We Wanna Be Like the Big Tech Companies…
By Jim Haar
In my work consulting with enterprises, I often hear business leaders say something along the lines of, “We wanna be like Netflix or Amazon or Google or [Big Technology Company X.]” This can be a misguided way of strategizing digital transformation.
Not so long ago, for example, I was with several executives from a major U.S. auto insurance provider. The lead executive commented, “We want to be like the big tech companies.”
The insurance provider has a significant business in the United States, and its leaders were concerned that in 10 years (give or take), that business as we know it may be gone. The company’s industry and economic trend forecasters (and it has the money to buy the best) believed that the rise of autonomous vehicles, ridesharing services, and other transportation disruptions may portend a significant decline in the traditional owned vehicle transport business model.
There is some evidence of this already as younger people are buying fewer cars, especially in urban areas. It’s still somewhat difficult to pinpoint how much of the shift is due to technology, lingering impacts of the Great Recession on millennials’ ability to make big purchases, migrations toward urban centers with mature public transportation infrastructure or all of the above (and perhaps more) — but the insurance provider’s leaders had seen enough to know that if they weren’t prepared to change, they’d likely be in for trouble. But what did that change look like? Where did it start?
The insurance provider had both a vision and a fear. Its leaders worried that some digital native company would launch “i-insurance,” and overnight, the provider would be sidelined, just as traditional taxi cabs and short-term accommodations have been impacted by digital upstarts.
What’s curious here is that this insurance company recognized that the threat could come from anywhere — maybe a ridesharing company, maybe a larger tech player, maybe some fintech that comes out of nowhere. So why the focus on emulating the biggest tech companies in particular?
Saying that a company should be more like these vastly complicated companies is a little akin to buying into a myth or an idea. Yes, large technology companies may have practices that other companies could benefit from adopting — but without some specificity of vision, some plan for evolving that particular business, attempts to “be like [Company X]” are just so much flailing around. Without the vision, it’s not a strategy — not a blueprint to act or react.
The insurance executives had formed many interesting visions of what insurance might look like in the future. One hypothetical difference from today, for example, is that the insurance burden may shift from the vehicle owner (or vehicle manufacturer or vehicle control software provider) to the passenger for a particular trip.
Suppose, for example, that a woman named Sally doesn’t own a car and needs to go to the hardware store. She uses an app to hail an autonomous vehicle. The app knows her current location and destination, of course — but it also knows a variety of other things that are useful not only for navigation but also for insurance.
It can not only map a path but also consider road conditions. It knows traffic, weather, and time of day. It has access to accident histories for potential routes. It knows how accessible emergency services are. It has a basic financial profile for Sally, and it knows what kind of vehicle is coming and what the safety ratings on that vehicle are. In essence, the app can get everything it needs to build an insurability underwriting profile for that trip. The app then sends that profile out for reverse auction to a handful of insurers and gets back bids. Maybe the bids are 8¢, 11¢, 6¢, 13¢, and 9¢. Sally’s app selects the 9¢ bid because she set a preference in her profile for higher-rated insurers. Or maybe her app knows that the 9¢ insurer is her bank and she gets a little perk. Many variations on the core idea are possible.
But how do ideas like this become something a company actually sells or produces? How might an industry incumbent gain the ability to launch new services with the ease that big digitally-native companies do?
The insurance company executives were frustrated because they knew the company had a lot to offer. It had decades of experience — and data — underwriting and insuring vehicles and drivers. It has an excellent brand and reputation. But what it didn’t have was a way to get started on its vision.
Cloud competency or any other broad technical benchmark observed in “big tech companies” may be a piece, to be sure — but there’s a lot more to it than that. If a company is just migrating data to the cloud because storage is cheap, that’s not going to accomplish a lot. If, on the other hand, the company has identified data and functions that are valuable and is using the cloud to scale them for new services, that may accomplish more. But the company still needs more than just “cloud;” that data and those functions, wherever they are hosted, need to be accessible to developers (and their apps) via application programming interfaces, or APIs. If the company isn’t competent with APIs, the ways it can capitalize on “cloud agility” may be limited.
For many companies, digital transformation is about taking whatever makes a company’s value proposition unique — its data, its proprietary functions and services, its user base and brand equity, and so on — and positioning it to constantly evolve as user behavior changes. Data that has been used only within the four walls of the enterprise may be transformative as part of an ecosystem play in which external developers leverage the data to create new services in new markets. An enterprise accustomed to doing everything itself may find that it reaches a bigger audience by piggybacking off a larger platform. A company that locked down access to digital assets may find it moves faster by breaking the silos, sharing data, and moving from monolithic teams to smaller, more granular groups.
That’s the discussion the insurance executives needed to have. When the problem is complex, businesses must see both the holistic and specific pictures — the forest and the trees. This isn’t about trying to ape a big technology company or buy into a single broad technology — it’s about identifying what makes an enterprise valuable, forming a vision for how that value can evolve in a world of digital platform economics and rapidly-changing customer preferences, and then tuning operations and technology investments to make that vision possible.
[Looking for more insights about digital transformation? Check out Apigee’s new ebook The Digital Transformation Journey, and explore Apigee Compass to get tailored recommendations for your company’s digital journey.]