Editor’s note: Today we begin a new monthly topic in Business Impact at Technology Review: Innovation Strategies. The world’s most innovative companies are using technology to move faster and more decisively than their competitors. They are mining data on their operations and their customers, letting their employees do inexpensive experiments, and using business software to get sprawling organizations working together. We’ll explore the industries that are most in need of fast innovation and examine new ways of doing business, with case studies and interviews from around the world.
Everyone recognizes that technology is destroying long-standing business models in news, music, and other media industries, but the next few years could also bring wracking changes in numerous other businesses, such as insurance, retail, cars, medicine, toys, and utilities.
The reason lies in the third wave of personal computing. The first, beginning in the late 1970s, gave us PCs. The second, the Internet revolution of the 1990s, hooked all those computers together. The third is letting us essentially carry the Internet with us, on smart phones, tablets, and other devices. Cameras and sensors are becoming cheap and ubiquitous. Every person and device will be able to talk to any other person or device, anytime and anywhere. And operating in this world of infinite connections will change almost everything for businesses.
Those accustomed to broadcasting their messages will have to get comfortable in the middle of a conversation where everyone is talking to everyone else, all at the same time. Businesses that act as middlemen will have to justify their value or get pushed aside. Businesses that depend on market ignorance will have to adjust to total transparency on price and quality. And that’s just for starters.
For example, because sensors, cameras, and wireless connections will be active in cars or in the smart phones that drivers and passengers carry, auto insurance will increasingly be based on detailed real-time information, such as how many miles are actually driven, how fast the car is going, and whether the driver stops at stop signs and uses turn signals.
Insurers will need to respond with far more flexible and customized pricing than they offer now. Allstate, Progressive, and others are already offering “Pay-As-You-Drive” programs that offer lower rates to (presumably safer) drivers who allow them to monitor such information. Insurers may also communicate more with customers in an effort to reduce claims. For instance, they might warn that a customer’s teenage son has deviated from the approved route from school and has seven friends in the car. Teens have accidents at about twice the rate of other drivers; any company that can prevent some of those accidents has the opportunity to lower individual premiums and capture much of the $20 billion in overall premiums that teens represent in the United States each year.