Di tiDisruptive The Key ingredienty gscaling up a high‐

iinnovaBy PeterBy Peter 

I tiInnovationts of launching and f ggrowth disruptive tiation.

NdiangúiNdiangúi 

1

ObjecObjec

• To help you appreciatedisruptive innovation fpworking through your 

ctivesctives

e the value of applying a framework lense when entreprenurial ventures

2

What we shallWhat we shall • About 35 minutes 

• The country I graduated in

• Disruptive Innovation theDisruptive Innovation the

• Applying Disruptive Innov

• About 15 Minutes• About 15 Minutes – E‐commerce in Kenya thinnovation

• About 10 minutes – Q &Q

be discussingbe discussing…

nto

eoryeory

vation framework to your venture

rough the lenses of disruptive 

& A time

3

"We always overestimate the changy gyears and underestimate the changeyears. Don't let yourself be lulled in

THE COUNTRY I GRTHE ONE YOU WIL

ge that will occur in the next 2 ge that will occur in the next 10 nto inaction" Bill Gates

RADUATED INTO & LL GRADUATE INTO

4

Economic grog

9000

GNI (Income) per Capita

Kenya Ghana Zimbabwe China Nigeria

7000

GNIKen

Sou

6000

7000

8000

9000

pita

4000

5000

6000

7000

GNI per cap

itaan

a, Kenya)

2000

3000

4000

5000

GNP per C

ap

2000

3000

4000

rging econ

omies G

Nigeria, China

, Gha

0

1000

1970 1980 1990 2000 2010

Time

1980 2000 K ’ 20 f E i

0

1000

Emer (N

• 1980 – 2000, Kenya’s 20 years of Economic s• From 2003 – 2011, growth rate reversed avera• Could we see a china “hockey stick growth" in• May be why ?• May be….why ?

• High growth rates + low birthrates due to• High growth due to ; Oil, Iron Ore, G

• May be not why ?• May be not ….why ?• Political instability + large balance of

commercialized & no strong manufac

owth story….y

40000

I per capita growth in OECD & emerging economiesnya Ghana China Nigeria

uth Africa South Korea Australia

25000

30000

35000

40000

NI per cap

itath Korea) 

10000

15000

20000

ECD Cou

ntrie

s GN

(Australia, &

 Sou

t ti l th t + hi h th

0

5000

1970 1980 1990 2000 2010

OE

TimeYour graduation

my graduation

tagnation – low growth rates + high pop growthaging 3.5 % CAGR , 2007 peak (at 7%)n the next 10 years ( reaching 4x today’s GNI )?

o low dependencyGas , new constitution (political stability), Coal

5

f trade – diminishing exports if resources are not cturing base

Internet Usa

70%

80%

ates

16%30%

40%

50%

60%Mobile Penetration Internet Acce

netra

tion

Ra

0.05% 0.38% 2% 4% 5% 8%16%

3%

0%

10%

20%

1999 2000 2001 2002 2003 2004 2005

Time

Pe

Time

• 47% of Urban Kenyans use the net at • In Mckinsey survey Kenya lead the paIn Mckinsey survey Kenya lead the pa

• Cheap access & devices - Zero Tax• 95 % of Mobiles are Internet acces

i h h l d i d• High Technology adoption rates du

Source 1 – Communications Commission of KenyaSource 2 - “Deep dive - The growing popularity of the intern

age Updateg p

58%

70%

22%

34% 35%

51%58%

23%

38%

ss

SEACOM & TEAMS U d Fib O i

4%9% 10% 11%

2006 2007 2008 2009 2010 2011

Under-sea Fibre-OpticCables go live in Jul& Jun 09 respectively

least 10 hour per week (Mckinsey)ck in Africa’s Urban internet penetrationck in Africa s Urban internet penetrationx on all internet access devices

