Hubs as a Hot Spot for Desruptive Innovation

Sustaining innovation describes a process of improving an existing product or solution, evolving markets and adding value to them. Disruptive innovation, on the other hand, creates new markets, is unexpected and typically addresses a different set of consumers with new solutions. In his compilation of essays on innovation in Africa, Will Mutua discusses disruptive innovation in the African context. In Africa, there is a large gap between small parts of the population that boast high incomes and large parts of the society that live in poverty. For them, consumer goods are often inaccessible and not affordable. Disruptive innovation is aiming at creating products that compete against this non-consumption and is targeting those segments of the population who are excluded from existing markets.

The mobile payment system M-Pesa, which enables the “banking of the unbanked”, is one of the most prominent examples of disruptive innovation ‘made in Africa’. The service, which is offered by Kenyan mobile provider Safaricom, allows users to conduct financial transactions via their mobile phones without the need for a bank account. When M-Pesa was launched in 2007, the formal financial sector served just over a quarter of Kenya’s adult population. The whole of the country only had 450 bank branch offices, which equaled to fewer than two bank
branches per 100,000 people. Today, every small kiosk, every bar and every shop has an M-Pesa number, enabling customers to pay for products and services with their mobile phones. In a city like Nairobi, people use M-Pesa not just because it is convenient but also because it is safe to use and helps to avoid having to carry larger amounts of cash. The service is easy to use: a user pays in cash to their M-Pesa account and can then transfer that money to another user’s M-Pesa account. The actual money can be paid out via a transaction code at one of the over 35,000 M-Pesa agents in the country. Today, over 15 million Kenyans use M-Pesa and no less than about 20 percent of the country’s GDP is transferred through the system.

Hubs try to foster this kind of innovation. “Disruptiveness is the ability to identify the gap and to take the risk and do it”, puts it the iHub’s Jessica Colaco. She believes that the iHub is setting up the right space to nurture this kind of innovation. Across the continent there is much focus on innovation centered around mobile phones, with many ideas being inspired by M-Pesa as a business model. But some hubs like the iceAddis also include different focus areas. At iceAddis, one of the first start-up ideas to attract an investor was a bamboo bike, prototyped by a student working at the lab.

In a city like Cairo where pollution is a major every day problem, the innovation hubs try to create replicable ideas that will benefit the wider urban community, like rooftop gardens. The urban rooftop gardening project, developed at the iceCairo innovation lab, addresses several problems at once: air pollution and problems caused by air conditioning as well as the shortage of clean water in the city. In a wiki, the knowledge needed to create such gardens is shared and different examples including instructions for low tech and low budget water distillers as well as solarbased water generators.

>> Ch. 8 From Hubs to Economic Development