by: Paige Robertson and Joanne Marshall
Date: Apr 1, 2019
Discovery’s pioneering approach to insurance has had a profound impact on the financial services industry, both locally and abroad. At RMI Investment Managers’ Leading Insights Seminar in March, founder and Group CEO Adrian Gore walked us through Discovery’s journey from humble beginnings to how an internationally relevant financial services business model emerged from South Africa.
An authentic purpose should serve as your north star
When Adrian Gore founded Discovery, the health insurance market was not an easy one to penetrate. It was 1992 and the healthcare industry was plagued by an undesirable mix of too few doctors, a very high disease burden and what Gore terms “an emerging, egalitarian Obamacare type of environment”. This combination of factors made it very difficult to price risk and so Gore adopted a different approach.
“Because we couldn’t price risk accurately in the prevailing environment, we turned our focus to whether we could reduce the demand for healthcare”, he says. “We came up with this very simple idea: we would make people healthier”.
This became the purpose upon which the organisation was built. While Gore doesn’t believe in the value of a mission statement, he is adamant about the value of a genuine purpose. “An authentic purpose is incredibly powerful. If you’ve got a purpose and a north star, you can always map back to it”, he says.
This became apparent to him during the process of teaming up with the Health & Racquet Club (now Virgin Active). At the time, Gore recognised the value in working with an aspirational gym chain, so he worked backwards from the company’s purpose to make people healthier. Together with his team, he settled on the idea that people should earn their gym membership through a points-based system that rewards healthy living. For all intents and purposes, this led to the birth of the Vitality programme which has formed the basis of everything Discovery stands for.
“When you start with the end in mind, you figure out a way to get there”, he says. “The most difficult thing about innovation is knowing what you’re trying to achieve”.
Find your innovation rhythm
On the topic of innovation, Gore stresses that this should be time-based and not event-based. “Don’t innovate for the sake of innovation; it’s only worthwhile if it is profound and changes your organisation”, he says. Rather than waiting for something relevant to happen (the entrance of a new competitor or a change in an applicable law for example), you should innovate at a rate that suits your business.
The culture of regular innovation at Discovery is firmly embedded within the company’s very DNA, according to Gore. It’s a drumbeat to which the whole organisation marches. Anchoring this innovation around the firm’s core purpose and focused business model has enabled Discovery to branch out into different areas of financial services. “The strength of our model is its wide applicability to a range of different industries”, says Gore.
For example, notable recent innovations include the launch of Discovery Insure, which is about influencing “healthier” driving behaviour by rewarding desirable driving activity, and Discovery Bank, which is about rewarding people for managing their money in a “healthy” manner. The key is that at the heart of every innovation, the fundamental idea remains constant: sharing the economic value that results from positively influencing people to change potentially destructive behaviour (like defaulting on debt or having a car accident) such that the individual, wider society and Discovery itself benefits.
“There’s nothing new about these ventures. We’re using the same model and just learning more and more about how to do the same stuff”, he says.
This focus on innovating within the framework of the business model is a key underpinning to the company’s whole strategy. “It’s an idiotic strategy to compete on price”, says Gore. “Price, by definition, is limited. Rather compete on a value proposition and innovation because then the potential is infinite”.
A distinctive organic growth model
The business model also fundamentally requires constant innovation because it is based solely on organic growth, rather than on acquisitive growth.
“I think we’re the only company starting new businesses from the ground up. That’s all we do. Our model doesn’t apply to a back-book; we can’t buy a company and then fit this model onto it”, Gore says. “The only way we can operate is to start new businesses from scratch, which is an unusual thing to do”.
It is a tough thing to do, and one which requires a great deal of patience. “We see a business having three phases: new, emerging and established”, he says. “In our experience, it takes about 5 years for a new business to become an emerging business, and another 3 to 5 years for an emerging business to become established. There are no shortcuts; it’s a lengthy process”.
Perseverance clearly pays off though. “It’s a skill to start a business and get it to succeed; it’s extremely hard work”, he says. “We’ve managed to pull 9 out of 10 businesses that we started through the cycle, and the reason we’ve been able to do that is that we have a model that works and an authentic purpose”.
Partner-led global expansion
Another important aspect of the business model is how well it has enabled Discovery to expand globally through joint ventures and partnerships. “We are strong believers in partnerships; we’re a partner-led business”, says Gore.
Partnering with established, leading insurers around the world has helped Discovery adapt the Vitality shared-value approach to, and enjoy great success in, international markets including the UK, Asia Pacific, China, the US, Canada, Europe and Japan. “Through the model’s relevance, we have amongst the best partners globally”, he says.
Importantly, Gore is also trying to create a network out of these international partners that is jointly committed to making people healthier. “We have brought all of our partners together and received a real commitment from them to collectively make 100 million people more physically active by 2025”, he says. Reaching this goal will be a dramatic manifestation of Discovery’s purpose to make people healthier.
Partnering with the right shareholders is also something that Gore attributes part of the company’s success to. “Quality of shareholders is fundamental”, he says. “RMI’s attributes, specifically its culture and long-term partnership mindset, have been crucial to our success”.
Ambition drives growth
Discovery is no stranger to setting impressive and large-scale goals. Every five years, the firm sets a bold “ambition statement” to help build scale. “We set our 2018 ambition in 2013”, he says. “Back then, we were embryonic compared to where we are now. It’s amazing how far we’ve come in five years”.
Ambition 2018 was to be the best insurer globally and the company came very close to achieving this. “We missed out on a few of the metrics but we’re certainly seen as one of the best globally by most of the industry”, he says.
The next ambition is to transform financial services through the shared-value approach by 2023. This involves perfecting the composite model in South Africa, playing a leading role in the UK with the same composite model, having the biggest global insurtech platform and being the leading health insurer in China. Through these goals, Discovery aims to impact 100 million lives, insuring 10 million lives directly.
A disruptive force to be reckoned with
Capitalising on the behavioural aspect of risk and incentivising healthy behaviour is what makes Discovery stand out from its peers. Recognising this as early as he did (as a 27-year-old actuary way back in 1992) is even more impressive and sets a motivating example to other South African entrepreneurs and business leaders alike. There is no doubt that Discovery and its shared-value model has become a force to be reckoned with both nationally and globally, and we’re quite sure there’s a lot more progressive innovation and creative disruption still to come.
To watch Adrian Gore’s full presentation from our Leading Insights Seminar CLICK HERE.
About the Author
Head of Marketing, RMI Investment Managers
Paige is an experienced marketing professional with a passion for people and corporate culture. She has a demonstrated history of working in the financial services industry and before joining the RMI group in October 2015, held senior positions in both business development and client service for two of South Africa’s top digital advertising agencies.