It would be nice to know how Nigerian health insurers are doing. The U.S. insurers are having unbelievable quarters as most Americans freeze elective medical procedures over the fear of contracting coronavirus. Since health insurance premiums continue to roll, notwithstanding, the insurance firms just keep the money. This is counter intuitive: how can health insurance companies be declaring record profits during a period of health paralysis? It comes down to capturing value in market systems.

The nation’s leading health insurers are experiencing an embarrassment of profits.

Some of the largest companies, including Anthem, Humana and UnitedHealth Group, are reporting second-quarter earnings that are double what they were a year ago. And while insurance profits are capped under the Affordable Care Act, with the requirement that consumers should benefit from such excesses in the form of rebates, no one should expect an immediate windfall.

But the amounts that insurers are retaining have caught the attention of the Trump administration. The Health and Human Services Department advised companies to consider speeding up rebates, and on Tuesday suggested that they reduce premiums to help consumers through the economic downturn caused by the pandemic.

It goes beyond what is actually happening in markets to positioning to capture value from markets. Yes, where you play on the smiling curve. If you are at the center, you do all the work and capture minimal value while those at the edges capture most of the values you have created.

Markets are inherently imperfect and companies work to improve the demand-supply relationship, pushing markets towards better equilibrium points, in a positive continuum towards perfection.You can fix big market frictions for DEMAND, and yet fail to capture any value. Today, hospitals are doing great things but health insurers are capturing most of the values, just as Amazon AWS and Microsoft Azure are using their cloud infrastructures to capture most values in the age of remote everything!

Where are you playing in markets?

Join me with the governors of Borno state (Engr Prof Babagan Zulum) and Nasarawa state (Engr Abdullahi Sule) along with the President of COREN (Engr A.A. Rabiu) for the 2020 President’s Annual Lecture of the Nigerian Society of Engineers (Engr Babagana Mohammed). Date is Wed, Aug 19, at 4pm Lagos time. I will deliver the Guest Lecture, titled The Infrastructures of Nations.

Good People, this week’s class note on Tekedia Mini-MBA is on the Board. As I shared a few hours ago, we are focusing on Perception Demand Marketing (read here), working on how to use perception to turn consumers into customers, and into fans, by creating products and services which do not just meet Needs or Expectations of customers but serve at the level of Perception. I offered some flash cases: iPhone, Diamond Bank’s DIBS, 23andme, Airbnb, etc.

Here, as a very good Physics student in secondary school, I use Speed and Velocity (speed with direction) to explain the difference between Sears (a bankrupt physical superstore), and Amazon. You can add Shoprite for physical retail in  the Sears column and Jumia in the Amazon’s column of digital retail.

Sears used catalog which has only speed, Amazon uses search technology which provides velocity. That velocity gives a DIRECTION into the future. To create perception demand, you do not give customers catalog options, you empower them to discover the future in your ecosystems.

You move them from speed to velocity where while completing the distance of life, over time, they do so with a sense of direction. When you do that, you create a new basis of competition, and turn many customers into fans, creating leverageable moments in your business. JOIN the Board for the full class note.

From Tekedia Mini-MBA Class Note

Sears, a bankrupt American retail chain, was built on catalogue – a fangled technology of its time. It was typical of industrial age business model: send the customers options on what they might need with no certainty on what they actually want. The discovery process was weak, defining the retailer with no sense to get insights at scale, quickly.

Amazon is built on search – a modern technology which is unconstrained and unbounded, only limited by the imaginations of the consumers. Search provides a window into possibilities, making it even possible that Amazon can see patterns on things it does not have in stock, and quickly respond to add them.

Search has velocity, catalogue has only speed; no antenna for direction. Search enables Perception Demand which enables the acceleration of consumerism by rewiring the mindsets of users to a new domain which they might have never imagined. As customer tastes move, your business must adapt. You need the antenna to move in the right direction to make that happen. Yes, in the 21st century, you win with Perception Demand.

Yes, no matter what you do, you cannot catalogue your customers. You need to find a way to help them discover the future in your ecosystem!

We think perception demand stimulation is more revolutionary than evolutionary. Data can take you to Expectation but getting to Perception does imply, most times, there is no absolute data driving it. Creating the iPhone was not backed by typical customer data as Steve Jobs did not believe in surveys and focus groups. He did believe that even customers could not understand what they needed. But you give them the “next big thing”, they would come along. 

My point is this: data has a limitation at the perception level. Verizon, a big telecom player in the U.S. is data-driven but still (initially) rejected Apple’s offer for it to carry the iPhone. (iPhone is a perception level product.) The second player behind it, AT&T, took a risk, as it had nothing to lose then. Simply, data cannot explain most things when you begin to operate at the perception level of market creation. 

The key thing here is Awareness and Observation as having data on something which does not exist is hard. More so, extrapolation fails since to have perception, you have to do something that is not typical. That means extrapolating today for that future makes no sense.

Largely, perception is highly orthogonal, not parallel to what many market players are doing. That is why perception level products are disruptive as they typically lead to a new basis of competition.

 In this introductory video, I discuss why organizations must focus on developing products and services that go beyond the needs of customers to their expectations and perceptions. Focusing on the needs of customers is a recipe for disaster. The whole desire must be to deliver products and services at the level of customer perception where they are offered products and services which they might not have even imagined would be possible. But the day they see the products they will say “wow”. This also explains the limitations of focus groups because focus groups are  tethered to what the customers think they need. Perception of customer level  service is offering something which could not have been requested during focus groups, because such products will not come into the imaginations of the people being studied.

There are other videos in Tekedia Mini-MBA Week 8 board, and a member asked this question: “Good day Prof, thanks for the lecture material on stimulating perception demand. It’s very insightful. Prof, could you please provide a real life example/use case of using O-data and X-data to stimulate perception demand, if such exists? Many thanks.” The above was my response.

Register and join Tekedia Mini-MBA which began this morning.