Simplicity is a real hard nut to crack

In the world of product innovation, are we getting it right? In essence, keeping things simple during product development is counter intuitive and more difficult than it sounds.

Many insurers start out with an innovative idea or concept, but through the natural development process, complexity is often added. This is probably due to the presumption that more is better and more equates to better value starts to dominate the thinking.

In the end, rather than taking a retrospective look at the features to determine if they are truly needed, added features are retained to make products a catch-all in a highly competitive marketplace.

Complexity legacy

Leaving features in the final product is also attributable to a natural human response that behavioural economists term the sunk cost fallacy.

This basically dictates that the more we invest in something, be it time or money or both, the harder it becomes for the mind to rationalise abandoning it and moving on.

However, this established approach to product development in the financial services sector has resulted in an industry inundated with complex legacy products that have become entrenched.

Having developed offerings that boast all these features, it has become extremely difficult to reduce the inherent complexity in the marketplace because supporting these products and features must continue to keep clients happy, whether they add value or not.

As a result, when most consumers review available financial products, many struggle to know exactly what they are buying, even with the assistance of a financial advisor. And the more complex a product becomes, the more the consumer will need to rely on professional advice.

Even legal clauses and other regulatory requirements, such as the terms and conditions, form part of this inherent complexity. This is despite that much of it is aimed at improving the customer environment.

However, despite these good intentions, there is currently so much regulation that it has become yet another hurdle in the quest to simplify products.

Sensible moves

Fortunately, there is an industry groundswell acknowledging that something needs to be done to reduce this complexity. However, knowing and taking action are two very different endeavours.

Not too long ago, there was this pervasive idea that simplicity was not needed. Increasingly today, we are seeing modernised financial service providers introducing step changes to simplify existing products, processes and procedures, both for the benefit of consumers and for the company's own benefit to improve efficiencies and competitiveness.

From the ground up

Then there are those who are innovating from the ground up when developing new products.

However, diverging from the product development status quo is, of course, not easy. It often requires an arrogant approach from a champion within the organisation which will not be popular.

It requires that companies take an honest and critical look at what they have worked so hard to create, then chuck out most of it leaving just enough to offer some degree of choice and customisation for the customer.

It is a strategy that has helped build some of the most successful businesses in the world today, the most iconic of which is surely Apple. When Steve Jobs was brought back to save the proverbial sinking ship he stripped down the company's offering from 1 000 products to just five. This simplification gave the company the capacity and ability to focus on producing products that their customers would want.

While there are already pockets of product innovation happening in the industry, driven by the desire and need for simplification, this has not been cracked in an industry wide context just yet.

What the local financial services industry needs to achieve is more leaders who are brave enough to make tough decisions about how their companies approach product development, or redevelopment, and to implement these changes to drive the mind shift toward greater simplicity.