Matt Manzella, Director of Strategy and Innovation Services at Allstate Insurance, presented an IMF web forum not too long ago talking about the “new normal.” What exactly is Manzella referring to? The new normal refers to the unprecedented changes our economy is experiencing. These changes will fundamentally alter how companies operate and compete. Here are some of the changes he’s talking about:

New competitors

Low barriers to entry, globalization and the power of the Internet enable legitimate competitors to populate the landscape seemingly overnight. A good example of this is the television manufacturer, Vizio. The company began in 2002 with three employees and $600,000 in capital. In less than eight years, they have grown to become the largest LCD manufacturer in North America by volume by marketing a good product at an extremely competitive price.

Overhauled industry fundamentals

Interrelated with the introduction of new competitors, whole industries have been altered by the upheaval of underlying industry fundamentals that have driven their status quo for many years. Less nimble companies can quickly find themselves unable to react. The internet has created an entirely new model for information delivery which has required companies operating under a traditional model to shift the delivery structure for their information or face extinction. 

Power shift from companies to consumers                 

The Internet has shifted the balance of power from companies to consumers by providing instant access to comparative information, including products, pricing and availability. More and more, consumers want to interact with companies on their own terms, meaning where, when and how they prefer. Allstate has built their direct channel (online) to compliment the agent channel by catering to those consumers who may not want to utilize an agent during the quoting and/or sales process. Additionally, Allstate developed “My Account” to allow customers to access their policy information online, anytime.  

 Mobile applications allow consumers instant gratification. An iPhone application called “Snap Tell” allows consumers to take a picture of a product and within seconds they are provided multiple links to purchase that product online. This eliminates the need for the more traditional and time consuming method of physically going to every store to compare prices.

Fixed cost/brick and mortar less important

While traditional retailers historically focused on growth and expansion through additional physical store locations, the Internet has allowed many companies to flourish without those fixed costs. Standard logic holds that buying shoes is a very personal act, particularly due to the importance of fit and feel. Zappos, however, has become a billion dollar plus online retailer of shoes by focusing on exceptional customer service before, during and after the sale. The company takes great pains to train their customer service representatives in order to maintain their customer focus.

Accurate long-term forecasting is nearly impossible

Rapid changes in markets, industries and consumer preferences have resulted in long term forecasting with suspect accuracy. Many online companies that have significantly impacted, or in some cases created, industries – Twitter, YouTube, MySpace, and Facebook, did not exist six years ago. Forecasting the impact such companies may have on the competitive landscape is virtually impossible.

Read about how Manzella and his Innovation Team at Allstate have evolved and battled these challenges in our IMF report- “The New Normal.”