ss capable amongst urban Kenyanshi h liue to high literacy rates

net" – Mckinsey & Company Africa Consumer Insight

Broadband InsBroadband Ins

KENYATotal Capacity - 575,000 mbpsp y , pUtilized Capacity – 265,00 mbpsUtilization Rate – 58 %

talled Capacitytalled Capacity

Infrastructure InvestInfrastructure Investtments completedtments completed

8

“Innovation is the specific instrumethat endows resources with a new cDrucker

THE THEORY OF DIDrucker

INNOVATION

ent of entrepreneurship. The act capacity to create wealth.” Peter

ISRUPTIVE 

9

The th

Source – www.christensen.com

heoryyTwo types of disruptions

1. Low-end disruptions• Target over shot• Target over-shot

customers2. New-Market disruption

• Compete against non-

Characteristics  of Disruptors

• Lower gross margins

p gconsumption

• Smaller target markets

• Simpler products and services 

• May not appear as attractive as existing solutions when compared 

i t t diti lagainst traditional performance metrics

10

m

The theoThe theoory contory cont…Case in point M‐Pesa

• Encrypted SMS technology – Simplifies payments/transfer processpayments/transfer process

• CBK did not stiffle money transfer by insisting on ‘ y gtraditional banking standards  

V l k N b k• Value network – Non‐bank Agency Network

• Low‐cost processes &Low cost processes & resources

11

Examples ofp

Industry Disruptor Disrupte

GlobalIndustry Disruptor Disrupte

Computers Apple Mac, IBM Mainfra

Advertising OLX Newspa

Music Apple iTunes Record P

Industry Disruptor Disrupte

Local

Industry Disruptor Disrupte

Banking Equity Bank Retail Ba

Advertising Dealfish/OLX Newspa

Payments MPESA Paying bmoney

f Disruptorsp

ee Key Disruption resultsee Key Disruption results 

mes Affordable computing power

pers Affordable & convenient way ofcommunicating with a customer

Production Affordable & convenient way of acquiring music 

ee Key Disruption resultsee Key Disruption results 

anks Affordable banking solution

pers Affordable & convenient way ofcommunicating with a customer

bills /sending  Affordable & convenient way of sending money

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"If I find 10,000 ways somethinam not discouraged because eveoften a step forward" Thomas E

APPLYING DISRUPToften a step forward Thomas E

FRAMEWORKS ON

ng won’t work, I haven’t failed. I ry wrong attempt discarded is Edison

TIVE INNOVATION Edison

N YOUR VENTURE

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Framing the g• Define your customer va

Th J b t b d th– The Jobs to be done theo• Customers do not  buy 1 i

• When customers buy a prto get a job done for them

b d• Targets based on Demogr

Customer’s  Job to be done Current Circumstance solution(

A car dealer with  Reach over 1000  Newspapno money to communicate to a wide range of 

customerseveryday

p pclassified

customers about cars in her yard

opportunity pp yalue proposition 

h l hory can help hereinch drill they buy a one inch hole

roduct they are hiring the product  mselves.

h lraphics are mere correlations. 

Limitations  of  Alternative (S) current solution (S) solution to  get 

the job done

per  Expensive to  www.olx.co.kepds 

padvertise Reach is capped 

Free to advertiseAd runs until you sell 

14

Define your Buy• 3 types of business mo

Solution shops Value c– Solution shops , Value c

• Value Network – To join or build a stand 

• For example do you selp ychannels or establish ne

– Example of Honda  vs Havia power equipment sto

– Intel & SAP joint venturevia previous channel parp p

– Imagine if Safaricom attethrough the natural cha

H i l t– How can you implementon this principle ? 

usiness Modelodels;chains & facilitated networkschains & facilitated networks

alone value  network ?l your product through existing y p g gew channelsarley‐Davidson dealers , Honda distributed ores 

e , SME targeted ERP software distribution rtners, Accenture ‐ FAILED,

empted to distribute its MPESA service nnels of Bank branches when it started

t l i ft i h l b dt  e‐learning software in our schools based 

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Elements of yourElements of yourKEY PARTNERS

