Digital Innovation in Emerging Markets

Introduction

Good afternoon or good morning, wherever we are from. I am excited to share thoughts today on what it takes to pursue digital innovation amidst constraints, especially in emerging markets. And this is novel because this is something we do every day in a business school, to teach case studies, but having a live case session with the protagonist in the room is something that's different. I think this is a novel opportunity and thank you to the organisers for organising the competition, and George congratulations and thank you for putting yourself in the hot seat today.


I want to start by sharing some thoughts on what it means to pursue digital innovation amidst the constraints of emerging markets. And I will start with 3 dynamics of emerging markets as we know it.


Emerging Market Constraints

The first is emerging markets and market constraints where we know that primarily that emerging markets are large organisations/ecosystems but then they have affordability constraints because the populations are predominantly poor.


The second characteristic unfortunately is that we also lack resources in the sense of infrastructure, talent and capital - all are deficient, and that limits the amount of innovation that can happen in an emerging market.


The third is the issue that we want to speak more about today, which is institutional voids. And this really is about the absence of institutions to connect buyers and sellers and create markets efficiently. In the public sector, this is about creating an enabling environment that fosters innovation and change and catalyses the private sector and then on the private sector side, it's also the lack of or the dearth of diverse value chain actors across the different things that you have to do. Typically in emerging markets you find one organisation that has core competencies in one area having to stretch themselves and doing multiple things in the value chain just because the actors don't exist or the structures for partnership and interchange don't exist. And I will use an example in our financial services industry that is known to us and that's the banks. In the banks, from product development to delivery, the bank conducted all business activities and owned the channels and delivery structures.

But when we portray this in a digital or mobile environment, we have different ecosystem actors or value chain actors.We have the bank serving as the deposit money holder; we have the e-money issuer; we could have a payment service provider; then we could have a distributed network of agents and then we have the telecoms channel that provides the infrastructure. So that's 5 different activities and we know that because of licensing and regulation structures, 2 are restricted to specific actors - the telco layer and the deposit holding layer. And what does that tell us. It tells us that in these types of structures and institutions, we need to think more about collaborations and partnerships. A few years ago, I addressed the Bankers Committee and Bank CEOs about fintechs and models for engagement and partnership. And the question I asked them was fintech - are they your friends or foe? And I think that's a question we need to ask ourselves. Because when you think about models for engagements theres really it's really partnerships is one structure, having your incubation/innovation centres is another structure and the third is a hybrid in general.


Conclusion

But what is relevant to emerging markets in this discussion is the fact that whether or not we like it, innovations should create markets, and the solutions address the social and developmental challenges of our markets. Otherwise, we can't really grow or develop in any sense. But in we expect innovatorsovators are expected to be agile and repurpose themselves and their solutions to deliver value over time. And this where, just looking at George's case and the Nomad money app and what they've done is that coming to the realisation that the market might not be ready for your product is something we all need to accept and adopt. And I'll share another example. As far back as 2003, even before M-Pesa launched in Kenya in 2007. A Nigerian Bank called First Atlantic Bank introduced a product called Flash-me-cash. That technically was mobile money. But then again as far back as 2003, when mobile phones were still new, everything was novel. It was an innovation before it's time. So what happened, the product sort of died a natural death. What they were not able to do is what George has done. How do we rethink our products around what the market can accept and do today? Rather than sticking to what the market needs to do to meet our product needs And I think that is one of the things we need to be mindful about. That in our environment where we are still fighting various challenges and constraints. How do we begin to rethink our products and repurpose our solutions and evolve them over time as the market evolves and develops.


I congratulate Nomad Money for this win. It is a learning process and as Viola said at the beginning, it's about how do we build successful startups and share our stories and share our pains and our joys as well in building a startup. And I will end there. So George, all the best. We hope that this engagement will provide richer insights into how you can continue to grow and evolve and develop. Thank you very much for the opportunity to speak today.


* Address delivered at the Virtual Sandbox event hosted by Ovamba and Dedalus Global held Virtually on July 16, 2020.

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