How market disruptors can thrive in SA

2016-10-19 16:33 - *Buhle Miranda Goslar
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Buhle Miranda Goslar

Buhle Miranda Goslar.

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FROM Uber to WhatsApp and Udemy to Paypal and M-Pesa,‘market disruptors’ are seemingly everywhere and making life easier for connected consumers.

Disruptive innovators can radically simplify and cut the costs of previously expensive products and services, making them more accessible to the public at large. This levels the playing field. Take education; where Wikipedia helped to democratise the curation and spread of knowledge, and later disruptors such as Udemy and Khan Academy significantly lowered the cost of accessing an education.   

For South Africa, increasing disruptive innovation can drive broader access to health, education, financial services, transport and communications. As philanthropist Melinda Gates so aptly put it: “Disruption can be a positive — sometimes vital — catalyst for change”.

But what conditions are required for market disruptors to thrive?

The necessary conditions for market disruptors

Disruption happens in competitive environments. In our consumer environment, the oligopolistic nature of key sectors in South Africa presents a challenge. Think of many sectors in South Africa and you will find just a handful of key players dominate and control it. Even when it doesn’t look like it on the surface, a quick study of ownership structures will prove the point. Granted much of this is a product of history; however, it is imperative that the barriers to entry be lowered. More competition will create the motivation to seek and serve new or previously ignored markets in the country.

It is important to remember that innovating for new or underserved markets is hard and comes with higher risk and costs. It is, therefore, unlikely that in a low or moderately competitive environment, existing players will be urgent about creating new, better options for their customers – essentially risk crashing and burning, when they can continue to provide a "least-worst" option for a decent margin and maintain market share. Just ask the local taxi industry who is now engaged in a daily struggle for the customer with Uber.

The second issue to deal with is the role of regulation in creating the necessary conditions for market disruptors to thrive. In South Africa, a peculiar situation seems to be unfolding. It is one in which, at a time when we desperately need more competition, the very regulation that is designed to protect consumers is inadvertently increasing the costs to deliver services, creating additional friction in the delivery of services AND keeping would-be new entrants / market disruptors at bay.

This is a difficult issue to navigate. It is true that that legislation like the Consumer Protection Act and National Credit Act protects consumers from abuses. This is important. But how can this be better designed so that the burden and cost of compliance are not passed back onto the over-burdened consumer? Especially since they already have to deal with a reduced menu of choices as said regulation keeps the would-be market disruptors out in the cold.

Last but not least we need much more variety in skills, experience, capabilities and structure of players in the market, for the generation of more creative solutions and approaches to thrive. If all our media, education, banks, insurers, transport and communications providers have a similar history, strategies, structures and resources – why would we expect them to come up with different, even disruptive solutions to pressing socio-economic problems? As Ashby said, “variety absorbs variety”, this cybernetics law holds true here.

Limited variety in market players will lead to limited problem-solving. New models of partnerships between existing and new players are potentially the quickest to achieve this variety and create conditions for disruptors to thrive in South Africa. There is a lot to talk about in this area but I will leave that for another day.  

Creating the necessary conditions for market disruptors is within reach. Indeed, there are already a number of companies disrupting multiple sectors; whose innovation, technological and social, has fundamentally changed how and to who services are delivered in South Africa.

Companies like Siyavula, HeroTel, DroneSnap, BrightBlack, Wi-Group, Snapscan and Rain-Fin, to name a few, are changing the future provision of education, communications, health, energy and financial services in South Africa. Some of these companies have already attracted substantial equity investment from JSE Listed companies. Others still, like Capitec Bank, have become giants in their own right.  

So what is the DNA of Market Disruptor?

Market disruptors are, out of necessity, lion-hearted - they are not afraid of tension and complexity.  Instead, they seek it out as a vehicle to seeing the world as it really is. They ask "why not? If not this way, then how?"  

Resilient by nature and experienced, they soldier on in tough times often having to change their product and business model a few times before finding a winning formula. Also, because making these changes is costly, market disruptors are smarter about how they learn (they are paying their own school fees). They find creative ways to learn – like connecting with, and learning from players outside of their own sector.  All this, as well as making decisions quickly, lowers their cost of learning. They possess what Roger Martin has called an “opposable mind”.

Finally, market disruptors are explorers, understanding that the only way to serve a new market is to be in it. They do much of their testing in the field and not the boardroom.

We have plenty of these people in South Africa, I run into them regularly.

So what?

So we have the market disruptors and we have the tools. What are we going to do about creating the necessary conditions for them to thrive? That may well be the difference between a mediocre future and an exceptional one.

*Buhle Miranda Goslar is passionate about Africa, FinTech and Social Innovation. A graduate of the UCT GSB Executive MBA, she has studied Systems Thinking and Business Model Innovation extensively. Views are her own. Follow her on Twitter @buhlegoslar.

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