In central North Carolina, we are graced with unusual art sculptures which look, for all the world, like giant pinwheels. They are, in fact, exactly that—the product of the ingenious mind of Vollis Simpson. His art went from curiosities which graced his farm in Wilson County to something which came to be part of Baltimore’s Inner Harbor and Atlanta’s Olympic Village. And of course, today, the Whirligig Park in Wilson, NC.
Simpson served in the U.S. Army Air Force during WWII. His pinwheels, some the size of houses, were a whimsical way of dealing with the stresses of war. He built them from spare parts from construction projects and engineered them with state-of-the-art 1920s technology. I had a chance to meet the crew doing restorations on these amazing pieces near the end of his life. When they rebuilt the freshly painted devices, they were stunning in their beauty, but they would not spin properly. When they asked the master builder what they’d done wrong, using his trademark economy of words, he noted simply that, “there wasn’t enough wobble wobble.”
The devices are a complex system of gears, pulleys, belts, and miscellaneous elements, and the results are much greater than the sum of their parts. Tighten things too much, lose the flexibility, optimize for the fewest possible parts, and the net result will be quick failure. Back in 1945, Simpson knew what we have recently relearned about supply chains. Optimize them to the point where the happy path can be remarkably efficient, but small deviations from that narrow trail can lead to catastrophic results, often with surprising speed.
Finding the Flexibility Insurers Need
The lessons from both these massive pinwheels and supply chains should provide a cautionary tale to CIOs and their leadership teams as well. We live in an era of significant technological advancement, to say nothing of the rapidly changing customer preferences, new distribution models, and, of course, demographic changes which continue to roil labor markets.
Together, all this means that building in sufficient flexibility, and adaptability, may be the difference between modest incremental gains on the margin and what one of my mentors once described as a “career-limiting move.” Squeezing the last bits of flexibility from a business system to create added margin might be successful, but there’s a higher probability of a less satisfactory outcome that can be hard to recover from.
Even before the pandemic, we saw some manufacturing operations reshored because long supply chains, despite their efficiency, couldn’t respond to rapid changes in demand. The more specialized a product, and the more variable the demand, the more flexibility can become a competitive differentiator. The more commoditized a product, the tighter the factors of production can become.
Addressing Changing Obstacles
The insurance industry now faces many of these issues as we race toward the decade’s midpoint. Demographic shifts in consumers and changes in distribution systems mean that carriers now need to think in a form of mass customization for products and services in some markets.
We are seeing the same issue emerge on the human capital side at some carriers who have depended on a form of tribal knowledge and long-tenured specialists to keep operations humming. When there’s a sudden shift in that knowledge pipeline, such as the loss of institutional memory resulting from the Great Resignation, the cost of recovery can be a multiple of the margin gains experienced over a period of years. Almost like the children’s game of Jenga, it’s unclear how many blocks can be removed while also keeping a stable structure in place.
Simpson’s simple awareness of how to build complex systems can serve as a humorous, but insightful, message for companies now. Tighten things too much and you risk breaking them. Appropriate “wobble wobble” can minimize breakage and maximize success. If you’d like to discuss this or other Aite-Novarica Group Insurance practice insights, please contact me at RMcIsaac@datos-insights.com.