As we enter our third week of Module 3, there is a lot of excitement surrounding our upcoming discovery expedition. There is also a fair amount of nervous energy regarding job search. To help diffuse the anxiety, Monday morning started with a bang as we launched into our first Strategy Beyond Markets case with Professor of Strategy and Political Economy, David Bach.
An underrated source of innovation
Class members with an affinity for Formula One have been treated to back-to-back cases based on this fascinating industry. Last week’s finance class with Arturo Bris focused on how to financially value these businesses. But Monday’s case took us beyond the realm of the usual market stakeholders. Instead we focused on the role that broader forces, like regulation, can play in shaping the competitive landscape of an industry.
A key takeaway was that companies often tend to view regulation as a constraint rather than an opportunity. Most businesses tend to think of innovation in terms of pushing technical constraints. “How much quicker, more efficient, at less cost can we develop our products”, are important questions that drive innovation. However, what can be missed is the opportunity found in the space created between the rules of the game.
Thinking broadly to catalyse change
As an African with a keen interest in social development, this got me thinking about how one could apply this to social innovation. A popular example is the case of mobile money provider, M-Pesa, in Kenya. In 2006, only 19% of the country had bank accounts. This lead to a lack of financial inclusion for the majority of the population. While the financial services industry has historically been heavily regulated, the M-Pesa concept was effectively able to define a new ‘industry’ for itself in which regulation was yet to be fully developed. By gaining impressive traction early on (formal financial inclusion jumped from 26.3% to 40.5% in just two-and-a-half years), the business was able to work with the regulator to shape policies that today have permeated the African financial services industry. Re-visiting the challenge of balancing financial risk with inclusion is a key topic driving the industry forward. In turn, this sets the stage for a more accessible financial system.
If we assume that the regulator has a clearly-defined purpose that drives the transformation of its frameworks, it is our responsibility as business leaders to seek opportunities in-between that framework to catalyse change. If we remember to lift our heads up and look beyond the framework, we may find value-creating opportunities that offer benefits for all stakeholders.