• Telco

KEY ACTIVITIES

• Telco• ISP’s

CUSTOMER VALUE 

PROPOSITION

•Develop platform•Market platform• Manage Content• Customer Care

SH

PROPOSITION

• Free/ low‐cost and convenient way to buy or sell

KEY RESOURCES• Brand  way to buy or sell• Online Platfrorm

COST STRUCTURE $• Platform devt/maintenance

•MARGINS

• Customer Acquisition Costs

Example of a freemium business m

r business modelr business modelCUSTOMER SEGEMENT

CUSTOMER RELATIONSHIPS

• Advertisers• Customers

• Online

CHANNELS• Telco• Internet •Mobile

REVENUEMODEL $• Premium Ad Fees

F d & fFree ads & free access

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model such as OLX

Agile Strategy maAgile Strategy ma• Embrace émergent strg

– Example ; Honda exper

A l di d i• Apply discovery‐driven– Make projections 

– Determine assumption

– Implement a plan to leaImplement a plan to lea

– Invest to implement str

Pi i i i• Pivoting is important , 

aking & executionaking & execution rategy’ thinking gy grience in the US market

l in planning

s that must prove true

arn – to test assumptionsarn  to test assumptions

rategy 

ias you experiment 

17

Outsource or integrg1867 frozen meat rail in the US

When functionality & reliability are inadequate integrate

• When the functionality & reliability o• When the functionality & reliability othen convenience ,customization & lo

• For e-commerce e-cosystem in Keny

So It depends !!

rate ? – It dependspDell Computers assembly plant

When customization & convenience are inadequate integrate

of products overshoot customer needsof products overshoot customer needs ow prices are what is not good enougha . What is not good enough ?

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Financing RecruitFinancing, Recruit• The concept of Schoolprecruiting 

For example hiring a fo– For example hiring a fomortar retail  might notcommerce settingcommerce setting 

• Org structure is critica– Even where you haven’roles as if you had emp

• Investors who are patiimpatient for profitsimpatient for profits 

ting & Organizingting & Organizings of experience  when p

rmer CEO of a bricks &rmer CEO of a bricks & t help you in an e‐

l ’t  got employees define the ployees in place

ent for growth but 

19

Opportunities are growing in E‐comm

E‐COMMERCE OPPOpportunities are growing in E comm

KENYA

merce

PORTUNITIES IN merce

20

Kenya’s OnlineKenya s Online

• How big are the oppor

• Long on promise shoLong on promise , sho

• Using the Disruptive inhow do we navigate it 

• What are the ecosysteWhat are the ecosystehurdles ? 

e Marketplacee Marketplace

rtunities online ?

rt on $$$ ?rt on $$$ ? 

nnovation framework ? 

em’s key ingredients &em s key ingredients  & 

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The Online MOnline 

AdvertisingOnline

ClassifiedsSocMe

gPlatforms

Classifieds Me

• FacebT itt

• CraiglistOLXra

l

• Twitte• Badoo• 43thin

• OLX• Schibsted

• Cheki.co.ke

Gen

eca

l

ll

• Seek.com.au• Realestate.comVe

rtic

Online Retailing

General Retailers

KilleCategoRetaile

• Amazon• E-bay

• Zappos

Market Placecial edia

Search Advertising

ContentPlatformsedia Advertising Platforms

Content CreatorsN ti

Global shareG l 82 %

book• Nation • StandardContent Aggregators• Huffington

• Google – 82 %• Bing – 4 %• Yahoo! – 6 %• Yandex – 2 %

erongs

• Hulu• AllAfrica

• Baidu – 5 %

ler ory ers

Online Gaming Portals

• Levelup

22

23

Kenya’s Online Adv

KES 250 000

KES 300,000

KES 350,000

000,00

0)

