Disruption in business is not an entirely new concept, for these has been happening since time immemorial. As new technologies are developed and adopted, new markets are created and new business models emerge. Think of the time when the car - spurred by the advent of automotive technology - replaced the horse more than a century ago. And now as cars become electric, self-driving and shared, we see new markets developing (i.e. telematics market) and a new wave of disruption coming to the automotive industry exerting pressure on the incumbents to revisit their business models.
While disruption is often confused with innovation, the two are not exactly the same. An often quoted definition of disruption is from Clayton Christensen’s book The Innovator’s Dilemma, which defines a disruptive product as one that displaces an existing market, industry, or technology and produces something new and more efficient and worthwhile. Thus while innovation which can be a new idea, method or product is just simply creative, disruption is both creative and destructive.
Some great examples of disruptions include WhatsApp in telecoms, M-PESA in banking, SportPesa in gambling and of course Uber in transportation. All these disruptors have managed to penetrate existing markets through the use of innovative technology-based solutions giving established companies a run for their money.
One of the sectors that is highly susceptible to disruption is financial services, as a matter of fact, a 2015 World Economic Forum (WEF) research report predicted that “the most imminent effects AND the greatest impact of disruption will be felt in the financial sector, specifically in the banking industry and the insurance industry respectively. This is already evident as we see new entrants and innovations such as InsurTech and FinTech (short for Insurance Technology and Financial Technology respectively) causing transformative shifts in the sector and presenting both a threat and an opportunity for the established players.
Business leaders in the financial services sector are faced with the challenge of how to interpret or react to this new developments as few are adequately prepared. A consensus exists on the need to react fast and be anticipatory in order to make the necessary changes and seize on any opportunities early enough. What remains unclear however is how to go about it and most importantly which disruptions are most relevant/impactful to help narrow strategic focus for prioritization, resources optimization and ultimately competitive advantage.
Curious to get some clarity and understanding on which innovations are most relevant and find answers to other pertinent questions, I have embarked on a research and writing expedition. Through a series of articles, I seek to satiate my own curiosity and hopeful provide you, my reader with some answers to your own questions as I share my discoveries with you.
NOTE: This is the first article which is a general introduction, I intend to go more specific where possible in subsequent articles addressing the various functions within financial services including payments, insurance, deposits and lending, capital raising, investment management and so forth and highlighting the innovations and trends within each function to enable us make sense of all this new developments and be able to make informed decisions that will guide our company's strategic direction.
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The writer is a technology enthusiast, working in Nairobi Kenya for a leading pan-African insurance technology and service company.
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