Navigating digital transformation

It is becoming evident that existing business models are vulnerable as a result of the transformation that is currently taking place in the world.

The digital platform economy is here and is disrupting the entire business landscape. What most of us don’t realise is the tremendously accelerated pace of disruption. For instance, the past one year has been more disruptive than the past five years. As Covid-19 pushed people into lockdowns, digital platforms created new conveniences and in the process pushing micro and small enterprises (MSEs) to the periphery.

Responding to the disruptions, women vegetable vendors (mama mboga) had no choice but join the digital bandwagon. Many started to market their produce through closed social media platforms such as WhatsApp. They co-opted informal motor cyclists to make deliveries for them. In turn, the cyclists downloaded Google Maps, a location finding platform, to help them find their customers. Although the switch was swift, not every MSME understood what was going on. In their confusion, the middlemen saw the opportunity to exploit the hapless traders. Some people can dismiss this as a normal occurrence in any free market economy but it undermines our ability to achieve inclusive sustainable development.

There is reason to worry about these emerging disruptions because it is not going to be confined to MSMEs. Business models are changing and threatening existing stable enterprises. Unless policymakers anticipate such disruption and do something, many will be decimated by large platforms.

Already, there are fears that big financial technology companies (BigFintechs) will complicate the continued existence of the local payment platforms from regional mobile providers and global payment platforms. These BigFintechs evade regulation and have huge resources to sustain a complex revenue model in which consumers are made to assume that their services are free.

In my view, these disruptions were anticipated by the United Nations some eight years ago. In their wisdom, the 66th session UN General Assembly in July 2012 adopted a resolution titled, ‘The future we want’.

This future we wanted is increasingly becoming more uncertain. In the melee of change are large multinationals organisations ready to bring conveniences that will push many businesses out into the cold. How do we navigate through these complex borderless wars on inclusive development models?

First, we could join them and innovate within the platforms just as mama mboga turned a social media platform into a marketing tool. This will, however, depend on how fast the rest of the population adapts so as not to leave anyone behind. The only risk is that we could strengthen the platform even further only for our data to sit in their servers from where they can study our behaviour and control our future direction if they have not done so yet.

The second option is to use the European Union model by creating an African single digital market to boost our negotiating capacity. With a market of more than 1.2 billion people and a harmonised policy and regulatory environment will give the continent’s innovations a chance to scale. A coherent regulatory environment would mean better approaches to dealing with security threats.

Thirdly, we could adopt the Chinese model where we seek to grow our own innovations by discouraging foreign platforms. However, this is unlikely since local content creation has been a challenge. It will require enormous resources which in all due honesty we do not have. We need to support locally developed platforms as a long-term strategy for developing capacity. If the local organizations become innovative and agile, they could perhaps take business away from large non responsive monoliths.

The world of business is changing fast, with new business models that never existed before.