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October 31 2014 | Denise Garth

The evolution of mankind and society has always been based on knowledge, expertise, collaboration, and good ideas. From famous inventors like Ben Franklin who invented the lightning rod and bifocals to Thomas Edison with the light bulb and phonograph to Tim Berners-Lee inventing the World Wide Web/Internet, all of these individuals’ inventions spawned new generations of ideas and inventions that disrupted, transformed, changed, and created new businesses. And it continues, with smart phones, social media, the Internet of Things, and many more … but at a much faster pace. Today, the Internet and collaboration are powering the shared economy movement built around crowdsourcing and open innovation to gather and share more ideas, knowledge, experience, and input than ever before. There is no turning back ... only moving forward to embrace the changes and the rapid pace with which they come.

The confluence of new and emerging technologies, the Internet, and new businesses have connected the world to an extent that is beyond anything we have experienced at any other time in history, even what we experienced 5 to 10 years ago. Now, information is at our finger tips. We instantly interact with businesses and individuals on different mobile devices. Collaboration via the Internet has quickly become mainstream in our daily lives, both personally and professionally. Mass collaboration is rising to new heights via crowdsourcing and open innovation, creating disruptive and transformative outcomes. The new SMA research report, Crowdsourcing and Open Innovation: Powering the Shared Economy, discusses the disruptive impact and transformative changes that these influencers will bring to the insurance industry.

Crowdsourcing enables companies to leverage and tap into the power of the masses and communities, while open innovation helps identify, develop, and market new ideas, products, services and more within these communities. Together, the combination obliterates the traditional internal, hierarchical, or linear thinking and development approaches and creates an entirely new playing field that accelerates the execution of innovation within organizations, from ideas to development to implementation. 

Shared Economy: From Ownership to Access

Just a few years ago, crowdsourcing was viewed as a method for ideation – a method to have people collaborate online, in an open forum, where they could share, learn, and create together, building upon on some ideas, rejecting others, and jointly developing the best ones. But today crowdsourcing has moved well past this to new, more sophisticated and disruptive levels. 

Crowdsourcing is eliminating the traditional boundaries between companies, creating a porous environment to engage the rest of the world, whether customers, channels, partners, or others. It is fueling open innovation and the development of new businesses at an unprecedented pace that, in turn, fuels disruption, change, and innovation in traditional businesses. It is reshaping business and the economy, creating a major new outside industry trend – the shared economy.

According to a Forbes article, "Airbnb And The Unstoppable Rise Of The Share Economy," in January 2013, it is estimated that for 2013 the revenue flowing through the shared economy directly into peoples’ wallets would surpass $3.5 billion, with growth exceeding 25%. It was noted that this rate of peer-to-peer sharing was moving beyond being an income boost to becoming a disruptive economic force. Fueling this trend are the millennials, a large and influential economic group. Strapped with high college loan debt that limits their ability to purchase homes, cars, or other high-value items, they are trending toward subscribing instead of buying music, movies, or TV shows (thanks to the likes of Pandora, NetFlix, and others). They prefer to access news from Twitter, Facebook, or Flipboard, or to buy used goods from eBay or Craigslist. Millennials have grown up with the technology that enables sharing, accessing, or subscribing as an acceptable alternative to owning.

The shared economy empowers people to become co-creators, resource funders, peers, customers, and developers of new businesses that are disrupting and transforming traditional industries, from transportation to financial services, goods and services, and professional services. Just consider Airbnb and Uber, two companies viewed as leaders in the shared economy that are reportedly worth billions, rivaling in value their traditional counterparts, taxi-cabs and hotels.  

In this new shared economy, traditional companies – like insurers – must quickly adapt in order to be relevant, perhaps even to survive. Insurers need to begin to ask themselves these questions: What new products and services can we provide to these new business models? How will the new models reshape discounts or the bundling of insurance products? How could we partner with some of these new businesses? How will we need to rethink the customer relationship?

Implications and Opportunities for Insurers

The shared economy is empowering individuals and businesses to access specialized skills, resources, goods, or services from anyone, anywhere, anytime based on a need for a point in time. It is generating new business models by leveraging the combination of crowdsourcing, open innovation, and technology. These new business models are challenging decades of business assumptions, models, pricing, and growth that were based on the assumption of ownership rather than short-term access or subscription. As a result, the fundamentals of insurance are being redefined, from risk models to pricing, products, and services.  

While many insurers may see crowdsourcing and open innovation as risky, other industries are seeing and experiencing the transformative power that is delineating and creating new market leaders. They are participants in the change, fueling the intensity and raising customer expectations that will impact and influence insurance. 

Collaboration must happen both within and outside the insurance industry because the challenges and opportunities have become much bigger and broader. Insurers must reorient their business practices from product development to services aimed at creating more value and a deeper customer experience. With companies across all industries embracing the shared economy and crowdsourcing and open innovation inspiring a renaissance of competitiveness and customer value, businesses are reinvigorating what made them successful leaders in the first place, and strengthening what keeps them competitive in this new shared economy.

Crowdsourcing and open innovation are rapidly becoming a strategic core mandate, supplying capabilities that are defining a new era of winners and losers as they reshape companies, industries, businesses, and even countries. There is an unparalleled opportunity for any company, in any industry, to ignite a new future that is powered by the human imagination through crowdsourcing and open innovation. 

The overriding and most critical question for insurers is not if, but how will they embrace the shared economy, crowdsourcing, and open innovation – first to get in the game, then to influence change, and ultimately to win.  

Contact me at dgarth@strategymeetsaction.com if you’d like to learn how SMA can help you on the innovation journey and discover new opportunities for the insurance industry. Click here to learn more about SMA’s research.  

For more information, please contact Deb Smallwood at dsmallwood@stratetgymeetsaction.com