Corporate longevity
“Companies that have thrived for more than 100 years have been successfully practising this form of capitalism that creates shared value. building on core competencies in a way that carefully balances tradition and change, this ability to involve a wide group of constituents in caring ability to survive.”
WHERE REINSURERS GO TO DIE Such theories, however, count for little in rapidly changing industries where change and innovation begin to supersede long-term thinking and
Foster at Yale says that such a period of change could be upon the
reinsurance industry. The next few years could determine the fate of many incumbent players. The landscape is already changing due to mergers & acquisitions but other changes in the order of things could also be overdue.
“It is not always that some of these older incumbent players disappear, it is simply that they become less consequential,” he says. “But if I was operating in the reinsurance industry right now, I would certainly be concerned.”
Foster notes that as the risk landscape shifts, it will be natural that
younger more nimble players will take a lead and grab market share. He notes how quickly the healthcare landscape in the US has changed thanks to the Affordable Care Act, aka Obamacare.
“This is a rapidly growing market and one that needs solutions in terms
of risk transfer. The question is: which companies will be able to react the fastest and adjust to changing opportunities such as this,” he says.
Good leadership can make a difference, Foster says, although he stresses
that this is often only enough to see a company through one disruptive period of rapid change. Companies that last to around the 100-year mark will have many people at their reins over their lifespan—only favourable market dynamics can ensure their long-term survival rather than being lucky enough to have a visionary as a leader every time the landscape shifts.
A fresh approach can help a company, however, as they are less prone to emotional attachment to parts of a business that may need closing down, paving the way for innovation. “An outsider can be impartial, unsentimental and act without remorse,” he says. “They can often also make tough decisions quickly and decisively when needed.”
In his previous piece, Foster effectively argues that the odds are stacked against the older incumbent players in industries undergoing rapid change. They simply cannot react swiftly enough no matter how hard they try compared with smaller, younger companies with fewer commitments and distractions.
Perhaps the industry’s older players should not be despondent just yet.
First, the extent of change in the markets can be debated and many have moved to capitalise on new trends around risk transfer.
But, more important perhaps, some experts believe companies open to change can indeed adapt. TenHaken, in her paper, uses the human
18 | INTELLIGENT INSURER | November 2015
“The question is: which companies will be able to react the fastest and adjust to changing opportunities such as this?” Richard Foster
lifespan, which has increased by 80 percent in the past century, as an analogy to argue that companies can adjust too.
“Humans have learned what behaviours increase longevity: a balanced diet, regular exercise, monitoring blood pressure and cholesterol, etc. If longevity factors, perhaps a company’s can as well,” she says.
want to be
in business for a long time. If young companies today decide this is a desirable goal, they should consider the longevity practices described in this paper.
“These practices correlate with longevity, but they are not proven to be causal. Companies still need good strategies and leaders need to make good decisions if a company is to survive for the long run.
“The practices described in the longevity model are, nevertheless, behaviours
company from employees, customers, suppliers, and their local communities—
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SHUTTERSTOCK / JORG HACKEMANN
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