Most corporates attending bank or payment related conferences, such as the SIBOS Conference 2014, will hear about Disruption. Disruptive innovation or disruptive technology is being spoken about across multiple industries, and for us the area are of interest is the disruption happening in the payments space – i.e. payments disruption. Many would argue that the disruption is happening too quickly and as a result adversely impacting various industries. But from a corporate perspective I think the disruption is actually pretty cool. For me disruptive innovation or disruptive technologies are presenting corporates, actually any small, medium or large sized businesses, with all kinds of opportunities and redefining / levelling the playing field.
1. What is Disruptive Innovation?
Disruptive Innovation is a term formulated by Clayton Christensen. Clayton describes disruptive innovation as a “process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors“.
According to Clayton, disruptive innovation is not a breakthrough innovation that immediately makes a product much better. Instead disruptive innovation transforms a product that was historically expensive, complicated and inaccessible to one that is affordable, uncomplicated and available to a much larger population.
2. Disruptive Innovation – The Cloud….
When people speak about disruption and disruptive technologies ‘the Cloud’ and ‘Cloud Computing’ will be key focus areas. The Cloud is essentially the internet, a collection of servers that we use to do all kinds of things. Now that is a big statement! Specifically the cloud can be used to do all kinds of things anytime and anywhere…. and it is exactly this that is transforming the way in which we go about our daily lives. Following are some examples of Cloud based disruption…
- Email has transformed the way in which we communicate. Gone are the days where we write a letter, put it in an envelope, put a stamp on it and send it via the postal service. How often do you write a letter ? Ok, how often do you write an email? I would guess that you can count on 1 hand the number of letters you write in a year, and have lost count of the number of emails you have sent!
- Social networking and social media are a huge part of our lives – most of us use either Facebook, Twitter or another other social media accounts that enable us to engage in various topics and with one another in a way that was previously impossible. We can very quickly report and comment on each other and companies that we engage with – social media can very quickly make or break a new product or company brand
- Software As A Service (SaaS) – is where we develop and deliver applications over the internet. SaaS is transforming the way in which corporations work. Organisations no longer need in-house development teams and specialists, we have the ability to reach out to SaaS vendors / service providers who can deliver the required applications or service over the internet
- Digitalisation – ultimately a lot of what we do now is available in a digital format. The way we interact with other people through work, rest and play is either done or tracked digitally. This digitalisation combined with cloud based solutions is disrupting the traditional way of doing things
- Consider how Netflix, eBay, Amazon, PayPal, YouTube, iTunes and Uber are shaking things up!
3. Disruptive Innovation – The Financial Industry
This is a huge sector, in the interests of brevity I will keep this to a few key examples:
- Retail / Shopping – Cloud based computing and solutions are enabling retailers to offer customers multiple ways of buying and making payments. Paypal, Amazon, eBay, Google Wallet and the newcomer ApplePay are all changing the way in which we buy both online and in the ‘real world’
- Online Banking – Most banks are now offering their customers the ability to manage their finances online. This shift to online banking is being further enabled through mobile apps that give consumers the ability to handle their finances anytime and anywhere via their mobile phone
- Digital and virtual currencies – Such as Bitcoin are shaking up the financial industry. Digital and virtual currencies are enabling faster, cheaper and real time payments a reality today
- Cybercrime and Cyber Security – as we all focus on Cloud technology and Cloud based solutions we must also recognise the threat posed by these technologies. We have all heard of the very public celebrity photo leaks, the recent Sony hack fiasco plus numerous financial institution breaches including the JP Morgan hack last year
4. Disruptive Innovation – Mobile Payments…
Mobile payments are causing a storm amongst both the ‘banked’ and ‘unbanked’ populations.
- The ‘Banked’ – for this group payment simplification, brand loyalty and incentives (such as loyalty programs and vouchers) are used to motivate the customer to use mobile payments. New solutions and partnerships are being announced on almost a daily basis – Apple Pay is the hot and relatively new entrant to the market, but also check out Zapp, Google Wallet, Paypal and my post, Starbucks Mobile Payments – So What?
- The ‘Unbanked’ – According to McKinsey 2.5 billion adults fall into this category whereby they don’t use banks or microfinance institutions to save or borrow money – this is about half of the worlds adult population. Recent initiatives in Africa, Asia and the Middle East in particular have highlighted the social and economic benefits of engaging this historically ignored and overlooked ‘unbanked’ population. Mobile payment schemes in Kenya (M-Pesa) and in Bangladesh (bKash) are examples of successful mobile payment initiatives. When it comes to disruption, this is absolutely huge!
5. Disruptive Innovation – The Millennials…
In his Financial Services Club blog Chris Skinner argues that when it comes to disruption, technology is only one part of the equation. Chris shares from a banking perspective that technology is not the most significant disruptor, its the Millennials – the population born after 1980. In the post, The Biggest Disruption in Banking is NOT Technology, Chris puts forward a compelling argument that this new generation is causing a stir because the millennials:
- Are a huge population that cannot be ignored
- Think differently – the way they live and interact with one another is different to previous generations
- Don’t like the traditional way of doing things
- Need to think and do things differently in order to make do and survive amongst the currently world climate….
Its worth noting that a lot of the stats and reference data / analysis is taken from the US.
Disruptive innovation and disruptive technologies often makes people think about cutting edge (shiny/expensive) technology that is way out there in the future. Some of it is, but there are also some very accessible disruptive technologies available that will present you and your organisation with real opportunities and efficiencies. As corporates we should be aware of the ‘disruption’ that is happening around us and of the upcoming disruptive trends and technologies in the marketplace. Disruption is also a new way of thinking and looking at the industry and indeed the wider world around you. For those few with the foresight this is hugely powerful and revolutionary. I would love to hear about your thoughts on this post and particularly if you have any comments and/or experience of ‘disruptive innovation’….