In business we like to talk of disruption. Disruption is a word that is used in any strategy document. To grow, you have to disrupt the incumbents by setting a new basis of competition which will help you to take market share from them. The digital camera innovators disrupted companies like Kodak who built their businesses on thin film photography. The digital camera firms introduced new technologies which the old guys could not overcome, and they became mortally wounded. In Nigeria, we have seen the old powerful banks like First Bank and Union Bank live under the shadows of Zenith Bank and GTBank which used information technology to redesign Nigeria’s banking sector. The market capitalizations of these banks make that disruption very evident.
Yet, it is not always necessary for a company to disrupt for it to grow. To explain that disruption is not always required for growth, I will use free-range chickens, found in most African villages, to create an analogy. A free-range chicken “is a bird that is allowed constant access to the outdoors, with plenty of fresh vegetation, sunshine and room to exercise”. As a teenager, I grew some and it was a very good business.
This bird does not compete for your time. Unlike dogs and cats, you practically do not invest so much time on free-range chickens. In the morning, they leave the house and in the evening, they return. They feed for themselves. The only time you really care is when it is time for them to lay eggs which many will not like to lay where they sleep because you would take the eggs. So, they try to hide, apparently to preserve the lineage. Unlike chickens, dogs and cats will need your help, constantly. You have to find food to feed them. Also, you have to clean up their mess. But free-range chicken does not create such problems. As a teenager, I found it easy to manage and I built a small place where they slept.
In business, we can be like chickens. That means we can find new markets and opportunities that may not have to compete with the present ones. In other words, we can find virgin areas where we can operate as monopolies because we have pioneered them. When such happens, you are not disrupting anyone even though you are growing revenue. It means that you do not need any disruption to grow your business. All you need is to find a market with needs but yet latent. Just like chickens, you do not have to compete with dogs and cats for the attentions of the owners. You leave the competition and create your own growth model, away from others.
When Interswitch decided in Nigeria to pioneer digital payment, it acted like a chicken. It was a monopoly. It simply left those Lagos companies that were working hard to make the best bank cheque designs. It became a monopoly in its new category, and controlled its world. It did not bother to compete with the cheque printers but it was able to grow by enabling digital transactions, more efficiently.
iROKOtv did the same thing when it pioneered and invented Nigeria’s digital video-on-demand sector. Instead of competing with Upper Iweka Road (Onitsha) and School Road (Aba) merchants, it went online. It did not want to be in the competition like the chicken. Simply, it went online and created a new business category.
Yet, while Interswitch and iROKOtv created new markets, they did indeed impact the cheque printing and video businesses respectively. That does not make them a real free-range chicken because the chicken does not always affect those (the dogs and cats) competing for the attention of the owner.
The most elegant example is when a market is discovered and there was nothing to actually disrupt. Viagra, the ED drug is a good example. For centuries, the ED problem has existed but no one engineered the drug to manage it. Pfizer created the drug, by accident, and built a multi-billionaire business without disrupting anyone. It simply created a new industry without disrupting anyone. In that business, there was creation but no disruption. That is the chicken: the competition within the dog and cat owners was not disturbed while the chicken was free to roam around and found success.
Growth via Pricing Model
Besides the need to have creation to have growth, disruptively or not, one has to discover novel ways to grow. In Tesla, most cars come with enough battery capacity that can power the cars to extended miles on full charge. But Tesla imposes a limitation on that capacity, limiting the range, unless the customer pays. Yes, the battery on full charge can go say five hours (just for illustration), but Tesla will limit it to say three hours. But when a customer upgrades by paying more money to unlock more range, they will release the full capacity. So what is happening there is that Tesla has found opportunities to generate extra revenue for two similar cars that have practically the same batteries. By doing it via software remotely, it simplifies the process.
Most car companies reduce the engine capacity of lower model cars even when they are using those used in higher-grade vehicles. But for those companies, they use microprocessors which are tuned in auto shops unlike Tesla which is doing the battery tuning remotely via software. But the impact is the same: if you want more engine capacity, buy a higher car model even though the same engine (but limited) is already in the one you are driving.
As you pursue your creative non-disruptive growth, understand that pricing model can be a great source of success. That is what Qualcomm is battling with Apple: the capacity to make chips to become more valuable instead of components with marginal value in products like iPhone. By seeking to be paid a percentage of the product cost, Qualcomm wants more revenue so that as the price of the product goes high, it makes more money, unlike buying its chip for $18 and using it to power $1,000 product. If it pursues that growth model, which seems largely lost as Apple plans to pivot to use Intel and MediaTek products, it will find growth just through pricing model.
A chicken does not need a new territory to graze, unlike goats. Chickens move around and continue to find value even in places it has passed through. Goats graze and move forward because it has eaten the grass behind it. By coming back to products which have been created and looking for new opportunities, companies can be like chickens: yes, find more ways to extract value in already conquered territories.
I want us to consider the need of creating new markets in Africa even when we are not disrupting any firm or sector. It is not always that one has to disrupt, but it is mandatory that one has to create, in order to find growth. My free-range chicken blossomed by finding its own paths and at the same time did not participate in any competition for my time. It used its creativity to survive and grow without disrupting (yes, disturbing) any person. Your company can be like it.------
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