Recently I was telling an insurance industry executive about Tonik, an affiliate of Blue Cross of California that only offers health insurance to “the young invincibles” — people in their 20’s. At first glance he thought this was niche marketing, nothing new. But Tonik is different, it’s a whole new subsidiary that created new products tailored to their audience. The marketing is important to initially lure prospects in, but relevant products, easy-to-understand forms, and online-based service are more likely to convert prospects to long-term customers. They’re offering more by going beyond marketing-as-facade.

Viewing Tonik as a business rather than a product line (or niche marketing) helps us understand its implications. I think Tonik qualifies as a disruptive attack in the insurance industry, because:

1. It focuses on a low-margin audience other companies are ignoring
2. Through self-service and use of the Internet they keep their costs down
3. As this audience gets older they will naturally look to Tonik for expanded coverage

I don’t think marketing as traditionally understood would be enough to create Tonik, it requires business design skills:

• Traditional disciplines like marketing aren’t holistic enough to address the entire challenge
• Abductive thinking is needed to create something new and better
• There is no discrete problem statement in this projects; tools are needed to prioritize and synthesize variables in the environment, like integrating creative product potential with financial potential

If we take the term Business Design literally — the designing of businesses — we get a sense of the scope of the challenges at hand. Design thinking excels at dealing with “wicked” problems that are complex and ill-defined, requiring abductive and integrative thinking to address the creation of whole businesses.