Harvard Business Review
Bill Taylor
A note from Bill: My new book, Practically Radical, launches two weeks from today. In this post, I thought I'd highlight one of my favorite pieces of language from the book — a phrase that seems particularly appropriate as we begin to think about resolutions for the New Year.
Robert MacDonald, one of the most offbeat and opinionated insurance-industry executives I've met (yes, I know, he doesn't have tons of competition), has a way with words when it comes to innovation. The art of starting something new, he says, is a matter of "reminiscing about the future." That is, conjuring up a set of ideas and practices that are so extreme that established companies can't begin to make sense of them, let alone respond to them — and painting a vivid picture of what your organization can become if it delivers on its change-the-game agenda.
That was the spirit behind LifeUSA, MacDonald's memorable contribution to an industry whose record of innovation is pretty forgettable. "If we had listened to the experts," he says, "we would have limited our goals and focused on the states around Minnesota, where we were based. But because we reminisced about the future, we started out as a national company competing against the giants of the field. We painted a picture of the future we wanted to create."
That picture became a compelling reality. LifeUSA took shape at a time when the insurance business was synonymous with poor service, slow decision-making, and bureaucratic complacency. (Some things never change.) MacDonald's response? A blank-sheet-of-paper outfit infused as much by the lightning-quick pace of Silicon Valley as by the humdrum pace of life in Hartford and the industry's other outposts. He vowed that the company would make commission payments to agents within 24 hours, issue policies to customers within 48 hours, and respond to questions within 48 minutes — unheard-of promises at the time. He paid independent agents in part with stock options (again, an unheard-of practice) and shared both ownership and detailed information about the business with all rank-and-file employees.
"How we did business was as important as what we sold," MacDonald told me. "The big companies simply couldn't treat people the way we did, either because the bureaucracy wouldn't allow it, or because they had no concept of how to do it."
Thanks to its one-of-a-kind ideas and practices, LifeUSA started fast, got big, and went public. In just a decade, the company signed up 85,000 agents and attracted $6 billion worth of assets — off-the-charts performance that got the attention of Allianz, the German insurance giant, which paid a huge price to acquire MacDonald's outfit, and then put him and his unorthodox colleagues in charge of its life-insurance business in North America.
"I remember when we started," MacDonald says. "People asked, 'How can you compete with Prudential and New York Life?' My answer was, and I didn't mean to seem arrogant, 'How can they compete with us?' They were responding to yesterday's market. We were reminiscing about the future. If we'd tried to be a little better than Prudential or New York Life, we would have failed. We had to do something completely different."
Most thinking about strategy, competition, and innovation emphasizes the intricacies of business models: revenues, costs, niches, leverage. But mental models are what separate organizations that break from the pack from those that are stuck in the middle of the road. That's why startups often come so far so fast, and have had such an enormous impact on the economy — even when they go head-to-head with giant rivals that can draw on more money, power, and traditional clout. They are successful precisely because they don't look, talk, behave, or compete like other companies in their fields. They are outliers, extremists, game changers.
What's also striking about such start-from-scratch innovators is that their extreme opinions often leave the old guard baffled, confused, and unable to muster an extreme makeover. It's certainly possible for incumbents to devise creative responses to fast-changing markets, fast-moving technologies, and demanding customers. But most big companies fail miserably at making big change, and the biggest obstacle is the pull of old mental models — how comfortable it feels to be pretty good at everything, how unsettling it feels to become the most of something.
Robert MacDonald, one of the most offbeat and opinionated insurance-industry executives I've met (yes, I know, he doesn't have tons of competition), has a way with words when it comes to innovation. The art of starting something new, he says, is a matter of "reminiscing about the future." That is, conjuring up a set of ideas and practices that are so extreme that established companies can't begin to make sense of them, let alone respond to them — and painting a vivid picture of what your organization can become if it delivers on its change-the-game agenda.
That was the spirit behind LifeUSA, MacDonald's memorable contribution to an industry whose record of innovation is pretty forgettable. "If we had listened to the experts," he says, "we would have limited our goals and focused on the states around Minnesota, where we were based. But because we reminisced about the future, we started out as a national company competing against the giants of the field. We painted a picture of the future we wanted to create."
That picture became a compelling reality. LifeUSA took shape at a time when the insurance business was synonymous with poor service, slow decision-making, and bureaucratic complacency. (Some things never change.) MacDonald's response? A blank-sheet-of-paper outfit infused as much by the lightning-quick pace of Silicon Valley as by the humdrum pace of life in Hartford and the industry's other outposts. He vowed that the company would make commission payments to agents within 24 hours, issue policies to customers within 48 hours, and respond to questions within 48 minutes — unheard-of promises at the time. He paid independent agents in part with stock options (again, an unheard-of practice) and shared both ownership and detailed information about the business with all rank-and-file employees.
"How we did business was as important as what we sold," MacDonald told me. "The big companies simply couldn't treat people the way we did, either because the bureaucracy wouldn't allow it, or because they had no concept of how to do it."
Thanks to its one-of-a-kind ideas and practices, LifeUSA started fast, got big, and went public. In just a decade, the company signed up 85,000 agents and attracted $6 billion worth of assets — off-the-charts performance that got the attention of Allianz, the German insurance giant, which paid a huge price to acquire MacDonald's outfit, and then put him and his unorthodox colleagues in charge of its life-insurance business in North America.
"I remember when we started," MacDonald says. "People asked, 'How can you compete with Prudential and New York Life?' My answer was, and I didn't mean to seem arrogant, 'How can they compete with us?' They were responding to yesterday's market. We were reminiscing about the future. If we'd tried to be a little better than Prudential or New York Life, we would have failed. We had to do something completely different."
Most thinking about strategy, competition, and innovation emphasizes the intricacies of business models: revenues, costs, niches, leverage. But mental models are what separate organizations that break from the pack from those that are stuck in the middle of the road. That's why startups often come so far so fast, and have had such an enormous impact on the economy — even when they go head-to-head with giant rivals that can draw on more money, power, and traditional clout. They are successful precisely because they don't look, talk, behave, or compete like other companies in their fields. They are outliers, extremists, game changers.
What's also striking about such start-from-scratch innovators is that their extreme opinions often leave the old guard baffled, confused, and unable to muster an extreme makeover. It's certainly possible for incumbents to devise creative responses to fast-changing markets, fast-moving technologies, and demanding customers. But most big companies fail miserably at making big change, and the biggest obstacle is the pull of old mental models — how comfortable it feels to be pretty good at everything, how unsettling it feels to become the most of something.
As we approach the New Year, how are you planning to "reminisce about the future"?
William C. Taylor is cofounder of Fast Company magazine and author of Practically Radical: Not-So-Crazy Ways to Transform Your Company, Shake Up Your Industry, and Challenge Yourself, coming January 4, 2011.
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http://dreamlearndobecome.blogspot.com This posting was made my Jim Jacobs, President & CEO of Jacobs Executive Advisors. Jim also serves as Leader of Jacobs Advisors' Insurance Practice.
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