Hemant Shah: A True Model for Embracing Change [Entire Talk] | Summary and Q&A

April 2, 2014
Stanford eCorner
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Hemant Shah: A True Model for Embracing Change [Entire Talk]

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In this video, the speaker shares the background and journey of RMS, a catastrophe modeling firm. He discusses the company's beginnings, the challenges faced during the experimentation phase, the establishment of the business model, and the need for reinvention. He also talks about the recent pivot in strategy and the challenges faced during this transformation.

Questions & Answers

Q: How did the speaker's upbringing influence his decision to start a business?

The speaker's father, a professor at Stanford, inspired him to start RMS by his pioneering research in earthquake risk assessment.

Q: How did the speaker and his co-founder come up with the idea for RMS?

While taking a class together at Stanford, the speaker and his friends had to write a business plan for a high-technology start-up. They developed the business plan for what became RMS.

Q: What was the initial focus of RMS?

RMS initially offered a single earthquake risk model for three cities in California.

Q: How did RMS expand its business over the years?

RMS extended the geography of its models from California to the United States and then to other countries. They also expanded the number of perils they modeled, from earthquake hazards to a range of climatic hazards, terrorism hazards, disease pandemics, and more.

Q: What is a catastrophe model?

A catastrophe model is a composite model that uses stochastic techniques to characterize the underlying characteristics of a particular type of catastrophic event, such as earthquakes or climatic hazards. It assesses the frequency and consequences of these events and the exposure and financial impact on assets.

Q: How did RMS use its catastrophe models to help the New York City subway system?

After Hurricane Sandy, RMS helped the New York City subway system construct a parametric hedge against future flooding losses. They analyzed the subway system's risk to flooding and helped construct the parameters for a bond that laid off the financial risk to investors.

Q: What was the mindset behind the decision to sell the business?

The speaker and his team saw the business as maturing and saw an opportunity to sell and move on to the next venture.

Q: How did RMS overcome the mature market fallacy?

The speaker and his team decided to re-envision the business and continue growing instead of settling for being a niche analytics firm. They re-upped with more equity, developed new ideas, and focused on deepening their relationships with customers.

Q: What challenges did RMS face during its recent pivot in strategy?

The pivot required a significant change in the company's value proposition and how it added value. The speaker had to overcome internal resistance, align the organization, and convince employees of the need for change.

Q: How is RMS positioning itself in the market with its new strategy?

RMS is positioning itself as an environment for resilient and real-time exposure and risk management. They are delivering their core system, RMS(one), as a cloud-based service and targeting a much larger addressable market.


RMS's journey from a start-up to a mature company and its recent pivot in strategy highlight the importance of continually reassessing and reinventing one's business. Success can be achieved by experimenting with new ideas, establishing a coherent product strategy, and staying open to change. Overcoming internal resistance and leading the organization through change can be challenging but necessary for growth. The ability to adapt and evolve is crucial in the dynamic business environment.

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