Sleepy Industries are Not Immune to the Shake Up of Digital Transformation
Posted by | Fuld & Company
It’s one thing to start a business or launch a product, another to earn market share and yet another to retain it. All three stages of operating a successful business require an in-depth understanding of the external marketplace and consumer trends, information that impacts a business’s ability to differentiate. Without this understanding, the organization is at risk for the unexpected.
Well known examples of companies with a firm grasp on competitive strategy include the big five: Amazon, Apple, Facebook, Google and Microsoft. Each company undoubtedly has either outpaced legacy brands (Barnes and Noble, Macy’s, Best Buy to name a few) or acquired their competitors. By leveraging a superior understanding of the external environment these companies are experts at anticipating customer needs and creating disruptive platforms that businesses and consumers alike can’t survive without.
The big five have been known to shake up many industries and sectors like health insurance are not completely safe from disruption. The rise of digital transformation has created fertile ground for startups. Dominant players like UnitedHealthcare, Blue Cross Blue Shield and Anthem have enjoyed minimum interruption, however, now more than ever they need to analyze and create strategies to evolve.
What Threat Do Companies like Amazon Pose to Healthcare Insurers?
Currently, large players offer ready-made plans with defined options and little ability to personalize. Furthermore, the plans can be seen as directed more towards the sick than the healthier population.
In January 2018, Amazon, JP Morgan and Berkshire Hathaway announced a collaboration to form an independent healthcare company for their U.S. employees as a result of the high healthcare costs. In essence, the trio intends to address the industry’s and consumers’ most pressing issues by using their employees as a sample audience. JP Morgan’s CEO remarks that this trio will use big data and virtual technology to align incentives, they will analyze high costs of end-of-life care to understand utilization of specialty services and pharmaceuticals and lastly, they will focus on wellness programs related to obesity and smoking, employee access to telemedicine, better customer engagement, and improved customer choice. Although details surrounding their solution will become apparent in the upcoming months, knowing that Amazon has the most robust platform and analytics ability, JP Morgan has the financial expertise and Berkshire Hathaway has keen insight into risk management, and now with the appointment of acclaimed healthcare thought leader, Atul Gawande as CEO, the speculation is certainly keeping everyone on their toes.
For more on Amazon in healthcare, read our blog: Why Amazon, Berkshire Hathaway, JP Morgan Entity Won’t Upend the Healthcare Industry
What Can Insurers Do Now?
Beyond what Amazon, Berkshire Hathaway and JP Morgan might do to solve these problems, there are other insur-tech companies that are more nimble, offer targeted services, and operate on a smaller scale, leveraging advanced technology to effectively manage risk. These companies won’t disrupt the industry like Amazon might, but they will provide more customized, user-friendly options for consumers. To understand the competitive threat posed by new entrants—large and small—and to craft strategies informed by evidence about the marketplace, there are tactics that can help organizations plan for the competitive risks and create differentiation including:
Establish Early Warning Detection and Contingency Plans
Reverse timeline analysis enables organizations to understand what activities and conditions must be met by when in order for an event to happen, and an early warning system with indicators and monitoring help anticipate how these stages are progressing. These tactics provide a more realistic timeline for organizations to weigh various scenarios and create plans in order to meet their goals while anticipating any disruption. If your organization fears certain competitors or events will impact your core strategies (like the emergence of Amazon, JP Morgan and Berkshire Hathaway in healthcare) then creating a plan to monitor and respond to the potential implications would be of value.
Create Stronger Customer Segments
Powered by machine learning, Lemonade is an example of an innovative startup in a minimally interrupted sector where their approach is entirely digital in anticipation of consumer needs. Like Amazon in retail, the app cuts out the middle man and dispels traditional ways of transacting. We suspect more models like this, also with an eye to Artificial Intelligence (AI) and extensive data sets, will emerge in all types of insurance.
If your company is not consumer-centric, it’s not going to be successful. Customer analytics and segmentation analysis help organizations achieve a better understanding of their opportunities within certain segments. Reaching your goals requires focusing on the right members or customers. This type of analysis could ensure you craft your product strategy around the right audience.
Develop or Partner with Technology Platforms
Companies like Castlight Health serve as an intermediary benefits management app, well-positioned to connect the end user to their plan with a customized experience. These companies also provide analytics on the back end for the insurance organization to use. Castlight was also the first app to help consumers manage their healthcare costs, understand their coverage, manage deductible and anticipate overall costs of care to make more informed decisions. A technology landscape analysis could help determine what currently exists, how the functionality is received and which companies/solutions would best serve your customer needs and your business goals.
There is no shortage of priorities in today’s marketplace but in order for a company to make strategic decisions that enable them to contribute value and differentiate, it must truly understand the customer and more importantly, the external environment. To manage disruption and prevent being blindsided by emerging trends and new entrants, a comprehensive assessment and roadmap are imperative.