Ecosystems: Shaping future business opportunities
Significant strides have been made in the past decade to mark the coming together of the trinity of events involving tech advancements, societal evolution and the shrinking world. Needless to say the companies in the Business 4.0 world are going through a strategic inflection point.
The top 10 companies with the largest market capitalization in the world, today, are born out of newer business models and shared mutual interests. The symbiotic relationship of the music industry and smartphones resulting in the wipeout of music on the cassette or the walkman to even traditional industries like banking becoming digital-first, we see these pairings everywhere. As seemingly unlikely a pairing as a goldfish and a scooter, most of these companies are being born out of symbiotic partnerships.
However, ecosystems are not a new trend. In the Insurance industry, core product innovation, underwriting, pricing to channels for distribution or product/service advice - all of these involve different actors coming together for a harmonious, organic interplay. This ‘vertical collaboration’ across the value chain has become more cohesive and digital-led over the past decade.
Evolution of ecosystems
Mentalist and author, Amit Kalantri’s quote, the telephone did not come into existence from the persistent improvement of the postcard, is very apt. While this continually evolving vertical collaboration has proven quite successful, we see the emergence of very unique models in the Insurance sector.
Currently, there is a lot of InsureTech, digital-only and Agile-born, offering innovative products within very easy reach of the consumer, leading to the consumerization of the erstwhile product-centric insurance industry. Some of the emerging InsureTechs are innovating to solve pertinent day-to-day problems; a Swedish startup, Automile, has developed a Software-as-a-Service (SaaS) solution offering driver identification, real-time tracking and geofencing technology to improve safety, incentivizing safe drivers with better premiums. A French startup, NetAtmo, offers a comprehensive weather system right inside your home, with a personal weather station and rain measurements, helping advance weather warnings and fine-tuning catastrophe modelling for insurers.
An emergent trend is insurers beginning to invest in such InsureTech companies to incubate and co-create products to stay relevant. AXA, for example, launched a venture capital fund worth USD 220 million to incubate InsureTech. Several insurers across the globe like Bajaj Finserv in India, Aviva, Legal and General in the UK, MassMutual, USAA and Allianz in the US are increasingly investing and curating InsureTech.
Insurers, like any other industry, have to disrupt or be disrupted. Their ability to do so, while maintaining their depth of vertical collaboration and existing successful business to collaborate horizontally with such InsureTech companies, is vital. TCS Business 4.0 survey says, increasingly leaders are stitching horizontal collaborations to create ecosystems with such InsureTech and other like-minded partners to realize significant benefits. The results are very encouraging with 44% of these firms witnessing increased revenues, 43% achieving access to newer markets, while 41% said they had increased ability to innovate new products and services.
Scope of the opportunity
Insurers today have unique challenges to cope with - rapidly changing Climate calling for robust models of underwriting, longer life expectancy resulting in the need to save more - opening a wide array of innovation like intergenerational saving, purposeful ISAs, nudging the younger generation to get onto the property ladder faster, and finding and funding for physical and mental wellness. However, despite the technological innovation, enterprises looking to doing it all alone have no luxury of time. The future lies in forging partnerships with players that bring together data, domain and digital, to innovate and co-create ecosystems.
An early example in the healthcare industry is the TCS partnership with the Singapore Management University formed to create an ecosystem of Care, Academia, FinTech and Housing Development Board with the overlay of AI and IoT technologies. This resulted in developing the idea of ageing in one place catering to a smart community. This is a classic example of the ways an ecosystem helped create a framework for the ageing population of the near future – a model that can be globally replicated.
Successful leaders in the fourth industrial age are recognizing the value of ecosystems and the ways they can facilitate growth going forward. Future growth will depend on the ability of the firms to embrace risk, partner carefully with complimentary capabilities (including R&D), as well as trust and adopt a collaborative mindset to create exponential value for the stakeholders.