Disruption is an ever-present word in our current business environment. But what is disruption, or more specifically, what is disruptive innovation? According to Harvard Business Review, “disruption is a process whereby a smaller company with fewer resources is able to challenge established incumbent businesses”. In the insurance space, disruption often involves simplified or innovative products as well as channel expansion using mediums traditional insurers have been slow to embrace (e.g., an online-only term life insurance product).
I recently led a discussion around the idea of disruption, where we set out first to examine disruptive innovation in the insurance space, and then focused our efforts on understanding how corporate venture capital can play a role in helping companies to embrace disruptive innovation instead of being displaced by it. We examined the differences between corporate venture capital and “regular” venture capital – particularly the importance of forming strategic partnerships in the corporate venture capital space. Not only do corporate venture capitalists seek a return on their investment, they may look for ways to offer their products alongside a startup’s and gain access to new markets using new channels.
As MBA students, it’s important for us to have a basic understanding of corporate venture capital and how it is a possible response to the disruptive innovation we are certain to see throughout our careers. Disruptive innovation continues to affect the insurance industry in ways we wouldn’t have thought of even 10 years ago. Financial technology companies are an example of how small startups are shake up an industry and show incumbents that they aren’t the only game in town. If and to what extent Insurance technology startups will change the industry is yet to be seen, but we will start our careers with an eye toward embracing disruption in a way that makes sense for the organization.
This blog highlights the research discussed during a RMI 765-RMI Topics class discussion that was prepared and led by Will Dickson. This arrangement exposes students to a broad range of topics, encourages collaboration of ideas, and builds a strong learning community.