Should e-business be evolutionary or revolutionary?
Turning a paper-based business into an electronic one is revolutionary and takes considerable planning, but it can be done. My business – life insurance – has changed little in over 100 years, but my company has decided to seize the e-business initiative.
Even today, the process of purchasing a life insurance policy from insurance companies is an entirely manual one, with the process flowing through brokers using traditional pen-and-paper application forms. Once the application reaches the insurer, the manual/paper process continues through underwriters, customer service representatives, data capture clerks, and finally the use of envelopes and stamps to get the policy to the policy holder. You might wonder how this could be so in New Zealand, a country that’s ranked eighth on the list of the world’s countries for internet penetration, with 80.5% of the population having internet access. But alas, it is true. And it’s not only true for life insurance, but for many other industries too.
Overlay this lack of technological evolution over a backdrop of rapidly-changing consumer behaviour, and the situation becomes even more surprising. It’s not that consumers are getting younger; it’s just that a 40-year-old consumer today is Gen X whereas just 10 years ago that same 40-year-old consumer was a Baby Boomer. Gen X can hardly remember what life was like without the internet, email and texting, let alone TradeMe, internet banking, Facebook, YouTube and, now, Twitter. Yet the industry still operates as it did a half century ago, without any recognition that modern consumers spend a significant part of their lives online.
Should we be concerned? Well, it depends on whether you regard the glass as half full, or half empty. Because any industry that continues to operate along outdated, non-e-business lines is ripe for change; not incremental change, but disruptive, revolutionary change. And the opportunities and spoils for the first mover in such an industry can be significant.
My company has done just that. Rather than taking an evolutionary approach to the introduction of e-business, the company has entirely re-engineered the distribution process to create the ultimate e-business.
This is how it works:
A consumer seeking life insurance can go to the insurer’s e-business website and view information about the products online. Once the consumer has decided to buy a product, the purchase can be completed in as little as 10 minutes. The process is simple: the consumer first gets an online quote. If they’re happy with this, they progress seamlessly through a series of typical insurance health questions to assess the risk. The software utilises an expert system that assesses the applicant’s health risks in real time and instantly applies appropriate loadings or exclusions. Once the risk and price is confirmed (called underwriting in the insurance world), the applicant can immediately click to view a customised policy document online, or download the document to review in their own time. Once they are satisfied, they can make their declaration by checking a tick box and make immediate payment via either online direct debit, credit card or internet banking. The customised policy document is then emailed immediately.
The entire process is untouched by human hands, and policies are completed and issued without a single piece of paper or an envelope. People and paper have been entirely replaced by technology; this is the purest form of e-business. The result is a modern acquisition process for a modern consumer.
The benefits of employing e-business in New Zealand are obvious, far-reaching and financially worthwhile. Here’s a quick overview:
* e-business will help you to meet or exceed the expectations of modern consumers, and these consumers represent future market growth. The benefits to the consumer are tangible: the process is quicker, easier, more convenient, and consumers feel they’re in control.
* e-business will significantly reduce business costs. In the insurance industry, around 30-35% of the cost of a life insurance policy is consumed in distributing and acquiring a policy. People, paper and time account for most of these costs. Technology allows you to eliminate most of these costs. Imagine removing 20-30% from your cost structure; imagine what that means for your competitive position and profitability.
* Finally, e-business can yield a significant strategic benefit. In the insurance industry it can take anything from two days to months to get a policy through traditional broker channels; e-business reduces that time to 10 minutes and enables a consumer to buy direct, at the lowest price. A shift of this magnitude can redefine an industry and enable a business to take a strategic hold of future market share.
So, in my view, e-business enables strategic thinkers to revolutionise rather than evolve their businesses.
