The Government's newly released National Innovation and Science Agenda shows that for economic growth to continue within Australia, an 'innovation ecosystem' must be fostered, where new businesses with new ideas are encouraged to grow and flourish. With every company wanting to increase, retain or improve their customers’ experiences, this makes marketing vital to fuelling Australia's ideas boom.
Rapid and customer-oriented innovation might be second nature to startups, but for the majority of businesses, fostering such thinking needs both a commitment to change and a cultural reset.
It’s this desire to bring entrepreneurship in-house that has seen general manager of Australian Unity’s private health insurance group, Natalie Vogel, kickstart an innovation program based on lean principles that is now gaining significant traction across the organisation.
Australian Unity maintains three key divisions within its healthcare business: Private health insurance (Retail Fund); a corporate funds arm, Grand United Health; and remedy and allied health services (Remedy Healthcare). All report to CEO of healthcare, Amanda Hagen.
Vogel has spent the last nine years with Australian Unity, firstly in marketing and for the past four years overseeing the private health insurance business including marketing, communications, channel management, call centre operations, sales and service, digital, products and P&L.
In the last two years, Vogel has focused on introducing an internal innovation infrastructure and new techniques to change the way her division thinks about products for its customers. The ultimate ambition is to create a culture of ‘intrepreneurship’ inside Australian Unity.
“Internally we’re introducing these techniques, building infrastructure and changing the mindset to become intrepreneurs,” she said. “Trying to do that in a corporate culture comes with its challenges but also rewards in terms of differentiation and creating something customers want. It’s all about putting customers at the forefront.”
The innovation effort kicked off in Vogel’s division with the support of Australian Unity’s healthcare CEO. Having defined Retail Fund as more of a challenger brand, Vogel said she’d always been interested and inspired by challenger approaches and techniques.
“Being a challenger brand means we must think about our customers constantly and do things differently, not just copy the big fish,” she said.
“The second trigger was our category. It’s extremely difficult, and there are many customer paint points embedded in that: Healthcare is expensive, complex and extremely regulated. When you add all of those together, you come up with a disillusioned and disengaged consumer.”
Recent government legislative changes to healthcare rebates and means testing has exacerbated paint points around affordability and complexity, Vogel said, as well as potentially alienated younger customers. All of this has led to a ‘what will you do for me attitude’ from consumers, she said.
In order to cope, Vogel felt it was time to start employing lean principles.
“There’s a new definition of failure and that’s building products nobody wants,” she explained. “It’s about challenging how we go about doing our business - how we launch products, and how we bring customers much closer to the beginning of the process, than at the end.
“This also challenges old-fashioned customer research techniques into an insight on customer intentions. What customers say about what they’re going to do is very different to what they actually do, and using that insight to help understand that research will just tell you what they do and don’t like. Research might tell you they have those opinions and mean them in the moment, but when it comes to translating into actual purchases, they do something quite different or that’s irrational.
“All these things led us to that point in our effort to differentiate in a very tricky environment.”
Adopting lean principles
Vogel said getting lean methodologies off the ground was arguably easier for Australian Unity because it is small enough to get things done quickly, but big enough to have the resources to support new initiatives. In addition, strong relationships maintained across the executive team, including with the CEO, has helped provide the trust needed for change to occur.
“There are all sorts of avenues open to me wearing a marketer or GM’s hat, but we do things for the good of consumers and that have long-term sustainability,” Vogel continued. “We won’t slash prices to grow topline revenue, and that also requires a different way of thinking.
“I’ve had to get the patience of the board, as we have set all this up but we’re yet to launch that disruptive idea.”
The first step towards lean was commissioning people to lead the charge, taking them out of their jobs and setting up an area internally to drive the new innovation agenda. Australian Unity also recruited innovation champions from across the healthcare business, and invested in an innovation manager.
“We tried to introduce agile approaches in project management and work. We learned a lot along the way, including that we needed the right capability and to have things less grey for some,” Vogel explained. “The next thing we did is use a consultant, and we also went the US to The Lean Startup Conference, where we learnt about the process and how to create a pipeline of both disruptive and incremental innovation initiatives.”
A core change has been bringing consumers in at the beginning of the innovation process, as well as producing minimum viable products (MVP).
