Paul Ricard: [Intro music] Hi everyone, and welcome to the first podcast in Oliver Wyman's new series, Reinventing Insurance. I am Paul Ricard, a partner in our insurance practice for the Americas. In this series, I will be covering themes and ideas around how the insurance industry has the opportunity to reinvent itself by pursuing new goals, new ideas, and new ways of working.
I will be calling up guests who will share their perspectives and lessons learned around these topics and provide their views on how insurers can move forward. I now have the pleasure of welcoming our very first guest, Michael Keeney. Welcome, Michael.
Michael Keeney: Hey, good to see you, Paul.
Paul: Today, our discussion topic, Michael, will be around failure to launch and I will be exploring with you some of the bear traps that insurers need to avoid when standing up a new digital venture. So, Michael, you are a (former) partner in Oliver Wyman's digital practice and you had Oliver Wyman Studio. Can you tell us a bit more about yourself to start?
Michael: Sure. As you said, well, I'm a (former) partner in the New York office and I help clients drive growth through digital, focusing on value proposition creation, designing experiences in new products and service creation. I've spent a lot of time over the last few years on digital ventures in the financial services sector. And to put a little bit of texture around Studio, it is Oliver Wyman's set of design thinking-focused transformation offers, which we develop jointly with our clients.
Paul: Great. So today I would like to talk with you, Michael, about failure to launch and in particular failure to start new ventures within the walls of income and insurers. Now we know that 90% of startups fail and that percentage is likely way higher when it comes to new incumbents, new ventures within incumbents.
So how can a traditional insurer be part of the 10% club, is what I would like to discuss with you today. And so, maybe before we start diving right in, Michael, I know you have a lot of experience in that space, or you have a lot of relevant experience. Can you tell us a little bit more about that?
Michael: Sure, happy to. I've been an employee of four startups, one that's spun out from a global 1000 financial services firm, two that were venture funded by Kleiner Perkins, a pretty well-known Silicon Valley Venture Fund, and one that was incubated inside a new business. It was a new business inside a global enterprise, and I've seen two successful IPOs, one failure where there was tons of learning and then one of the startups, the jury is still out, but things are trending well.
I've also made a number of angel investments, which isn't for the faint of heart and we can talk about another time, but I've also spent a lot of time working as a consultant and advisor to many firms in the space. And I've seen successes and failures in both startups in the wild and then incubated ventures inside large firms. And so happy to share that with you today, Paul.
Paul: So let's get right into this. If you think about the number one bear trap that makes it challenging to launch a new venture inside a traditional insurer, what immediately comes to your mind?
Michael: The thing that leaps to mind, Paul, immediately is really installing the right kind of governance. Let me say a tiny bit more about that for me. The governance that a large corporation operates with is set up to protect the large corporation. It's not set up to enable the creation of a new venture inside. And so, what you have is two different kinds of motions.
You have a generally conservative and risk-averse public company and inside we need to be able to create this motion where we're quickly pivoting, testing product market fit, where we're learning and failing and pivoting and adjusting. Those are the real criteria for startup success. Find your product, find your market, make them work together.
And the challenge is that many large corporations are not set up to do that. And the sponsors of the new venture very often might say that they're driving the start up speedboat, but often they revert back to the safety of the corporate ocean liner. And so, making sure that there's enough clear air for the startup to operate, without being crushed or controlled by the mothership, is really the most important thing that I think impacts success in so many of these startups.
Paul: So what I'm hearing you saying is getting that appropriate governance, not only at the beginning, but throughout the endeavor through thick and thin so that the default should not be to revert back to the traditional way of doing things but continuing to have that appropriate governance throughout the life of that venture.
Michael: Yeah, that's exactly right. That's exactly right.
Paul: What else comes to mind beyond the appropriate governance?
Michael: For lack of a better term, let's just call it conditional customer obsession. In Silicon Valley, everybody is customer obsessed. They have to be. Incumbent venture teams inside large organizations often talk equally about being customer obsessed, and it means finding and satisfying unmet customer needs and being relentless about it.
The challenge with conditional customer obsession is that quite often senior stakeholders inside the large firm have their need for internal wins. And the founding team, rather than being focused only on customer, end up creating distractions for themselves because they need to create wins for their stakeholders, those stakeholders have views on what could be in the product and bringing them into the fold and pulling them along meaningfully slows product review and approval cycles, and often means that there's less learning per unit time than one might typically like.
