By Gichobi Mwangi
East Africa’s business landscape has become more dynamic and more competitive. Staying in business is a much more complicated matter than ever before. Rapid innovations have disrupted successful products and business models and pushed companies out of business, most notably, due to competition; whereas most banks have adopted mobile and agency banking as new models to stay afloat, a shift from conventional off-the-counter service.
Managers are not only under constant pressure to sustain current growth performance, but also to improve margins, reduce costs, improve products and grow market share innovatively and strategically.
Lack of constant innovation can prove harmful to organizations; it precipitates decline. It may deny companies greater opportunities to deliver better products and experiences. This can significantly dent revenue earned and market share gained.
Integrating innovation in the business processes and quickly adopting, can spur companies to remain competitive. Tech innovations in East Africa have challenged the financial industry by offering convenient, efficient, and customer-focused products. A good example is M-Pesa, a mobile phone-based platform for money transfer and financial services that was launched in 2007 by Safaricom.
The platform works by allowing registered individuals to withdraw cash, store money, make payments and send money through their mobile phones using the existing Safaricom mobile network. Before M-Pesa was launched, only 25% of Kenyans had access to banking products. By 2014, this figure had jumped to 68%, attributed to M-Pesa performance as an essential financial platform. Its agency model for deposits and withdrawal points have over 261,000 agents in 11 M-Pesa countries.
M-Pesa reshaped economic interaction in Kenya; its success remodeled Kenya’s banking and telecom sectors, through financial inclusion to the base of the pyramid and creation of thousands of small businesses. Most importantly, M-Pesa’s success threatened traditional banks emerging as serious competitor. Firstly the platform was able to reach the majority unbanked mostly at the base of the pyramid. Secondly, the platform automated the banking process. Lastly, its network of agents across the country placed closer to customers.
Due to the stiff competition, most banks have changed their models; a number have adopted the agency model, others have integrated M-Pesa into their services as an incentive to retain and attract more clients.
Adopting a culture of innovation will stimulate growth while maintaining a competitive edge.
Doblin, a global firm focused on solving complex problems innovatively formulated Ten Types framework for innovation. The tool is used to diagnose and enrich innovation in addition to analyzing existing competition. Companies can use this framework to analyze innovation and enrich competitiveness. The framework is structured into three sections: configuration, offering and experience.
- Profit model: Innovation on how to make money.
- Network: Innovation on how to connect and create value for our clients.
- Process: Innovatively improving organization’s process to achieve higher value.
- Structure: Alignment of resources to optimize value innovatively.
- Product performance: Innovation on distinguishing features and functionalities in a product.
- Product system: Innovating on complimentary product and services.
- Services: Innovating in support and enhancement that surrounds an offering.
- Brand: Innovate on how the offering appears in the market.
- Channel: Innovation on delivering an offering to the customers.
- Customer engagement: Distinct interaction to improve customer relationships innovatively.
To be competitive, organizations in East Africa must constantly explore new things, discover new needs and develop new technologies for their customer base. Failure to consistently and relentlessly improve is one of the surest (and shortest) routes to failure. More often, limited resources are available towards these goals and, especially for SME’s, putting a strong innovation culture that utilizes available scarce resources to spur competiveness is the surest way to survival. Companies need to be agile, fast and lean, leveraging on existing tools and frameworks to explore and adopt innovation.