“This allows us to test actual behaviour versus intent, and it also taught us about iterating and pivoting, learning quickly and failing fast before you invest in infrastructure internally,” Vogel said. “Before you build that product, prepare the big campaign or spend $100,000 on research, you do everything in a super lean way, iterate, learn and go around that loop quickly.”
There have been plenty of teething problems, ranging from getting the right capability, to ensuring people understand culturally that it’s about doing things differently, and sourcing expertise in MVP testing and how to do experiments, Vogel said.
“It’s so hard to know that you’re doing testing properly,” she said. “The idea is that innovation is change that adds value, and that’s quite a scientific process. It sounds creative and out there, but actually it’s very disciplined.
“You have to start by asking: What is the mission, is it tied to the strategy? Then you actually follow the process. This involves doing scan work, going out to the field and talking to customers, and creating a challenge directly from customer paint points. From there, you ideate around what to do around that challenge, and pool all diverse thinking internally as well as external thinking. What you don’t want is to have all like-minded people in the room doing the same thing.”
The steepest learning curve for Australian Unity was around experimenting and embracing the concept of MVP. Vogel said its ambition is to reduce product launches from a six-month process to a few weeks.
“Only when it’s been proven, would you invest in infrastructure,” Vogel added. “That’s in contrast to the traditional methods of doing a business case.”
It’s not enough to just take up lean principles; you have to be transparent and share the failures as well as successes along the way.
“You can’t sink $2 million and go whoops, but you can fail fast, learn fast, iterate and keep moving,” Vogel said. “I stood up at our staff update and told 300 people about one thing that failed and that we were killing it. The fact that someone senior would stand up and say that was a fail, were honest about it but picked themselves up and moved on had a profound impact.”
In this example, Vogel said the team had tried to create an adjacent product to sit alongside its private health insurance products and got it wrong – consumers didn’t buy it.
“We have made a big ceremony of killing it – we might pivot, but got it wrong the first thing, therefore we won’t invest more time and effort on it, we’ll look to do other things with greater opportunity and that resonate with consumers,” she said.
“The other part of this, which is difficult to do, is to have enough objectivity to not be in love with your own ideas. Traditionally, the more senior you are, the more you trust your instincts, because you’ve got a good vibe on something. But lean requires you to stand back and let consumers decide, the data tells me what to do.
“I’m not precious about it – we have a pipeline of stuff and if it’s not this, it’ll be something else.”
Selling to the board
According to Vogel, selling the new innovation methodology to the group MD and board was not difficult given their familiarity with consumer pain points across the health insurance category. Lean was recognised as a new way of achieving sustainable growth. It’s also a reflection of how empowered consumers are.
“It’s not such a big investment if you fail lean. You need time, and the buy-in of executive teams, but it’s not like you’re asking for tens of millions of dollars,” she pointed out. “You need to position this as a technique that allows customers to decide and to enable the organisation to move quickly. It’s a very enabling business strategy. That spoke for itself in terms of logic and is on trend with helping consumers feel they are making a choice.
“But these techniques still have to prove themselves, and I do hope in six months’ time to have something that’s launched and is disruptive, which is our end goal.”
For Vogel, modern innovation requires resilience, an ability to shift your mindset quickly onto something else, and a great respect for the customer.
“Almost understand you’re facilitating a process on behalf of the consumer,” she said. “You need an inherent respect for where customers sit in the whole process, as it’s a more outside-in view of things.”
Australian Unity’s lean-based innovation approach officially debuted in February 2015. Although she’s yet to see one of these ideas disrupt the business, Vogel said the culture of innovation it inspires is already permeating the organisation.
“What’s great is that we are starting to integrate this with business as usual,” she said. “Now, if we have an idea, we just pop it through the innovation area to do some quick experiments, or do that in our own business area by using these techniques as business as usual. That language of innovation and quick experimentation is also becoming BAU.”
Read more about how other organisations are looking to innovate:
- How innovation labs are helping organisations think like startups
- Australia Post earmarks $20m for Australian ecommerce innovation investment
- Salesforce CMO: Pursuing innovation at one of the world's largest marketing tech companies
- Optus: Improving product innovation with a data-driven customer view
- Why marketing analytics is not about ROI calculation, but innovation