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AgendaObjectives of the paper
Highlights on open innovation
Case study: Collaboration between NMB and Vodacom
Lessons from the case study
Conclusion
30.05.2014
Redefining distribution channels through open innovation
Lessons from Mobile Financial Services in Tanzania
Authors:Otto M. Muba and Deodat E. Mwesiumo
Valenova Foundation
THE 14TH INTERNATIONAL CONFERENCE ON AFRICAN ENTREPRENEURSHIP AND SMALL BUSINESS (ICAESB)White Sands Hotel May 29th and 30th 2014, Dar es Salaam, Tanzania
To illustrate open innovation in a developing country context
To draw lessons from the case relevant for SMEs
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Highlights on open innovation
What is it?
Commercialization of external (as well as internal) ideas by deploying outside (as well as in-house) pathways to the market (Chesbrough, 2003).
The mechanism
Systematic acquisition and exploitation of resources and capabilities for innovation undertaken both internally and externally (Lichtenthaler, 2008)
Potential benefits of open innovation
Potential for reducing innovation costs and risks (Belderbos et al., 2004)
Potential for reducing challenges of adaptation to dynamic environments (Dittrich and Duysters, 2007)
Potential for accessing and leveraging external complementary resources (Miotti and Sachwald, 2003)
Potential for generating higher revenues(Faems et al., 2005)
Potential pitfalls of open innovation
Source: Enkel et al. (2009)
Leakage of knowledge
Higher coordination costs
Loss of control
Increased complexity
Case study:
The partnership between NMB and Vodacom
Key facts
Fully-fledged commercial bank listed on DSE
149 branches: present in 124 of 134 administrative districts
The largest branch network: 34% of all bank branches in Tanzania
NMB old innovation approach
Closed innovation
Key facts
Leading telecommunication company in Tanzania by number of subscriptions.
10,288,972 subscriptions as per December 2013.
The first to introduce Mobile financial services in the country: M-Pesa.
Extensive network of agents: of over 40,000 agents countrywide.
The partnershibetwp
Rapid growth of Mobile Financial Services changed business landscape in retail financial services
NMB realized that in order to cope with the changes innovation was inevitable
NMB could hardly develop on its own a fully-fledged Mobile Financial Services
Being the leading mobile network operator, Vodacom became an obvious choice for NMB
The partnershibetwp
The partnership became reality on 28th February 2013
This meant over 40,000 agents of Vodacom M-Pesa became part of NMB distribution chain
The service would enable more than 729,000 NMB customers to make transactions via M-Pesa
The mechanism o of the partnershi betwp
Open innovation model
Implications of the partnership
The collaboration demonstrates how firms can exploit external linkages in persuasion of market opportunities
The case illustrates feasibility of open innovation in a developing country and service sector contexts.
All parties involved will benefit from the partnership: NMB, Vodacom, Customers and regulatory authorities
Lessons relevant for SMEs
SMEs should tap into the external knowledge and expertise.
Open innovation works even for SMEs (van de Vrande et al. 2009).
Through collaborations SMEs can mobilize their technological and marketing opportunities (Chesbrough, 2003, 2007).
Collaborations can increase the chances of SMEs to access financial resources.
Lessons relevant for SMEs
Type of innovation
Motivations of the potential partners
The business model.
SMEs that intend to collaborate on innovation should carefully assess the potentiality and feasibility. Things to watch:
Source: Boudreau and Lakhani (2009)
Other sources of open innovation for SMEs
Academic institutions
Research centers
Government agencies
Liefner et al.(2006); Biggs and Shah(2006); Kaminski et al. (2008)
Lessons for policy makers
SMEs need deliberate policy-based support for creating the right atmosphere for innovation
Public procurement could promote innovation by prioritizing innovative offerings tabled by SMEs
Encouraging SMEs to submit bids in groups
Conclusion
The case shows that open innovation is one of the ways firms can use to exploit market opportunities
And even SMEs in developing countries can access and leverage resources beyond their boundary thus accelerate their growth and indeed their role in economic growth
THANK YOU!
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