By Solomon Severa
THERE is no denying that disruptive developments are causing major changes to all kinds business models. In my own opinion a business model that is likely to be leading in any industry in a decade or so does not exist at the moment and it usually takes a new business model to cause a major shakeup in all industries. And naturally, a new plan to make money (a business model) in any industry comes as a result of a disruptive innovation.
Disruptive innovation, defined as a shake-up of existing well established incumbents by a new market entrant is not alien to Zimbabwe’s business world. There are many instances when companies faced disruptive innovations but, a standout account would surely be that of the mobile telecommunications industry. We can all agree the industry used to have some monopolistic tendencies and that hindered innovation.
Their business model was mainly centred on the provision of calling and messaging platform. They thought their business model was in a safe place, forgetting the world today is a global village and disruption often comes from outside, not your usual competition. They were caught unaware with the coming of Over The Top services (OTTs). OTTs are services which provide a product over the internet and bypasses traditional distribution.
Furthermore, they provide a traditional service at a lower cost than what it cost with a traditional method. In this instance, OTTs which became of much concern to mobile telecoms companies were the WhatsApp, Viper and Skype. Their clients were adopting OTTs as an alternative to their traditional calling and messaging services.
Supported by many prevailing factors among them cheap and easy accessibility of internet, OTTs use surged at an alarming rate in the years leading up to 2016. The telecoms players viewed the disruptive innovation with a pessimistic mind-set. The OTTs were a threat to their cash cows; a big chunk of their revenues came from the provision of calling and messaging services. Therefore, they lobbied the government for a ban on OTTs, arguing they were eating hard into their profits.
Threatening their existence in the process. A rent seeking behaviour peculiar to Zimbabwean businesses. The funny thing was, the dominant players in the industry had themselves, upset the telecoms industry by introducing prepaid SIM cards business model at the turn of the 20th century. Had they forgotten the recent years’ business environment rule book principle. The principle is that disruption is the only constant phenomenon, you either adapt or struggle. I have no idea. I can only assume either, they had lost vision or it was complacency on their part.
The government refused to budge, asserting innovation was a welcome development in Zimbabwe and was in line with the national strategy. The government advised the concerned companies to find ways to navigate in the new environment. After they failed to turn government hand, some players in the industry went on to put wheels on developing their own versions of OTTs to complete for the same market.
However, success on that avenue evaded them and they failed dismally on that avenue. Even up to now, they are still struggling to make major inroads. This was not the kind of disruption to be competed with but to be embraced. Fortunately, during all these frantic efforts to save their model they noticed and realized something respectively. Firstly, another of their product line revenues was picking up aggressively and secondly, it was not possible to successfully fight the disruption; OTTs were here to stay and just getting started.
Finally reality dawned, they understood that the solution was not in trying to maintain an environment in which their business model has been flourishing but to align their model with disruptive development. Therefore, they evolved their business model to focus more on data services provision. Mind you, disruptive developments like WhatsApp and alike use by extension, their data service was surging like never before. So why not align the business model towards data services. And align they did.
With an optimistic mind-set towards the disruption they worked on improving their data services. Embracing the new reality that data service provision was evolving into being their main revenue anchor. They embarked on a massive data infrastructure development in line with international standards. Others went even further around that period and made strategic acquisitions and alliances to position themselves well and enhance their data provision abilities. Until today, they continue to cultivate their new found cash cow by updating data service infrastructure regularly. Take a look on a mobile telecoms companies in Zimbabwe’s Income Statement, revenues are being driven by data service provision. Data is now their best performing product by far; their cash cow.
Another interesting account is about a company not far to the mobile telecoms industry. A cousin I would call it, after considering the fact we once had Post and Telecommunications Company (PTC). We used to have a vibrant postal services giant with a model centred on sending messages through letters and telegrams. With the advent of easier methods to send messages mainly over the internet, their business dwindled. They refused to concede the disruption was a direct threat to their revenue anchor. They failed to see their biggest competitive advantage was, they had the best and established sending and distribution network. Therefore, an opportunity to evolve their business model around that, pushing whatever product. Instead, they resisted and maintained stuck on their rigid model.
What they needed maybe was to quickly focus more on parcels, money or anything else that needed sending physically. They were slow to change/ evolve their business model until it was a bit late. Now the parcel and money sending market is very lucrative but, it’s difficult for them to complete with disruptors in the market. Playing catch up is not helping the former giant. It is being dwarfed in all ventures it is involved. A testimony of what happens when a company’s business model is slow to evolve in respond to disruption.
In this disruptive environment, companies must thrive to disrupt themselves or another company/ start-up will do it for them. Diverting the company’s resources on disruptive innovations may b time consuming, costly and takes focus on business core activities, it is worthy the effort. Alternatively, aligning their business model quickly enough when faced with a disruptive development is as equally good. In short, when faced with a disruptive innovation a company must not wait too long before evolving. It has to embrace it, adopt it and try not to fight it. The company also needs to allow the disruptive innovation be a guide in its strategy formulation going forward.
‘The rainbows of life follow the pathways of the storm’ Unknown.
Solomon Severa is an Independent Macro Analyst. He writes on his personal capacity. You can follow him on LinkedIn.