And that often delays product launches and slows momentum. And that can have impact on overall sponsorship and money, as the senior executives inside the firm starts to lose interest in the startup. So, the focus really needs to be on customer first, second, and third, and then perhaps looking at stakeholders enough to bring them along periodically, but not to lose focus on the customer and prioritize the stakeholder.
Paul: And that's interesting. It almost builds on the prior point around the appropriate governance is you need to make sure that venture has room, but you need to make sure that everyone inside that venture is focused on the right items, is obsessed with the customer – what the customer wants, what the customer needs at all points.
Michael: That then leads into how to think about risk, which I think is really important for insurers.
Paul: Well, that's interesting because one thing that's particularly important in the financial services industry and in the insurance industry in particular is around risk management. And so, I think counterbalancing everything you mentioned about the customer is all the risk considerations. So, is there anything you would like to say around that, and are there any bear traps that you've seen in that particular arena?
Michael: Yeah, I mean I think there is a risk of failure with a new venture, but quite often I've seen in larger firms this notion of a riskless risk strategy. So, in most global one thousands, large risks need to be fully resolved before moving forward rather than resolving in flight. So, procurement processes, IT and security, they only operate at enterprise scale. And this idea of sandboxes to allow experimentation and fast-pathing, which many large firms talk about, don't naturally exist.
Having real risk is not something that a public company really likes a lot and mitigating that is really an important thing. So, going back to this overall theme of giving the startup an opportunity to search for its product market fit means that it has to take some risks.
And so, the enterprise and the sponsors needs to feel like they're comfortable in taking a little more risk in certain areas in order to enable the startup to have a real chance of success. So, it is a bit of a tricky thing, particularly in insurance firms which tend to be even more conservative. So definitely something that I would encourage people to think through, because they really do need to have a risk appetite, which is different than the corporate parent, shall we say.
Paul: But what I'm hearing you saying also is there's a lot of experimentation. There's a lot of going into places the company hasn't been before, and being able to adapt to these things, to tailor your risk appetites more nimbly is an important part of being successful out there as well.
And one point that's very common amongst startups and intro techs and others is that concept of MVP, right? And then going to market as quickly as possible. By the way, can you just remind what MVP means? It's not Most Valuable Player here.
Michael: No. It means Minimum Viable Product. So, get to market with the core of your value proposition and testing.
Paul: Yeah, we're in the middle of March Madness right now, so just want to make sure that we don't confuse our audience.
Michael: That's great. That's great. Anyway, so quickly creating a minimum viable product that does one thing that expresses your core value proposition and testing that is really the trick. Quite often what we end up doing with larger companies is creating something which, for lack of a better term, I'll call the MVP Max.
Many of the senior sponsors in some of these larger companies have grown up a little bit more in the waterfall era, where launching with a fully functional solution that does many things is typically what they've seen. This idea of a large feature set is kind of hard to shake if you've grown up in that era.
And so, we end up with product roadmaps and features that are really quite substantial and often occasionally bloated with features that a sponsor X likes or sponsor Y thought would be a good idea, when the real goal should be to launch with a very limited offer that attracts feedback and learning, and not that one that is really a pre-staging of the full launch.
Paul: If I look back to the bear traps you've mentioned, we have the lack of appropriate governance or a constant appropriate governance. We talked about conditional customer obsession. So again, customer obsession being there at times and sometimes being replaced by the needs of other stakeholders.
We talked about riskless risk taking or riskless risk strategy. And now that MVP max, what would be your number one advice or recommendation on how to avoid these bear traps, Michael?
Michael: If I were an executive sponsor, I would try and focus just on a couple of things. One is really trying to understand the dynamics of a startup. It's not the same as a big company except smaller. There really are fundamental differences. And so, I think going to school a little bit around that is really important. Talking to people who've been through the journey who have the scars is very helpful.
And then I think understanding how to make that dynamic work inside your organization. So, if you really understand that different dynamic, how will that manifest itself in your organization? I would suggest that's a good topic to think about again and again and again. Maybe the other side is really that to identify where the biggest risks are, from your point of view as a sponsor or a senior person driving this.
And try and prioritize the largest and culturally most challenging topics first, and then actively try to de-risk those two areas. So, if you really think that there are certain cultural behaviors which are going to be anathema to the way the startup works versus the corporate culture, let's figure out how to address that.
