Take a Direct Line to your Customer

In the early 1980s, if you wanted to take out motor insurance in the UK then you went to a high street insurance broker who took down all your details on various forms and sent them off to insurance companies to get quotes. The insurance broker insisted that it took all his skill and experience to eventually get you a good policy. Then Peter Wood came along and took a different view. He bypassed the insurance brokers altogether. His company, Direct Line, used computer databases with up-to-date information and banks of telephone operators to quote competitive prices immediately over the phone. It rewrote the rules of the industry and Direct Line grew into the largest UK motor insurance company.

What Peter Wood did was to take telephone and database technologies – neither of which were particularly new at the time – and apply them in an innovative way in order to find a new and better way of reaching and serving the customer. Applying new (or nearly new) technologies to traditional business is a classic way of innovating in a marketplace and of going around competitors’ defences. Amazon did a similar thing when they used the Internet to bypass the traditional book-retailing channel in order to sell first books then CDs and other merchandise direct to users everywhere.

In 2004, Vodafone’s Kenyan affiliate, Safaricom, was awarded matched funding by the UK’s Department for International Development to develop services for extending the provision of micro-finance to the poor in East Africa. The result has been M-Pesa, a mobile money transfer system that enables people to transfer funds without using a bank account. It has been enormously successful. Pesa is the Swahili word for money and M-Pesa is mobile money. There are now over 12 million users of M-Pesa in Kenya alone. M-Pesa represents a significant threat to banks because it offers a more convenient service. What Vodafone has done is to rewrite the rules of the banking game by using a new technology, mobile telephony, to bypass the banking network.

What existing technology could be used to bypass the distribution network in your business? How could you use technologies in creative new ways to add value for your customers or to find a more convenient ways to reach them?

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Paul Sloane writes, speaks and leads workshops on creativity, innovation and leadership. He is the author of The Innovative Leader published by Kogan-Page.