Q&A with Steve Anderson, Bestselling Author of The Bezos Letters

Digital Transformation - January 22 2020

Steve Anderson is the author of The Bezos Letters: 14 Principles to Grow Your Business Like Amazon, published by Morgan James Publishing. Steve has spent his 35+ year career helping the insurance industry understand, integrate, and leverage current and emerging technologies. From business management systems to social platforms, he can analyze what’s happening now and explain its implications for the future. Steve was invited to be an original “thought leader/influencer” on LinkedIn representing the insurance industry and has over 340 thousand followers. He also is a top ten Global InsurTech Influencer. We sat down with Steve to ask a few questions about his new book, the Amazon effect on insurance, and what established insurance organizations can learn from Jeff Bezos’ and Amazon’s successful approach to managing risk. 

Steve, congratulations on the publication of your first book, The Bezos Letters, which Forbes recently included on their list of the Top 20 Books You Need to Read to Crush 2020. In the book, which we also reviewed, you analyze the risk-taking mindset that made Amazon the fastest company in the world to reach $100 billion in sales. What can a notoriously risk-averse industry like insurance learn from Amazon and Jeff Bezos’ example?

First, let me say that buying a book on Amazon is not the same as buying proper coverage to insure your home or auto. Yet, each of the 14 Risk & Growth Principles I talked about in my book do apply to the industry.

For example, Amazon’s focus on customer obsession is something that the industry needs to understand. There are many terms we use to describe the interaction agents and brokers have with customers: customer service, customer focus, customer experience, and the customer journey. Yet Bezos, from the first shareholder letter in 1997, always maintained a focus on customer obsession. In that letter, there is a section titled “Obsess Over Customers” (Principle #4).

Another area is the difference between experimentation, invention, and innovation.

There’s been a lot of talk over the last several years about the need for innovation. I think that focus is misplaced. The industry doesn’t need more innovation, it needs more experimentation. What do I mean?

In Bezos’s 2013 Letter to Shareowners, there’s a large section titled, “Experiments and More Experiments.” Amazon understands that experiments, by their very nature, mean you’re going to fail. Bezos goes on to say in the 2015 letter, “One area where I think we are especially distinctive is failure. I believe we are the best place in the world to fail (we have plenty of practice!), and failure and invention are inseparable twins. To invent you have to experiment, and if you know in advance that it’s going to work, it’s not an experiment. Most large organizations embrace the idea of invention but are not willing to suffer the string of failed experiments necessary to get there.”

Bezos’s comment certainly seems to describe the insurance industry. Principle #1 is Encourage Successful Failure. I explore how businesses need to create a “safe to risk” environment that allows experimentation, failure, and ultimately success.

There’s a lot of discussion today about the Amazon effect on customers’ expectations when they go to buy insurance. Some in the industry have pushed back, arguing that insurance is complex and a unique category of product that can’t – and shouldn’t – be sold online in the same way as, say, a new pair of jeans. Do you have any thoughts on this?

One of the things Amazon has done well over the years is making Complexity Simple (Principle #8). Yes, purchasing insurance is more complicated than buying a pair of jeans. And indeed, the financial consequences of a wrong purchase decision are much more significant. Yet, what can the industry do to take the friction out of the process of obtaining an insurance policy? It is too complex.

One of my favorite quotes from The Bezos Letters came in 1998:

“I constantly remind our employees to be afraid, to wake up every morning terrified. Not of our competition, but of our customers. Our customers have made our business what it is, they are the ones with whom we have a relationship, and they are the ones to whom we owe a great obligation. And we consider them to be loyal to us – right up until the second that someone else offers them a better service.”

Amazon is experimenting right now with health insurance. Their first experiment is creating a new entity to provide health insurance coverage for the employees of Amazon, Berkshire Hathaway, and J.P. Morgan. They are experimenting, learning, failing, and adapting. The second experiment is their acquisition of PillPack, an on-line pharmacy now renamed Amazon Pharmacy. Amazon is “inventing on behalf of the customer” to streamline the process of obtaining prescriptions.

