Disruptive Innovation

The term disruptive technologies was coined by Clayton M.  and introduced in his 1995 article Disruptive Technologies: Catching the Wave,which he co-wrote with Joseph Bower.

 is an innovation that helps create a new market and value network, and eventually goes on to disrupt an existing market and value network (over a few years or decades), displacing an earlier there. is an example of disruptive innovation. A new market was created for money transfer in Kenya. In this process, it has threatened traditional retail banking services.

It’s important to note that usually it’s the that is disruptive to existing companies, not the technology itself. For example, the business model of MPESA is what has been disruptive to offered to the poor. Disruptive innovation does not necessarily create a new product. Banking services were already there. Technology already existed for customers to transfer money. However, there was a group of customers that could not access this facility. Before MPESA  it was still possible to do this with considerable obstacles and risks.

Christensen defines a disruptive innovation as a product or service designed for a new set of customers. This is what MPESA did. It is an example of “low-end disruption. According to Christiansen, low end disruption targets customers who do not need the full performance valued by customers at the high end of the market and “new-market disruption” which targets customers who have needs that were previously unserved by existing incumbents.

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Safaricom launched MPESA to serve customers that were not been served by traditional banking services.

 Business implications

Disruptive technologies are not always disruptive to customers, and often take a long time before they are significantly disruptive to established companies. They are often difficult to recognize. Indeed, as Christensen points out and studies have shown, it is often entirely rational for incumbent companies to ignore disruptive innovations, since they compare so badly with existing technologies or products, and the deceptively small market available for a disruptive innovation is often very small compared to the market for the established technology.

It is well known that the Kenyan Banking sector took a while to recognize the disruptive nature of MPESA to their business model.

You can read more on a link to an excellent Wiki article. I have used MPESA as an example to help our readers put the concept in an African context.

Francis Stevens George

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