July 14, 2014
History tells us, or at least the story has it, that Henry Ford was once asked if his prospective customers were asked anything about the Model T before it went into production. Ford’s supposed response went something like,
“…if I had asked my customers what they wanted they would have said a faster horse.”
One hundred and six years later, the fact that he brought the single greatest change to personal transportation since the horse, meant that change was something Ford was not only comfortable with but anxious to bring to the world. Few of us are so courageous.
Part of the answer is rooted in the Law of Diffusion of Innovation. The graphic below illustrates how a given population of people is generally distributed across a spread of tolerance for change – any change. It is weighed with observations of human psychology and our propensity to be comfortable with change and how we are influenced to change, and by whom.
Starting from left to right – those on the left, the “Innovators,” are the natural leaders who enjoy being out in front of everything and everyone. These are the ultimate risk takers. Next are the “Early Adopters,” who enjoy being among the first to try something new and are influenced by the actions of the Innovators – but want the Innovators to go first. The line between Early Adopter and the “Early Majority” is called, “the tipping point,” which is the point where once crossed into the Early Majority we will see success in the innovation being brought to the population. Once the Early Majority has adopted the innovation the “Late Majority” comes along – with the “Laggards” bringing up the rear. As Simon Sinek once said, Laggards are the people who only use push button phones because they can no longer buy rotary dial phones.
Making our associations “safe” for change, given that all change is usually hard, means that we find those populations within our membership most often found to be innovators – and then early adopters of change. This creates the environment within which change is possible. This also establishes the strategy one employs in considering change. First, one would never start with Laggards – or work from right to left on this graphic. One begins with getting the Innovators on board, and then from that point having the Innovators influence the Early Adopters in your group.
Everyone has encountered someone in their professional lives who is resistant to change. Resisting change is a normal human reaction arising from a number of factors ranging from fear of failure to a perceived lack of capacity to learn or do something new.Fear is a powerful emotion that is a primitive reaction designed to preserve our lives by preventing us from doing things that might cause us harm. Fear also can prevent us from doing things that benefit us most.
We need to make change safe, and resisting change uncomfortable.
“Our role is to make our associations safe for change by creating the environment within which change is not feared, nor is fear of failure allowed to exist.”
Making professional life accommodate failure as a natural part of human endeavor, not as an objective of outcome but a recognition of its reality, is an essential part of leadership. It is also among the most valuable learning experiences. The country was not built by those who were averse to risk – but by those who saw risk as a necessary part of conquering frontiers of geography, science, transportation, medicine and virtually everything else we enjoy today in our daily lives. Incentivizing the desirability of rational risk taking and allowing people to grow from within that environment is what enables change and growth to flourish.
Our project on private health insurance marketplaces is instructive in this discussion. Since World War II, employers have borne the burden of providing health insurance and other benefits to their employees. This developed solely out of the federal government’s wage and price controls during the war. Employers couldn’t pay higher wages to keep or attract employees – so they started adding desirable benefits. And there it began.
After 70 years of this system we have employers who can barely afford to provide benefits and 75% of employees who don’t really understand what their benefits are or how they work. In a system that represents $2.4 trillion a year of the economy, we are not in a good place.
- First, we need to change the system where an employer chooses the benefits that everyone lives with – that’s called “defined benefits.” The modern version is called “defined contribution,” where the employer decides how much money to give each employee for benefits and then the employee decides what to buy;
- Second, we need to forget carriers, policies and plan comparisons by employers. Employers need to decide what their budget will be to pay for benefits. That’s right, no more sweating out renewals – the employer controls what the employer wants to spend on benefits and then decides how to divide up that budget among his/her employees;
- Third, after the employer has a budget and has decided how to divide it up, we educate employees about the bold new world of no longer having decisions made for them – now they get to decide for themselves what they want to buy for benefits. What a liberating experience!
- Fourth, the employees go to a private association marketplace where they make their benefit choices with the help of professional benefit planning advice. These marketplaces help turn employees into consumers for the first time. The importance of making your own choices, learning the value of what you chose, and how your own benefits work cannot be overstated.
Imagine going to hundreds of employers who, for 70 years, have done something a certain way – painful or not – and trying to convince them that everything they know and have been doing needs to end and they all need to learn something totally new? Then there are the employer’s insurance brokers – who are in just as much need of changing their business model as the employers.
If we ever have a chance to get some degree of control over health insurance costs we need to inject real market-based competition and create consumers of us all. The 1/7th of the economy that is health care is the only segment of the economy that almost totally lacks transparency of price of services and outcomes. We compare everything from buying a toaster oven to a house and mostly online and wouldn’t buy anything without price, service and performance comparisons – except for health care.
This is not a commentary on the Affordable Care Act, and only focuses on the fact that health insurance costs have risen rapidly, and annually, every year since the early 90s for many reasons and associations have tried to find solutions. One such solution that works is a private, association-based marketplace that creates both competition and consumers where neither had existed before. Without government.
- employers control costs by setting their own budgets
- employers divide up their budgets among their employees
- employees make their own choices for what they want to buy for themselves and their families
- employers have stability and employees control their own lives
We need to make this endeavor safe for change as this is as unknown as virtually everything else we deal with in our daily lives. That’s exactly what we are trying to do – make this extraordinary change in the lives of businessmen and women and their employees – safe.
“If you want something you’ve never had, you’ll need to do something you’ve never done.”
It’s time for change. Associations are leading – the Innovators.