You argue that Amazon’s success really comes down to why, when, and how Bezos takes risks. Do you think insurance companies can continue to stay relevant and profitable without changing their mindset when it comes to risk, experimentation, and failure?

The insurance industry has been thriving for quite some time and it is not going away. What is changing – because of technology (Principle #9: Accelerate Time with Technology) – is how people interact with the industry and the new types of risks that need imaginative insurance products. If the industry does not do it, the start-ups will.

Since every business must take risks to grow (and by definition, have some failures), by understanding how Bezos leveraged his “failures” with Amazon, the insurance industry can learn from his mistakes without having to go down that (expensive) road themselves. He has also cleared a path for other businesses to move forward because of his success. Though there are many concepts universal in business (i.e., managing cash flow), Bezos has given many of them a unique spin. The ways he looks at business, as he reveals in his letters to shareholders, allows others to appreciate the unique ways he evaluates and approaches risk and opportunity.

With the InsurTech movement, established insurance companies are increasingly partnering with small, nimble tech start-ups that have very different organizational cultures. What advice would you give insurance companies and start-ups on how to make these partnerships work?

Embracing and effectively managing partnerships will be vital in embracing invention and innovation in the 2020s. The cultural differences you highlight can be significant. Sometimes that will mean creating a separate division that is separate from the older organization. The CEO of Allstate did this when he spun off the internal telematics unit into a separate company a few years ago.

It will also take strong leadership to bring the start-up’s more entrepreneurial culture into a larger, well-established organization. This will be a significant challenge for the industry for the foreseeable future. The ones who can navigate this well will be the ones that we look at in 10 years as successfully navigating digital transformation.

You co-wrote The Bezos Letters with your partner Karen Anderson, an “insurance brat” herself who recalls spending weekends with her dad looking behind buildings and parking lots checking for potential risks. Can you talk a bit about what it was like to work on the book together?

Karen and I have been married for 44 years. She’s been part of the book world for about 25 years and has a deep understanding of writing, editing, and, most importantly, book strategy. She is amazing. How did it work? There certainly were some tense moments during the process of writing and editing the manuscript into the final form.

On the other hand, it was easy because I completely trusted her judgment. If she said a word, sentence, or paragraph didn’t work, we changed it. Any success that the book has had is due to her ability to weave a compelling story.

The insurance industry is facing a talent crisis. With the workforce expected to be 50% Millennial and Gen Z in 2020 and more than 95% by 2030, what can insurance companies do to attract younger talent to the industry, and does innovation have a role in enticing top talent?

We’ve all heard the reasons why younger generations are not interested in the insurance industry. One reason that is not talked about is the industry’s risk aversion. Younger people seem to relish the opportunity to try new things and experiment. The industry’s reluctance to allow for experimentation appears to be a significant barrier to attracting talented and hard-working people into the industry regardless of age. The industry needs to Encourage Successful Failure (Principle #1). When I’m working with organizations on implementing the principles, we always spend time talking about this one. My question always is, “What is your employee bonus program for the most successful failure?” Which always provokes some blank stares.

Take out your crystal ball: What do you think the insurance industry will look like in 10 years?

In 2030 agents and brokers will continue to have a significant role in the distribution of insurance products. And, because of the continued development of technology, the internal processes and transactions necessary to manage policies will be more and more automated. Machine-learning will especially help augment employee knowledge and experience. This will free up agency staff to spend more time providing proactive service which will increase the relationship between them and their customers.

The insurance industry is vital and necessary. There will continue to be pressures to change faster and adapt, and I would say experiment and invent. Yet if we look back over the last 50 years, the industry has been able to adapt. It’s just the next 10 years that will require changes to happen much faster than they do today.

SteveAnderson1_300dpi_2019Steve Anderson, MA, is a trusted authority on risk, technology, productivity, and innovation. He is the author of Wall Street Journal, USA Today, and international bestselling book The Bezos Letters: 14 Principles to Grow Your Business Like Amazon (Morgan James, September 2019). He was selected as one of the original 150 LinkedIn Influencers and has over 340,000 followers. Steve and his wife, Karen, have two married daughters and seven young grandchildren.




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