Until the credit and financial crisis struck, Ted Bernstein was primarily focused on the successful niche that his insurance company served in the market.
“We were guilty of not looking at the macro picture of our industry and where change was going to affect us,” says Bernstein, the president and director of Life Insurance Concepts Inc.
As the supply of capital began to shrink and many people stopped spending money on life insurance premiums, demand for the company’s niche ebbed. What do you do when the product that you are selling no longer fits with what your customers need?
You start from scratch.
Through a process of “creative destruction,” Bernstein discovered the opportunity to transition the company online to reengineer its product and service offerings for future growth.
Smart Business spoke with Bernstein about how business leaders can use creative destruction to help them innovate.
What is creative destruction?
A typical example of creative destruction is the PC, because it essentially destroyed the main frame and gave way to an entire new business model that improved upon what was killed off. It is the idea of product progress, and it is a staple theory in support of capitalism, constantly serving the economy in positive ways. From an individual company’s perspective, it represents the idea of looking at established product lines and service offerings with the goal of improving the status quo. I think it is essential for growth in normal business times and essential during a sustained crisis such as the great recession we are now experiencing.
What made this process so difficult and challenging?
It’s easy to destroy for some and for some it’s easy to be creative. Being creatively destructive is a real challenge. In a period like we’re coming out of right now, it may be why some companies just flat out couldn’t make it — they could not recover or evolve through the destructive period — and why so many incredible companies grow up out of these destructive times.
One aspect of creating differentiation around us was that the product certainly had to be better. The other was you had to have a reason that you are going to buy from us, because maybe you’ve been buying from people who have been serving you well until we’ve come along. So we felt that we had to offer value to you that maybe you weren’t getting from others.
It’s really been a two-pronged thing that we had to differentiate ourselves with the product and then our ability to engage them to make them feel that they should use us.
How does destruction lead to innovation?
I don’t think you can go through creative destruction without getting as wide angle of a view as you can of your industry, which is not easy to do when you are an insider and you know your way around. You think you pretty much know how your industry works, and it’s pretty difficult to put yourself back in that position to almost be looking at it as if you know nothing. We did that. I would say everybody should force that view and that type of lens on themselves. They will see their industry and their business in a way they may not have looked at since they came into their business however many years ago.
I reconnected with the leaders from all aspects of our industry. I began having conversations with executives of insurance companies. I began having conversations with the professional associations, the organizations that monitor trends in our industry. We ran focus groups here at the consumer level and also focused on technology to see how technology was changing our industry. I kept pulling back the lens further and further and further so we could get as much of a macro, big-picture view as possible.
How can a successful company use this process to spark new ideas?
If every couple of years management puts itself through some type of crisis management exercise and you just imagine the worst — imagine your biggest supplier cut you off for no reason, or you could no longer acquire bank financing or whatever was most important to you, like capital was to us. If you could imagine that it was lost and lost quickly, how would you react? I think that’s an incredible exercise not just for the CEO or owner — it’s the team. You might find out who in your organization is better in your organization than you ever realized. Or you might find out some things about your organization that you maybe don’t want to find out but it’s important to find out.
How to reach: Life Insurance Concepts Inc., (561) 988-8984 or www.lifeinsuranceconcepts.com
