Dealing with digital disruption in Africa

How can African companies and governments anticipate and court disruption?

Disruption is not a new phenomenon in the business world. There are always different ways of doing things that interrupt the status quo. Now with the expanse of digital products, Africa is getting its fair share of interruptions and many companies are on high alert for any new technology that might make them irrelevant.

The steep curve of growth that most African countries are experiencing could make the continent a hot bed of disruption. After all Africa is already known to leapfrog technology and adopt innovative ways of solving its problems.

According to a recent C-Suite study, Redefining Boundaries, conducted by IBM, African companies are well aware of the oncoming disruptions and most of them recognise that it will probably happen through IT.

“Technology is considered the main game changer for CxOs in Africa, followed closely by market factors,” the report said.

It pointed out that the number one digital disruption companies expect in Africa is the ‘anywhere’ workplace. While another digital disruption cited was customer interaction.

“In Africa, CxOs see customer interaction moving most certainly online,” the report stated. Most of the companies in the continent have followed their counterparts in developed nations by improving online interaction for customer support and interaction.

Ben Mann Program Director, Software Offering Management Africa at IBM Kenya added that disruption has always been there but now it has a different twist.

“The speed in which markets are disrupted today is extraordinarily fast. It moves like a tidal wave; so if you see it, it’s already upon you.”


The role of government

Many governments are quickly finding themselves in a conundrum as they try to ride the wave of innovation by coupling it with relevant legislation.

The introduction of Uber, Netflix and minimal use of Bitcoins has put some in a defensive mode. The Kenyan government wrote off the introduction of Netflix, terming it as ‘immoral’ and a danger to national security, due to the ‘unrated’ programming it offers. The Kenya Film Classification Board vowed to regulate it.

Bitcoin companies [PDF] also caught the attention of the government in Kenya, as it cautioned citizens in the use of the digital currency. In a statement, the Central Bank of Kenya said that the cryptocurrency was not regulated and hence exposed the users to loss.

Recently, Nairobi taxi drivers protested against Uber and Easy Taxi terming these technologies as foreign and something that will render them jobless. The conflict escalated when Uber cars were torched by goons in Nairobi.

Fighting disruption is a natural reflex, especially when new technology creeps up on you. Yet it not an advisable solution, especially if its adoption is positively welcomed by the users of the service. Businesses have to invest in forecasting and research to find out the next evolution in their industry.

Russell Southwood, CEO at Balancing Act, a consultancy focused on telecoms and broadcast in Africa, told IDG Connect that even though the various African countries will have their own experience of disruption, companies need to be aware.

“No African company can afford to face these kinds of changes without having some kind of digital strategy,” Southwood said. “But this kind of strategy is to some large extent going to be reactive whereas the smarter corporations will begin to make innovation a core part of their business so that they help disruptive start-ups launch and invest in them so that they know how to shape their businesses in the future.”

Regulations could also pose a challenge to disruption. Southwood gave the example of mobile money in Kenya and Nigeria. In Kenya, mobile money was allowed to operate until the regulatory bodies understood its implications.

“But by the time Nigeria drew up its m-money regulatory framework, it insisted that the banks - not the mobile operators - were formally responsible for offering the services. If disruption threatens powerful players in the economy, it will be much harder but if not, much easier,” Southwood said.


The road to disruption

Established companies have the option of mapping out a smooth transition to future disruption by becoming its pioneers.

Agency banking in Kenya is an example that has taken this positive course. According to two Kenyan banks, Equity Bank and Kenya Commercial Bank, more people are using mobile banking either by withdrawing and depositing funds through mobile money or by using physical agents who do the same.

Kenya Commercial Bank said that it expects to see over 90% agency banking in the coming year. Equity Bank has reportedly laid off over 660 staff and is transforming its banking halls to handle other banking matters.

Such a move might cost more jobs, but it is responding to what the market needs.

Ben Mann of IBM stressed that even big companies need to keep on re-evaluating their business models and keep innovating. “In many cases the disruption is on the fundamental assumptions being made about your business,” he said. “That’s what is under attack.”

With this in mind, businesses also need to trace where disruption might happen.

Southwood suggested questions such as, “Are there enough internet subscribers that will help them build a successful service?” And “are there payment methods that do not involve carrier billing through the mobile operators?” will help businesses evaluate their position.

“Fifteen years ago, there were either a few hundred or few thousand internet subscribers in each African country. Now there are hundreds of thousands to millions,” Southwood observed.

As Mann concluded disruption is not an optional situation. “It is truly a case of disrupt or die. It’s not a question of ‘Should I disrupt?’ but, ‘How do I do it?’.”