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February 5, 2001 Edition Editorials
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Waiting To Be Napsterized?
Imagine, a year ago, few of us had even heard of Napster. But when the Internet startup manipulated converging technologies to its advantage, spinning the record business as we've known it to the brink of extinction, it slipped swiftly into the business culture-- and into the language.
A year ago, your worst fear was to be "Amazoned," to have a competitor come at you with an e-business strategy that turned your current assets against you. Napster took that to the next level. To be "Napsterized" is to have the entire structure of your industry turned on end by technology.
Napster did it by figuring out how to get music from performers to listeners, free, without a physical medium like a compact disc.
Could what happened so suddenly and decisively in the record business happen here? Is there a Napster out there on the financial services horizon? Is the already technologically challenged insurance business more vulnerable than most?
You bet, says Mike Connors. The warning signs are there.
Connors, e-business guru and president emeritus of AOL Technologies, posed the scary musical question, "What Industry Gets 'Napsterized' Next?," during the annual meeting of the National Association of Independent Life Brokerage Agencies. His answer struck a dissonant chord with the audience of leading life brokers to whom it was directed. It sure got my attention.
Connors, who is now chairman of Webley Systems, argues that the professional services industries--medicine, law, consulting, education, and, arguably, insurance--share risk factors with the very entertainment industry Napster Napsterized.
His "warning signs," indicators of the next targets of opportunity for Napster-like clones on the prowl, should make insurance professionals most uneasy:
• You do business in a highly regulated market.
• You sell a product which is based on information.
• You occupy a marketplace in which a few dominant sellers have worked out ways to avoid real competition.
• You have a large number of customers who have no easy way to organize themselves.
Connors leaves you with the impression that those in the professional services wander, dangerously, in a world of delusion cemented together by misguided attitudes, bad assumptions and outmoded practices, a world which, like the record business, may be shaken to its roots when an alternative e-business model inevitably presents itself.
According to him, those in the professional services wrongly assume, for example, that an organic medium, a people medium, is required to deliver its products. Napster, among others, should have laid that one to rest for good.
Further, he says, few in these old-economy sectors really believe that technology can help a "true professional."
And there is widespread resistance in these businesses to improving the operational inefficiencies inherent in the current time-and-material, pay-me-by-the-hour billing model. If I work more quickly, and technology can help me do that, I make less money. No thanks.
It all boils down (as it always does with matters technological) to convenience and "service, service, service," hardly insurance industry specialties.
"Convenience is the engine that makes the Internet go," Connors reminds us. "The Internet is convenience in a box."
And more bad news for most insurance companies: if a transaction is inconvenient offline, it has high online potential.
To Connors, online shopping, which has more than tripled in three years, fairly defines convenience. Online merchants are faster, always open, offer huge selection, and provide lots of information.
That's how high the bar is set for the insurance business if it would capture the "dream demographics" of Internet users: 61% married, 51% female, 57% professionals, 86% college-educated, 66% heads of households earning $50,000 or more with 40% of them earning upwards of $75,000, and a median age of 37.6. And, incidentally, 75% of U.S. households are now online.
The Internet will play a big role in the future delivery system for financial services. It's just a matter of time.
The Napsters are there to remind us that time is running out and that tradition-bound businesses can be upended overnight.
Mike Connors is there to remind us that you may be on the hit list.
Heed the warning signs.
Reproduced from National Underwriter Life & Health/Financial Services Edition, February 5, 2001. Copyright © 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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