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Disruptive Innovation to Continue Changing Our of Lives
By: Hezron M. Karanja
Disruptive Innovation is a term that brings forth a lot of frowns in a number of CEO’s faces around the world. For these CEOs who stand by and support status quo in the business world, this innovation has been nothing but a wave of obstacles and a major hindrance to the comfort zone of doing business-as-usual. This phenomenon however, has been gladly welcomed by a diverse group of open minded CEOs whose premise and principles are not so much geared to the contemporary times, but rather towards the future. Disruptive Innovation is an innovation that comes into the market – largely unnoticed – but very quickly picks up steam and disrupts the traditional market with better service delivery and better quality products. This innovation normally leaves the traditional corporations holding the short end of the stick, and it eats up a large portion of revenues that are available in that market. A good example is Uber, and the end result is what it has done to the traditional taxi service industry.
Corporations evolve just like most things in life. A corporation’s culture and traditions are the bedrock of its success and its future is pegged on a strict adherence to these principles. But that doesn’t mean that they too cannot be tweaked so as to conform to modern times. Disruptive Innovation is one of the ways where the world has been able to see tremendous advancement in product quality and superb service delivery in the last 25 years or so. Companies that refuse to advance to the new age are largely being left behind, just like the taxi industry is very painfully experiencing today.
The advent of the internet in the last three decades has been a friend to both traditional and new age businesses, but it also has been the engine that has been running Disruptive Innovation the world over, and especially in Kenya. Bob Collymore the CEO of Safaricom was on the popular American TV show ‘60 Minutes’ in November of 2015 where he talked about Disruptive Innovation and the role that Safaricom in general and M-Pesa in particular has played to change the way Kenyan’s and businesses in the region conduct business. It’s no secret that M-Pesa revolutionized the monetary industry for good. They say 70% of the Kenyan citizenry do not have a bank account. This is due to many factors i.e. Minimum balance requirements, unavailability of banking institutions in some rural parts of the country, and some stringent rules and regulations that can sometime delay withdrawals or transfers. M-Pesa has successfully been able to tap this market which has left many banks very unhappy.
Mr. Collymore was asked why a regular US citizen cannot ‘text’ money as Kenyans do. His reply hinged mainly on Disruptive Innovation. The US banking fraternity has a very strong lobby groups in Washington DC. These lobbies operate on a bottomless pit of hundreds of millions of dollars. Their job is to lobby members of Congress against enacting laws that would make this kind of innovation possible in the US banking system, because just like it happened in Kenya; it would eat up a large portion of their revenue in lightning speed. An equivalence of M-Pesa will not see the light of day in America anytime soon, not when the banking industry has something to say about it, even though the technology and the wherewithal needed to accomplish this task is readily available.
Kenya has come a long way, and it is very comforting that the government has been willing to allow innovations even when it means the death of older and more traditional entities being replaced by newer and modern operations. However, it has been disappointing on the other hand that the government has moved very slowly in allowing this innovation to be accommodated in parastatal organizations. The private sector has moved with great speed in embracing this new wave of innovation, but the parastatal sector has lagged behind. Our government has a history of being last to embrace anything new; from software upgrades to strategic thinking evolutions regardless of who is running the government. This can be attributed to political red tape, bureaucracy, and the sad truth that a minor decision has to be bounced along a line of a few people who probably have nothing of value to add to the process. This obviously contributes to the passive progression process to which these parastatals miss the golden chance to increase their revenues.
Overall, the public sector’s inability to embrace new technologies and new ideas does impede the general growth and economic advancement of the country. The private sector cannot be expected to lift the country economically without the honest and robust input from the public sector. On my extended stay in Kenya recently, I talked to a few private sector players –mainly in finance- who intimated that the parastatal world has always looked to the private sector for guidance and trends. I agreed to this assumption mainly because it is an occurrence that happens to most corporations co-owned by the government globally, with the slight exception to military and security operations.
Some CEO’s in the parastatal world have a sub-conscious view that parastatal organizations are not equipped to make a profit. This in turn proves to be a major impediment to the acquisition of new technology and the overall hesitance and trepidation in embracing new and modern ways of product manufacturing and exceptional service delivery. This sub-conscious belief should be brought to the fore front of consciousness with the main goal of reinforcing the fact that parastatals are in business like any other private sector operation and as such, are required if not mandated to turn a profit.
Innovation (Disruptive or otherwise) can turn a page in the parastatal world. Most parastatals have monopolies in their areas of operation. Kenya Power has a monopoly in the lighting industry. From the outside looking in, this corporation has seen the wave of new innovations and has jumped and reorganized itself to be at the receiving end of all things modern, so as not to be overtaken by innovation. It has avoided the road mostly traveled by many parastatals. Kenya postal service system was a victim of innovation, so was its sister company Post Bank. There are many factors that contributed to the demise or the decline in influence of these corporations: mismanagement, incompetence, low morale and the lack of corporate culture adherence among others. But we also have to understand that these organizations fell at a time when the private sector industry was coming to terms with the advantages of the internet and all the convenience and simplicity of product and service delivery that came with it. They saw their demise at the right opportune time as innovation was creeping in.
Constant change is a business reality, corporations must continually adapt to their environments to stay competitive or risk becoming obsolete. The ability to incorporate big changes and innovation into the fabric of the organization should be the core competence of its management and its Board of Directors.
Contrary to some beliefs, change is good. Embracing change makes us learn new things and avoid the more too often mundane routines. Innovation brings in new ideas; otherwise, everything stays the same and stagnates.
Hezron M. Karanja
Director of Finance, (Digital Media), Paramount Pictures – Los Angeles, California, USA