It’s hard to turn around a Locked-In company. But it sure is exciting to see a CEO try. And that’s what is happening at Allstate (see chart here.) I blogged previously about this historically staid company that has begun Disrupting and using White Space to chart a new course.
Taking a page from Neutron Jack Welch’s book about how to be a Disruptive leader, the CEO recently decided to implement the "80/20 Management Principle" which he picked up from Illinois Tool Works (read full article here). ITW, by the way, happens to be one of the most long-term successful companies in the U.S., with decades of experience Disrupting and implementing White Space to grow. So the Allstate CEO said "let’s implement this policy, and see if we can be a better company." It doesn’t matter if 80/20 is a great idea or not – the point is that it is Disrupting the old approaches and making people change they way they work. Mr. Welch used rules like "Be #1 or #2 in your business or get out" and created DestroyYourBusiness.com teams to Disrupt people at GE – and open White Space for new growth. For us as investors, suppliers and employees what’s critical is that the CEO is Disrupting people, and causing them to look for new ways to manage the business.
The Allstate CEO is also on a path to use White Space to "reinvent" Allstate (read article here.) Yes, he’s implementing product extensions intended to defend the historical business. But he’s being clear to call these "horizontal" products and he says they really aren’t "new." Meanwhile, he is simultaneously setting up teams to develop entirely new "vertical" products that he intends to use for changing what Allstate develops and sells. These White Space teams range from new insurance products, to new investment vehicles (like mutual funds) to hybrid products that offer both insurance and investment – but different from the old-fashioned "whole life" policies sold our parents and grandparents.
Kudo’s to CEO Wilson, the management team, Chairman and Board of Directors at Allstate. After reeling from the hurricanes, they could have attempted to persevere with business as usual. But even Warren Buffet has said that the old insurance business will see costs rise faster than revenues. At Allstate leadership is using Disruptions and White Space to create a new future that will reposition the company for customer needs in 2015 and beyond. Good for them. They are on the way to becoming a Phoenix Principle company with long-term above average returns!