Your post-reform success depends on your portfolio. Yet, many agencies are making a serious mistake in how they are diversifying. As they attempt to reposition themselves for the impending reality of fee-based compensation, too many firms are adding products and services for the wrong reasons, and without asking the right questions. Unfortunately, most of these newly diversified portfolios will prove inadequate for post-reform success.
Successful diversification is not about adding great products and services; it's about adding the ones that are right for your agency. This requires a careful, strategic approach to expanding the portfolio, which begins with understanding the portfolio's key role in your firm. While a portfolio must provide sufficient revenue and differentiation, its primary role is to be the agency's toolbox of HR and business solutions.
A strategically diversified portfolio is the agency's cornerstone, the essential product and service solutions that are the tools of a consultative broker. There is, however, no single "right" portfolio; what your firm's portfolio should contain depends on a number of factors. Four strategic questions will help you determine just what tools belong in your toolbox.
To create your 21st century agency portfolio, filter potential products and services through these criteria:
1) Does the product or service support and enhance your firm's key value proposition(s)? Since the role of broker soon will no longer pay the bills, your portfolio must contain the solutions you need to fulfill your new value proposition. If, for example, you are presenting yourself as a human capital management consultant, you must have innovative products and services that help the client manage their people better. If you are a business solutions firm, your portfolio needs a variety of valuable solutions that will help the client run a more efficient business and drive more dollars to the bottom line.
2) Does it meet the specific needs of your target market(s)? A best practice for a 21st century agency is to target specific key markets, such as manufacturing, retail, etc. Customize your portfolio so that the products and services solve problems for your target market, recognizing that, for instance, manufacturing firms face some different challenges than health care organizations.
3) Do you have the internal capability to deploy the product or service successfully or are you willing to either partner or hire the talent? This is an often-overlooked consideration. While post-reform success will require all producers to be consultative, many portfolio products and services require advanced skills, specialized expertise and/or additional licensure, e.g., executive benefits, P&C, ACA compliance services, population health management, and retirement services. Choose only those that you will be able to fully and effectively support.
4) Does it generate sufficient revenue to justify the investment and/or effort or does it provide sufficient value in other ways, e.g., providing a true competitive advantage, differentiating or enhancing your firm's value proposition? Put colloquially, is the juice worth the squeeze? Carefully evaluate the real value to your firm before adding a product or service. Don't fall into the arms race trap thinking you have to have more in your toolbox than the competition. This is a case of quality trumping quantity.
Griswold is one of the industry's foremost thought leaders. His Agency Growth Mastermind Network helps agency leaders reinvent their firm in 12 months. Reach him at (615) 656- 5974, nelson@InsuranceBottomLine.com or through 21stCenturyAgency.com.
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