The two most common complaints I get from CEO's are: 1) I'm in a commodity business, and 2) There aren't anyopportunities to grow in my market.
I'll argue that what the person really means when they say this is, 1) I can't figure out how to differentiate my business enough to earn anything above commodity profitmargins (e.g., razor thin margins), 2) I don't see any opportunities in my market to grow.
One of the double-edge sword liabilities in this economy is too much experience in one industry.
When you're in an industry that's being doing the same thing for 30 years and you've personally have not spent much time outside of your industry, it is very hard to notice new opportunities.
One of the values I often provide in my consulting work is to be not only the outsider, but the outsider who has worked across dozens of industries and routinely follows innovative companies across close to 100 industries.
My best ideas are really nothing more than taking an idea that is common in one industry and moving it to another where it's considered radically innovative.
Here's an example.
One of the industries I follow is the insurance. During my McKinsey days I worked in both auto insurance (on pricing &underwriting) and in re-insurance (the insurance company for insurance companies).
One of the challenges is the insurance business is mature, competitive, and some would argue a commodity business wherepeople just want the lowest price. (Does this sound familiar?)
I came across a very interesting company offering an entirely new kind of insurance…. for an very unusual kind of risk.
Now before I let you in on the big secret, lets think about this situation from an insurance company's point of view.
The business of insurance is about taking a low probability, high loss event and smoothing out the cash flow. So the chances of your home burning down due to a fire is very low, but if it does happen for most people they lose their single largest asset.
The cash flow pattern on a situation like this is very volatile. No loss today, massive wipeout tomorrow.
So homeowners insurance was developed to smooth out the cash flow curve… pay a little every month, eliminate the riskof a financial wipeout.
Now from an insurance company's point of view, every major risk has been covered already.
You have medical insurance, life insurance, long term disability insurance, unemployment insurance, long term care insurance, auto insurance, liability insurance, etc…
So if you're in the "product development" group of an insurance company, you're basically racking your brain trying to figure out what kind of new risk is occurring in society that doesn't already have insurance policies available for it.
So, pop quiz:
Does any opportunity come to mind?
Think for a moment…. a situation where when the worst case scenario happens there is a huge financial cost for which currently there is no insurance available to cover that risk.
One last try…
Any ideas?
Give up?
No problem, here's the latest innovation out of the insurance industry:
It's DIVORCE Insurance.
At the point of being literal, a divorce is the dissolution of a marriage typically involving some party to the marriage losing 50% of their net worth.
Does this qualify as a major financial cost by most people's definition? I'd say so.
Does competition exist for divorce insurance? Nope.
There's only one company that offers it currently and theyhave the entire market to themselves… yes they have dibson the ENTIRE U.S Divorce market.
