Uber’s role in Africa’s disruptive innovations
Nairobi is the most talked about hub of innovation in East and Central Africa and ranks among the top tech hubs in Africa.People in Kenya’s capital, where public transport is poor and the traffic horribly congested, few months back welcomed ride hailing app Uber for car rides.San Francisco based Uber entered Kenya this year as part of its expansion across the Africa region. Uber that connect drivers to passengers are creating competition for established taxis. And the yellow ribbon cab drivers in Kenya were not a happy lot but after they failed in their bid to have Uber blocked, they ganged up together and launched their own app which has similar functions as those of Uber.The Nairobi Taxi associations even questioned the legality of Uber cars operating in Nairobi. Last month, one of Kenya’s most popular bloggers Cyprian Nyakundi revealed how Uber is facing all manners of challenges including smear campaigns online that to his credit, disclosed and exposed the dimwits who think that they can do anything to stop disruptive technologies.Tensions between local Uber and traditional taxi drivers are also simmering. Uber is basically a referral service. The apps work with Android, iOS and Windows phones. The GPS capabilities of smartphones allow both drivers and passengers know each other’s location. This removes the question of when the ride will arrive.The competition from these new technologies is disrupting the market for traditional players. Given the relatively low price and ease of access for Uber, these apps are entering a head to head war with established operators.Conflicts arise since Uber operators are creating competition for conventional operators within the same market. During the advent of the internet, several experts foresaw the possibilities for market disruption caused by new technologies.Disruptive innovations which are taking the world by storm are used to describe products and services that make use of new technologies and business models.Such innovations disrupt the market by creating new demands and new type of consumers. Eventually these innovations will replace products and services from established business players.Disruptive innovation allows a new population of consumers to access products or services that were historically only accessible to rich consumers.The term disruptive innovation is rooted in the creative destruction theory that was crafted by legendary economist Joseph Schumpeter.
The theory describes it as a process of industrial mutation that incessantly revolutionises the economic structure from within, incessantly destroying the old one, incessantly creating a new one. Uber are not the typical disruptive technologies. They are not creating new markets and value chains. But Uber exist because the disruptive trend of over the top services, where businesses provide services over the internet, bypasses traditional distribution.Kenya’s task in the coming years is to find a way to elegantly monetise this wave of disruptive technologies.On disruptive innovations in Africa, i have found that the wave of disruptive technology has significantly contributed to the recent economic growth being experienced in the continent.Disruptive innovations will create significant capital accumulation, which is more than enough to accelerate Africa’s economic growth in the long run.On the other hand, technological disruption can cause losses of potential revenue in the short term due to business shifting. The telecommunications industry in Africa is predicted to lose a total of US$11 billion between 2015 and 2019 due to over the top messaging services such as Skype, WhatsApp and other third party internet voice applications. Disruptive innovation follows evolution theory. The fittest survive. Capital, knowledge, and labour of disruptive innovation will remain, while capital, knowledge, and labour in mainstream technology will not.In a recent chinwag with a Yale University professor, who asked me to make predictions about Africa market, I predict there will be 300 million connected devices and about US$5 billion of potential African market for disruptive technologies in 2017 and this in my view will grow to 500 million connected devices and US$20 billion by 2020. This will in my view dramatically change the way people sell and buy products and services.Governments should catch the wave of technological disruption. Regulation holds an essential role in harnessing disruptive innovations. However, regulation could also preclude quality enhancing, lower cost innovations from entering the market.Flexible regulations should be there to cope with this trend. Many African countries regulations are currently too rigid to be able to adapt to the entrance of disruptive technologies. For example, Kampala Capital City Authority in Uganda, taxis are obliged to have a licence and pay taxes to the government and local authority as well. The rate and tariff for taxis in Uganda is highly regulated. The tariffs are determined by transportation ministry and it applies to all public transportation company without any exception. Uber considers its business model as different to the traditional taxi service. No doubt rigid regulation is creating a barrier for new service providers such as Uber.In a nutshell, disruptive innovations will always outsmart regulators eventually.So the choice is, are you with us techies or against us? Facts are out there that shows us historically disruption always wins.