American Family helping set standard for ‘big company’ role in emerging economy

27 Mar American Family helping set standard for ‘big company’ role in emerging economy

From the outside, American Family Insurance might strike observers as a buttoned-down, old-line company operating in a traditional business market.

Beneath that blue-chip exterior beats the heart of a corporate entrepreneur.

Founded in Madison nearly 90 years ago, “AmFam” is a mutual insurance company that grew steadily but somewhat slowly across the United States for much of its history. Its property and casualty insurance sales are the foundation for about $7.4 billion in annual revenue and $20 billion in assets, good for a spot on the Fortune 400 list.

Long known for its attention to customers and community involvement, American Family has emerged as a prominent example of a company that values innovation – not only within its own walls, but inside companies in which it may invest or otherwise take an interest.

That message was stressed Monday at the second annual Wisconsin Tech Summit by Peter Gunder, American Family’s chief business development officer and an architect of the company’s innovation strategy.

Gunder spoke at an event that epitomized how large companies can interact with emerging companies, often to the benefit of both. The Tech Summit matched 15 major companies and more than 50 emerging companies, many with technologies tied to the “Internet of Things,” digital health and advanced manufacturing.

Throughout the day at the GE Healthcare Institute in Pewaukee, those companies engaged in more than 175 “speed-date” minutes lasting 15 minutes each to talk about possible partnerships – from exchanging research to investment to sales channels.

For the major companies, it’s often a case of staying ahead of the curve. They want to hear about ideas before their competitors. They also don’t want to rely purely on innovation from within, which can be difficult in larger companies that sometimes move more slowly.

Gunder noted how Google became a billion-dollar company in just eight years and that Facebook did the same in five, Tesla in four, Uber in two and Snapchat in one. And he noted that iconic camera-maker Kodak is now out of business – despite having invented the digital camera in the 1970s. Gunder said his company realizes the need and potential financial rewards of embracing change.

“We live in an exponential era,” Gunder said. “Either disrupt yourself or be disrupted by someone else.”

American Family is one of just two major insurers — the other being San Antonio-based USAA — to add corporate investment to its business strategies. While American Family began investing in venture capital funds in the 1980s, it wasn’t until 2010 that it launched its own venture fund.

The company plans to see returns on its venture investments over time, but it also expects to benefit from investing in companies that help improve the company’s core business, which is insurance.

That means investing in products or services that help prevent burglaries, detect or suppress fires, mitigate water damage and more. Those kinds of claims produce about $335 million in losses annually, he estimated.

Examples of inventions in which American Family has invested include a device that detects if heating elements in appliances are left on and a security system that notifies homeowners of disturbances via cellphone.

Gunder said his company is watching the evolution of self-driving and other “connected” cars that allow even visually impaired individuals to travel safely. It also invests in insurance sales-related technologies, such as tool to allow consumers to easily compare its insurance packages with those of competitors.

Finally, the company remains interested in innovations that help the company use data to understand customer needs and serve them – while limiting the risk of having that data be compromised. “If you think about it, we have a brand of trust,” Gunder said.

In addition to its venture fund, American Family is a partner in the “StartingBlock” entrepreneurial hub in Madison and a supporter of “The Commons” entrepreneurial project engaging colleges and universities in southeast Wisconsin.

With a background in engineering and information technology, Gunder has kicked plenty of startup tires in California’s Silicon Valley. He “bullish,” however, on Wisconsin’s ability to create more companies that can compete nationally and beyond.

For those emerging companies to take root, however, it will require more state companies such as American Family acting out of a sense of enlightened self-interest. The right partnerships between big and small can be profitable for all.

Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal.

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