Keep disrupting yourself to stay relevant and to avoid being wiped out – The case of Retail giants in Kenya

August 19, 2020

“Believe it or not, the failure of Uchumi, Nakumatt, now Shoprite, Choppies, all have something to do with technological dynamics”. That’s how Professor Bitange Ndemo begins his talk on disruption when he was guest at Unthinkable roast in July 2020. Prof. Ndemo is Lecturer of entrepreneurship at the University of Nairobi, and former Permanent Secretary of Information & Technology in the Government of Kenya. He proceeds to enlighten the members on the theory of Creative Destruction, coined by Austrian economist Joseph Schumpeter in 1942, who observed real-life examples of creative destruction, such as Henry Ford’s assembly line. He says this is what has happened in the retail industry due to the complacency of previous industry leaders who enjoyed great success at their heights, refusing to evolve with shifts in consumer behaviour and entry of more innovative players into the market.

Prof. Ndemo continues. If today, Kamau is the only one selling bananas on the street, his margins can be as high as people are willing to pay. If tomorrow, Peter comes with his own bananas to sell, then the margins reduce. If after a while there are several people selling bananas on the same street, they will kill one another business-wise. By Schumpeter’s theory, a good entrepreneur would then destroy themselves when they notice that the competition has become too stiff. So while everyone else is selling bananas, this shrewd entrepreneur still brings bananas, but starts selling banana smoothies. He is back to enjoying high margins. If the competition goes into banana smoothies as well, Kamau then kills his smoothie business and starts making banana bread, and the cycle continues.

Prof. believes that there’s no enterprise that is immune to this theory. Every business, at some point, gets disrupted. Your role as a business leader is to never rest, but always seeking ways of staying a step ahead of disruption by destroying and recreating yourself into a business that can continue enjoying high margins.

Prof. Bitange Ndemo was a guest at Un.thinkable roast (our monthly 10X Growth Leaders Meet-up) in July 2020. Click here to apply for membership in Un.thinkable.

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