more ready for change, advises Mr Agarwal.

More importantly, incumbents must not view disruption as a dirty word, but rather view it as a source of potential competitive advantage that can be used to fuel their own growth.

"What can disrupt others in an industry can also become a source of unique advantage to the one that got ready for the event faster and better than the rest. The things that drove success in the past won't continue to guarantee success in the future. It is important to run experiments that challenge the status quo," explains Mr Agarwal.

It is also important to collaborate with external entities such as startups, academia, research organisations and even other larger companies, to find new ways to meet consumers' evolving needs, he adds.

Meanwhile, the key for smaller companies to disrupt incumbents is finding unconventional ways to tackle the big problems that have yet to be solved by the established players, says Rosaline Koo, the founder of Singapore-based startup ConneXionsAsia (CXA), a company that provides group insurance brokerage services.

CXA is attempting to disrupt the insurance space with its innovative platform, which allows employees to choose what they need in terms of insurance protection and treatment versus prevention and wellness.

Employees get recommendations on ways to improve their health after they complete on-site health screenings and lifestyle questionnaire. They can then convert their unused insurance dollars to wellness and disease prevention and be rewarded with more dollars for getting healthier.

"At CXA, we combat escalating healthcare costs by migrating firms to a fixed predictable budget and providing employees a fixed wallet to personalise their benefits from our discounted network of over 500 fitness, wellness and health management providers," says Ms Koo.

She notes that the industry was ripe for disruption as healthcare spend has risen considerably faster than compensation, but employers are not provided the return on investment data to combat worsening employee health.

"Since we've digitised all the paper, we can provide companies with the analytics they need for targeted corporate wellness interventions with the greatest impact on costs and productivity," she says.

Most insurance companies in Asia have also traditionally used intermediaries - such as agents, brokers and financial advisers - to deal with their customers. According to Ms Koo, without direct customer interaction, it is difficult for an insurer to truly understand their needs and expectations. However, insurers have been wary about disintermediating these lucrative distribution channels.

She says: "Insurtech startups, unconstrained by these legacy channels, have started leveraging technology to disrupt the industry."

 

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