Why Africa needs more Disruptive Innovations.
Any time a new person, be it a politician making political promises or a new officeholder is assuming office, in their acceptance speech use words like new technologies, innovation or even disruptive innovation. For today, let me debunk the term ‘disruptive innovation.’
On one hand, innovation is the creation of a new thing; an invention or the practice of developing or thinking in a new way. Disruptive innovation on the other hand, according to the Clayton Christensen Institute , is an innovation that makes products and services more accessible and affordable, thereby making them available to a larger population. The reason why everyone will fall in love with disruptive innovation is more of a David vs Goliath story, where we are always rooting for the underdog to win.
Equity Bank
The Equity bank story from Kenya, epitomizes the Disruptive innovation in the Banking sector. Once started as a building society, which was considered technically insolvent three decades ago, to become the top bank in the region in terms of the customer base. When it entered the market, banking was only considered for the elite. The market was dominated by foreign banks, the likes of Stanchart, and Barclays bank now Absa Bank..
Equity Bank came up with a clear strategy for banking the unbanked. Some of the simple things that they adopted included extending banking hours, implementing a no minimum account balance, and literally taking the bank to the customers through Equity agents.
But surely one may wonder, weren’t the other leading banks innovating? Yes, they did innovate, but the type of innovation they had was sustaining innovation that focuses on the improvement and growth of the existing market needs. That is why they focused on existing customers and not being deliberate on the unbanked population that was considered high-risk. On the contrary, established companies are best placed in implementing sustaining innovation since they have the capacity to improve on existing products.
Another notable example of Disruptive innovation is M-Pesa, which provided a platform for people to initially send money particularly to people in rural areas. This grew and gradually enabled the massive population access to a safe and cheaper money transfer platform.
Way Forward
Africa has a huge market for the untapped markets, which are prime for disruption. Anzetse Were a development economist aptly said, “For a company to succeed in Africa then you will need a strategy for the bottom of the pyramid.”
The bottom of the pyramid is a tough nut to crack. It takes years probably decades for some to completely disrupt an industry. Why? In the beginning, the product will be average and not that good but with continuous improvement, it will certainly be better to the level desired by customers.
The debate is not whether disruptive or sustaining innovation is superior to the other in fact Africa is in need of all forms of innovation. Nevertheless, disruptive innovation stands a better chance in solving some of the long-lasting problems that have existed in the Health, Education and Economic Growth.