Because if we don't, it doesn't matter. If a success one needs as a sponsor just to look at a couple of things, understanding the nature of things and trying to identify the biggest risks first and, really in a calculated fashion, de-risking those.
Paul: So can you talk more a little bit about how you've seen incumbents successfully addressing this challenge around derisking, and embracing that point about taking risks in a calculated and methodical fashion?
Michael: Yeah, I mean, we talked about a couple of things, but just to put a point on it, I think suboptimize optimally is kind of a cute phrase, but you're not going to be able to operate fully effectively.
So, whether it's looking at stakeholders or customer needs or product features or timelines, identify where you're going to have to suboptimize and then take that suboptimization to your stakeholder community and present it as a strength. It's going to take us 18 months to go to market versus nine, but we're going to be able to do that and then sell into a large incumbent base. So, it's worth it.
Paul: And that's a big deal, right? Because to your point, sub-optimizing is not necessarily something that's seen as a positive. You're basically saying that framing this as the trade off, what's the impact from one versus the other? And reframing the ability to do this as a strength is key to being successful
Michael: Yeah. And then maybe the last point, I'll combine a couple of ideas – I think going to the CRO to CSO and discussing these risks with him or her is an important thing. Maybe there are ways to set up the new entity. Perhaps it could be built by a partner who then brings it into the organization. Perhaps there are other ways to bound the risk. Perhaps it's a new division, but I think talking to the CRO or the CSO about that is an important thing.
And then I would say the last part is baking into the venture team the left tenants or even some of the key stakeholders, so that this is not an arms-length entity that someone else is doing. This is an entity that we are building together. I think these are all ways to de-risk.
So suboptimizing, bringing your risk partners into the conversation and having stakeholders see at the cold face what we're doing. Quite often, there's a lot of fear, uncertainty, and doubt that's generated. And if you have your stakeholders in the meetings or the designated left tenant, they can actually see that it isn't quite as bad as it seems and we're making good progress.
Paul: So what do you need to do to increase the chances of success around actually implementing a more startup culture and a culture of de-risking the way you described it?
Michael: Fitting the right executives to the role is really a key way of increasing success. So not every executive is set up to be the sponsor or leader in a new venture. It is difficult and different by nature, it can be challenging. The journey and the destination are both important.
So, finding the right senior executives is critical and having them, as I said before, embrace the model. And then I think the last thing I would say is – taking the typical measures of revenue and profitability and applying them to a startup doesn't work in the early stages. And so, bringing in objectives and key results, OKRs, that a life stage appropriate makes sense.
So, in the early stages, you really want to try and think about, as a customer of this new company, am I feeling more confident about my finances? Am I feeling like I'm able to break free of inertia and take control of my life? Those kinds of objectives are not revenue and margin, but those are really important ones, for example, to measure, so that you can see whether your audience, your customer base, is really connecting with your value proposition.
Paul: Great. Any other final words for our audience, Michael, before we close?
Michael: The highs are higher, and the lows are lower when creating new startups. And so, I think really reflecting before choosing to sign up for one of these is an important consideration for both the CEO or the business unit leader, and for the person who's choosing to drive this forward because it is a bit of a journey, shall we say.
Just to go back to a point we mentioned earlier, I and many people have been successful in helping launch new ventures inside large firms. So, it does happen, and I continue to spend my time in this part of the market because I really enjoy it.
At the end of a painful week, sometimes I'm reduced to weeping into my beer, but then at the end of the following week, I'm exalted and happy that we've made incredible progress.
So, it's not for the faint of heart, but I particularly find that there's great reward in it. And I would encourage other people who are strong-willed and intestinally robust to try this. Finding all of the right elements, as we talked about before, is key. But when they exist, this is an incredibly rewarding journey to take and venture to build.
Paul: Well, thank you Michael. Hopefully you will not go weeping into your beer right after this. That was Michael Keeney, a (former) partner in our digital practice at Oliver Wyman and head of the Oliver Wyman Studio. Michael, thank you for your time today. I really appreciate it.
Michael: Yeah, you're welcome.
Paul: So that was the first podcast of our Reinventing Insurance series. You can find more information about Michael and about everything we discussed on our website, www.oliverwyman.com/reinventinginsurance. My name is Paul Ricard. Thanks for listening today.
This transcript has been edited for clarity.
