This guest blog was written by Ben Harrison, Partner, Head of Partnerships and Policy, Portage Ventures (Canada) for the benefit of ICMIF members. Ben participated in the ICMIF Webinar last year, “Insurtech partnerships and the companies enabling them”.
Before the pandemic, digital transformation was at the top of almost all insurer’s list of strategic priorities. The last two years have only accelerated the importance of this trend and placed an even greater focus on it for executives across the industry.
While a lot of important elements need to be in place to navigate this journey successfully – culture, people, business models, etc – at the heart of your company’s digital transformation is the technology that is deployed to deliver the types of products, services and experiences that will attract and retain customers, today and in the future. In approaching the foundational technology decisions your company will need to make, you’ll often hear or read about the infamous “build, buy, partner” decision.
While I will leave the consultants many of you are probably dealing with to help make those choices for your specific situation, the partner option in many cases provides one of the quickest and most efficient paths to market. In a world where speed counts for a lot, if done thoughtfully, with a long-term view of your organization’s business and technology roadmaps, partnering can play a pivotal role in your transformation agenda.
In light of the importance of the digital transformation topic, I thought it might be helpful to start the year by sharing some insights and learnings into how to approach partnerships, specifically with insurtech start-ups. At Portage Ventures, we’ve helped put in place over 50 partnerships in the last three years, with some of the largest insurers globally, as well a few ICMIF members, so we come at this with a proven track record and a keen understanding of the ins and outs of the process and the challenges and opportunities it presents.
This article provides a practical, high-level overview of some of the key steps to creating successful partnerships. This will be particularly helpful for those without much, if any, experience working with start ups. For those who have partnered in the past and/or are just looking for more detailed information including, best practices and tools please feel free to use our Partnership Playbook as your own personal reference guide. A copy of the document can be found here.
With that all said, let’s jump in…
Finding the right partner for the business strategy you want to execute can be challenging at the best of times. When that partner is a start-up, the challenges can seem even greater — but that doesn’t need to be the case.
Navigating a successful partnership is all about setting clear expectations, defining what success looks like up front (both short and longer term) and getting all parties aligned around those metrics. So, how should corporates navigate this journey to achieve, at best, a new commercial agreement, and, at worst, a potential future partner to advance their digital transformation?
If you do decide to explore a partnership with a start-up, set expectations openly so you don’t waste each other’s time. To the extent possible, communicate what the typical sales timeline for your organisation is, whether it’s going to take six, nine, or twelve months to get to a decision. It’s critical that the start-up has this information so that they allocate internal resources accordingly. For example, a six-month sales cycle may mean the start-up has to focus on a small number of potential customers, but a twelve-month cycle means they can manage a few additional prospects.
If you’re interested in the offering but don’t see an immediate opportunity, or the partnership can’t make its way on to the organisation’s priority list, be clear about that. The worst thing you can do to a start-up is waste their time because that is, in many cases, the most important asset they have. Direct and honest feedback is always better than dragging out a conversation that likely won’t go anywhere over several months.
As you move forward with a partnership, setting expectations internally is equally important. If you are one of the first customers for a start-up, it’s inevitable that there will be bugs and necessary changes along the way. It’s called a ‘start up’ for a reason. You need to make clear to senior leadership that these issues will come up. This isn’t a reason not to work with a start-up, as the benefits will outweigh any initial hiccups — but you should make sure that leadership won’t be surprised.
When it comes to risk management, know where you can and can’t compromise. Procurement and vendor selection processes have certainly evolved to accommodate earlier stage companies, and the days of requiring vendors to provide five years of financial records or USD 50M in errors and omissions insurance are all but gone. That said, if your request for proposal process could potentially kill a start-up, then you probably shouldn’t be considering them in your process.
If you move forward with a contract, be sure to get aligned in the implementation plan. There are things you cannot and should not flex on, like security or customer services. It’s critical to be extremely upfront about expectations, so that when rubber hits the road the fintech is prepared to respond to your concerns.
While corporates and start-ups work on different timescales, the basics of clear communication and expectation-setting are critical regardless of which side you’re on. No successful partnership will be created without these basic building blocks. By getting aligned from day one, you can successfully navigate the partnership process and accelerate your digital transformation agenda.