Back in July of last year, I wrote Let's stop talking about disruption and argued that tech is here not to disrupt incumbents but to augment. The essay cites one particularly compelling data point - the rise of bank accounts in Kenya in conjunction with the rise of M-Pesa.

Mobile money, on one hand, is an on-ramp to traditional financial services, and, on the other hand, is pushing incumbent banks to innovate and adapt for the customer segments better served by mobile money. But the proliferation of mobile money hasn't come at the expense of banks. Quite the opposite.

And we've seen it more recently. As Paystack's Shola Akinlade told me, Paystack is now doing five times more in online payments than what Nigeria as a country was doing before the startup launched. Card issuing banks have undoubtedly benefitted from this growth, as well.

It is worth revisiting Clayton Christensen's theory of disruptive innovation. In Harvard Business Review, he writes,

“Disruption” describes a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses. Specifically, as incumbents focus on improving their products and services for their most demanding (and usually most profitable) customers, they exceed the needs of some segments and ignore the needs of others. Entrants that prove disruptive begin by successfully targeting those overlooked segments, gaining a foothold by delivering more-suitable functionality—frequently at a lower price.​

Disruptive innovations are made possible because they get started in two types of markets that incumbents overlook. Low-end footholds exist because incumbents typically try to provide their most profitable and demanding customers with ever-improving products and services, and they pay less attention to less-demanding customers... In the case of new-market footholds, disrupters create a market where none existed. Put simply, they find a way to turn nonconsumers into consumers.

So disruptive innovations start where there are gaps left by incumbents. But the second part of Christensen's theory involves the disrupters then moving into the mainstream, and taking marketshare from incumbents.

Incumbents, chasing higher profitability in more-demanding segments, tend not to respond vigorously. Entrants then move upmarket, delivering the performance that incumbents’ mainstream customers require, while preserving the advantages that drove their early success. When mainstream customers start adopting the entrants’ offerings in volume, disruption has occurred.

But is mobile money a disruptive innovation if it didn't lead to less banking customers for incumbents, but more?

I don't mean to insinuate that M-Pesa doesn't pass the disruptive innovation test - I think that's beyond the scope of this newsletter - but I wish rather to illustrate the importance of narrative here.

I think we ought to discuss tech not through a disruption lens but through an abundance versus scarcity lens - of targeting nonconsumption in an environment of abundance, and through means that enable abundance.

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Thanks for reading,

Justin

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