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The response to disruption extends far beyond marketing

With $115 billion in revenue, over 170,000 employees, and 76 million customers, Allianz SE is the largest insurance company in the world and the 11th largest financial services firm. Founded in 1890 and now operating in over 70 countries, this enormous enterprise has survived world wars, the San Francisco earthquake, the Great Depression, and Cats‘ 18-year run on Broadway.

Digital devices and habits now threaten Allianz’s performance, if not its very survival. As reported in Tuesday’s Süddeutsche newspaper, the firm has stirred from its dogmatic slumber, recognized new consumer expectations, and now intends to turn the massive ship in one of the most wrenching – and no doubt the most critical – transformations in its 125 year history. (The article is not available online.)

The article describes an exemplary case of a company (finally) grasping that its business model has been fundamentally and irreversibly disrupted. For all of the recent brouhaha about Clayton Christensen’s concept of disruptive innovation (including a bizarre attempt to demonize the very word), the term has a simple and unmistakable definition: “to cause something to be unable to continue in the normal way.” One way or another, whether celebrated or deplored, Christensenized or (Jill) Lepored, the fact is that digital innovations and the behaviors they encourage make it impossible for virtually any firm today to continue in the normal way. As the article notes (in my lose translation), “The point has arrived where businesses need new answers, and ‘business as usual’ is no longer viable.”

Andy Grove, the long-time CEO of Intel, offered an elegant model of such disruptions in his 1996 book Only the Paranoid Survive. With little more than three quarter-circles and a Cartesian plane, Grove illustrated how a “strategic inflection” interrupts the ability of an established business model (the “old paradigm”) to produce business value. In the new context introduced by the disruption, clinging to the old paradigm leads to irrelevance and ruin. Success now depends on adapting to the transformed environment and adopting a new paradigm.


Mind the dissonance gap

The “dissonance gap” is the expanding delta between the status quo and the transformed processes that can flourish in the new context. Every day – indeed, every second – that passes without an adjustment makes the gap wider and more of an existential threat. But identifying, understanding, and implementing the new paradigm is, as Hegel said (in a remarkably relevant context!) “the hardest thing of all.” Ingrained habits, outdated assumptions, entrenched company cultures, legacy architectures, siloed systems, and calcified contracts, commitments, or obligations – virtually any aspect that marks the “established” status of a firm like Allianz works like gravity to keep it rooted in place. Yesterday’s “secure foundation” becomes today’s anchor, preventing the ship from moving, let alone pivoting quickly.

On beyond marketing

It’s tempting to assume that chief marketing officers (CMOs) and their marketing organizations, who typically own the customer relationship, and who have developed sophisticated methods for understanding and communicating with customers, would be the natural locus of the organizational response to disruption. Indeed, many of the vendors and service providers who aim to help companies with customer experience management (CEM) have focused their attention on marketing professionals and processes.

But as the Süddeutsche article shows, successfully crossing the dissonance gap requires far more than today’s obsession with digital marketing. In the case of Allianz this means fundamental changes in every aspect of the insurance business – not only sales and marketing, but risk assessment, claims adjustment, asset management, customer support, and the way in which policies are written, described, and contracted. (To their credit, Allianz has created a distinct business unit, the Digital Accelerator, that aims to “develop new digital business models and accelerate their execution and implementation within Allianz.”)

Marketers are on the front lines of customer engagement. In most companies they justifiably take the lead in the response to empowered consumers and new digital touchpoints. But survival — for Allianz or any other company – requires comprehensive and extensive transformations across the entire organization. Marketers might also lead that effort, using their skills to engage internal audiences and sell the difficult but necessary changes. This doesn’t mean that “the CMO is the new CIO” (ugh), or that marketing is taking over operations.  In fact, on the other side of the passage, what we today call marketing, IT, sales, and ops will likely be largely unrecognizable.

Two new DCG assets

My latest Insight Paper, “Beyond Marketing: Why Digital Disruption Requires a Deeper Transformation” has just been posted to our site.; it’s available without charge after a quick registration step. It expands on the topics here – disruption, Grove’s model, and the dissonance gap – with additional reflections on how innovation compresses time and space, the true meaning of “the consumerization of IT,” and, of course, the need for company-wide transformation. (The paper is also available on Acquia’s site.)

My colleague Scott Liewehr explored similar themes in this presentation on Slideshare, “Great Customer Experiences: Moving Beyond Digital Marketing to Build the Ultimate Customer Experience.”

We look forward to your feedback.


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