Judging by recent developments, there can be no doubt that Kenya’s banking industry is undergoing a disruption.
In
the last couple of months, for instance, more and more banks have been
restructuring — cutting down on staff as well as reducing the number of
branches by closing some.
More is expected in the
coming months. The key driver for decision making in the industry is
cost cutting — the anchoring message being “alignment of the business to
the current environment”.
Ordinarily, such decisions are based on the quest for revenue enhancement, technological advancements, and innovations.
The
Kenyan reality is, however, that changes are coming fast, making it
easy to predict that the banking industry will in five years look very
different from what we currently know it to be.
Bank
branches will no longer be a source of competitive advantage. Banks will
be operating at half the current branch network, and in 10 years we
will have branchless banking with virtual money as the dominant mode of
transactions.
This is a reality arising from changes
in the market as well as the consumer preferences. Consumers have become
more demanding and technology is transforming the way they do things.
It may be lost to many that only five years ago,
consumers of banking products were, for the first time, exposed to a
24/7 banking system which has now taken a life of its own.
Innovations
are happening at a faster rate than expected, effectively putting
non-compliant companies on the path to extinction. Kenya has firmly
entered the era of ‘digital disruption’.
Industries
and companies are being disrupted and others are enjoying and cashing in
on the disruptions. In the transport industry, for instance, Uber has
become the largest taxi company without owning any vehicles; Facebook is
the largest media company without producing any content; Airbnb took
three years to reach over 500,000 rooms and market capitalisation of
more than $25 billion whilst it took Hilton Hotels more than 50 years to
achieve similar results. Skype, which owns no telecoms infrastructure,
is the largest phone company.
If there is anything
that should be keeping the management of companies awake at night, it
should be how to enhance the capacity of their organisations to
innovate.
Innovation needs to be part of the corporate DNA if organisations are to achieve sustainability and success.
The
challenge is how to make large corporations more agile and ready for
innovations. Put differently, the question is how to make the elephants
dance to the innovation tune. It starts from the top — CEOs and boards
must have the goodwill and intention to steer their organisations in an
innovative direction. This calls for moving away from business as usual.
READ: Nairobi finance inclusion rate linked to banks’ innovation
Management has to allow for innovations and create a climate that is conducive to it. To increase the chances of success, there is need to increase the number of attempts to innovate.
Management has to allow for innovations and create a climate that is conducive to it. To increase the chances of success, there is need to increase the number of attempts to innovate.
Innovation is about
both ‘breakthroughs’ and creating a difference such as developing new
products and making them commercially successful; adopting new business
models; changes in products and service delivery mechanisms and
developing new processes. Innovation in organisations will follow one of
the three distinct approaches; that is incremental, distinctive and
disruptive.
There is a need for quick and dirty
experimentation in an organisation. This experimentation will lead to
new ways of doing things and management needs to allocate resources to
such experimentation.
The experiments need to be fast,
cheap and must ensure the release of beta versions of the products and
decisions need to be made fast on whether to discard or adapt.
The
organisation should try to come up minimum viable products (MVPs) and
have them tested in the market for customers’ feedback. The feedback
should be used to iterate the product until an acceptable version is
arrived at.
In
regard to employees, innovation requires a different breed. The
organisation must have within its ranks people with entrepreneurial
risk-taking mindset. The employees must be willing to fail and learn
from their failures.
This is because the mantra for
innovative businesses is, “if you are failing, fail fast and move on.”
The employees also need to have the ability to focus on monetising the
ideas.
This is critical if businesses are to be
sustainable. The culture of innovation for employees is something that
can be built in an organisation if there is deliberate effort to build
innovativeness from within.
As companies head towards
the innovative environments, it will be critical that they consider open
innovations. This is where companies invite external parties to take
part in design competitions and innovation challenges within
organisations.
It is critical that the businesses
assess how innovative they are and if they have a culture of innovation.
If not, they need to brace themselves for extinction.
It
is critical that the Kenyan corporations assess how innovative they are
and if they have a culture of innovation. If not, they need to brace
themselves for extinction as we have seen some Kenyan companies that
were successful in the last decade disappearing from the market due to
lack of innovation.
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