y

KES 150,000

KES 200,000

KES 250,000

lings  in Millions  (0

2003 2004 2005 2010 2KES 0

KES 50,000

KES 100,000

Kenya Shil

Total Advertisement Spend (Ksh) KES 5,950 KES 10,115 KES 10,744 KES 48,960 KES

Annual Online Ad Spend KE

Online Classifieds Spend KE

Key Points ey o ts• Kenyan Online Ad market could be worth 78

billion by 2017• Kenyan online classifieds market in 2017, could be

h $ 17 billiworth over $ 17 billion • Online advertising in Kenya is at it’s infancy, but

it is at an inflection point• The Long Tail of advertising (SME’s &The Long Tail of advertising (SME s &

individuals) is underserved in Kenya. • Its a huge opportunity !

vertising Crystal ballg y

2011 2012 2013 2014 2015 2016 2017

 67,150 KES 87,295 KES 113,48 KES 147,52 KES 191,78 KES 249,32 KES 324,12

ES 672 KES 1,484 KES 3,280 KES 7,248 KES 16,018 KES 35,400 KES 78,235

ES 154 KES 341 KES 754 KES 1,667 KES 3,684 KES 8,142 KES 17,994

100%120%

nd

G‐20 Countries Advertising spend trends

e

0%20%40%60%80%

100%

2003 2010

%  of m

edia spe

Non‐Digital Media Spend

Digital Media Spend

24

2003 2010

Year

50% growth – print migration, 50 % new investments

E‐commerce chaInternal view - From an E

DevelopSelect 

Merchandise to  stock

ProcessPayment

Develop &

Maintain PlatformPlatform

allenges in Kenyag yE-commerce Entrepreneur

st

Fulfill Order

DeliverOrder

Care for Customer

NOT GOODWhat can 

entrepreneurs do  

innovation theory ?

pbased on disruptive innovation theory ?

25

Applying InnovatApplying Innovat1. Define your value pr1. Define your value pr

based on a ‘jobs to b

2 D i b i2. Design a business mvalue proposition at 

3. Avoid Pre‐mature sc1 Be patient for growth1. Be patient for growth

4. Choose your investo1. Whether  from family

capital has to be ‘patp p

tion frameworkstion frameworksroposition & target marketroposition & target market be done’ approach

d l h i fi hodel that satisfies the acceptable price points 

aling !!h but impatient for profitsh but impatient for profits 

ors carefully. y , friends or VC’s  innovation tient capital’p

26

Becoming a SeBecoming a Se

• Key ingredients of building a dis– Associating 

Q ti i– Questioning 

– Observing

– Networking– Networking 

– Experimenting 

erial disruptorerial disruptor.. 

ruptor’s DNA

27

Key takeKey take

• A disruptive innovationthe odds of success 

• A business plan/strateday you updated itday you updated it 

• Pre‐mature scaling is oof start‐ups 

• Innovation can be pred• Innovation can be pred

e awayse‐aways

n lense might increase 

gy is as good as the last 

one of the biggest killers 

dictabledictable  

28

Who wWho wOLX.co.ke is formerly dealfish.co.ke,or Classifieds siteor Classifieds site. 

OLX is one of the largest and most sgworld with presence in over 90 counlanguages. accessible through a PC o

fWe provide safe and transparent trasellers

You can sell or buy almost anything 

You can also search for jobs availabl

we arewe are, Kenya’s leading online marketplace 

uccessful free classifieds site in the ntries and supports 40 different or mobile phone.

b bansactions between buyers and 

on OLX and its all for free. 

e on OLX.

29

Finally – My chy y• You graduate in an eraeconomic growtheconomic growth 

• A lot of global disruptoi i d lluniversity dorms ; Dell

• The country is full of de cou t y s u o dthat can bring affordabsolutions into the marsolutions into the mar– Air travel 

– Healthcare 

– Education 

• Disrupt the market !

hallenge to youg ya of potential high 

ors have eminated from l G ll, FB, Google etc

disruption opportunities d s upt o oppo tu t esble/convenient ket e g ;ket e.g.;

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