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Can You Learn To Unlearn

“The illiterate of the 21st century will not be those who cannot read or write, but those who cannot learn, unlearn and relearn.” Alvin Toffler, Futurist

I recently attended a talk by a South African futurist, Craig Wing, who began his talk with the quote above. Learn, unlearn and relearn. Craig walked the audience through technological megatrends that should keep every single corporate leader’s nose glued to their smartphone. To begin with, a 2014 study of the average life span of American companies on the S&P 500 Index by Standard and Poor’s yielded interesting results. In 1955 the average life span of an American company on the index was 61 years. In 2016 the average life span was 21 years and by 2027, projections based on current data estimate that the average life span would be 14 years. There is no better evidence of how this happens than outgoing Nokia CEO Stephen Elop’s quote in 2013 following the takeover of the company by Microsoft: “We didn’t do anything wrong, but somehow we lost.” The seemingly defeatist statement understated the myopic nature of the firm as it cruise controlled itself from relevance while Apple and Samsung were flat footing the accelerator in the smartphone space.

Another industry at a confluence of shifting consumer preferences and channel disruption is the retail industry. Singles Day in China falls on November 11th every year, or, more aptly 11.11 as the digit one purportedly looks like a solitary individual. The festival is a product of Chinese social culture amongst the youth to celebrate the fact that they are proud of being single. It has evolved into the biggest online shopping day in the world and a wonderful thumb up the nose to the more insular Valentine’s Day culture. Alibaba, the Chinese largest online shopping portal has registered phenomenal growth on this day alone. Sales in 2013 were US$ 5.8 billion, $9.3 billion the year after [when Facebook’s annual revenues were US$ 12.5 billion], $14.3billion in 2015 and tripling the 2013 numbers to a whopping $17.8billion in 2016. I forgot to mention one notable point: These were sales taking place within 24 hours, translating into processing numbers of 175,000 orders per second and 120,000 payments per second on their own payment platform Alipay. In the digital payments world this is the great grandmother of server challenges!

A pivotal part of Alibaba’s strategy is vertical integration, essentially ensuring a transaction gestates from an online conception into a physical delivery. Consequently 1.7 million couriers from 4,000 different retailers shipped 657 million packages out of 5,000 warehouses as a result of Singles Day 2016.
A Forbes magazine article covering the spectacular sales summarized the phenomena thus: A day in China is now bigger than a year’s online sales in Brazil.
Here’s the clincher: 82% of those sales were on smart phones!

The average life span of companies is shrinking largely due to the colossal analogue thinking that straddles boardrooms. Our “normal” as we know it no longer holds true, not when we can drive across Kenya from Mombasa to Busia carrying nothing but a toothbrush, an empty wallet and a mobile money filled phone while never lacking food, fuel and shelter.With the youth bulge that all African economies are facing, the current and future customer for a Kenyan business is more likely to be under 35 years of age, and doing most of their utility payments, banking, social interaction and entertainment off a smart phone. They are the ones who will ensure that Kenyan companies’ life spans shrink unless the corporate thinkers unlearn their current ways and relearn the rapidly shifting customer preferences. The unlearning is not only limited to customer preferences though, a highly differentiated approach will have to be taken towards the employee value proposition too. Employees are no longer in it for life, that’s been left to the KANU stalwarts. Keeping youthful talent is less a question of how much you pay, and more a debate of whether your company has a cause they believe in. Because the minute the values are diametrically opposed to what management actually does, many of these young folk walk. The question to ask yourself this week is, can you learn to unlearn?

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Banks are the new slaves of technology

[vc_row][vc_column width=”2/3″][vc_column_text]$300 billion. Let me translate that into Kenya Shillings. Roughly, Kshs 30 trillion. Now let me put that into perspective. The Kenyan Government budget for the current financial year 2015/2016 is Kshs 2.1 trillion. So about 15 times that number. What is this $300 billion I’m going on and on about? That is the size of penalties that had been levied since 2010 to global financial institutions by June 2015 as reported by the Financial Times. These included fines, settlements and provisions for various levels of misconduct some of which is related to the global financial crisis of 2008. The culprits read like a who’s who on the red carpet to punitive pain: Bank of America, JP Morgan Chase, Standard Chartered, Citigroup, Barclays, Deutsche Bank, HSBC, BNP Paribas and on and on.

And the natural reaction for all these institutions is to tighten controls, seal loopholes, grow the compliance function and generally create enough bottlenecks internally to ensure regulatory compliance. The winners: audit and compliance teams who rule the roost over every single non-compliant new customer onboarding and new product approval process. The losers: the concept of the big, global monstrosity bank that straddles continents like a financial ash cloud. Compliance is expensive. Non-compliance is astronomically expensive. So it was with great interest that I listened to a talk by a renowned futurist called Neil Jacobson last week.

Neil paints a bleak future for the traditional global bank citing six reasons why there is a perfect storm in the global financial industry. First off, there is trust crisis. Even with pedigree board members, highly experienced (and paid) executives in management as well as world class operating systems and processes, many banks clearly can’t get the back end right. The chase for profit trumped controls many times. Secondly he cites the security and regulatory firestorm. I don’t need to harp on it as the number is clear: $300 billion and counting. Regulators are licking their chomps at the highly lucrative knuckle rapping that they have been undertaking. If nothing else, it’s a back alley way to raising more taxes. Thirdly is a technology tsunami. You don’t have to throw a stone very far today before it lands on a code writer, developing one app or the other as there are so many financial technology companies (fintechs) willing to throw money to anyone who comes up with the best app to help provide access to credit or money transfer. The classic thing is this: with the Internet, it doesn’t matter if that developer is sitting in a bedsitter in Kayole or a one bedroom flat in Silicon Valley. The one with the best solution wins. Visit iHub on Ngong road and see what I’m talking about. Facebook, as a matter of fact, is already running app competitions in Kenya. The demonetization of transactions such as matatu fare, paying for food at a restaurant, receiving payment for supplying milk or vegetables is very quickly democratizing the role of money movement beyond the traditional banking space. And banks are too clunky and too heavily regulated to make the quick changes that fintechs are able to exploit. Which brings me to the fourth reason for the perfect storm: an explosion of new, different and rude competitors who are not members of the “old boys club” (which requires academic and professional pedigree) and are alternative thinkers. At this point Neil introduced the audience to the acronym GAFA -which acronym derisively originates from French media – that stands for Google, Apple, Facebook and Amazon. None of which, with the exception of Apple, existed twenty five years ago and together virtually own the technology space. Three of these powerhouses got together in November 2015 under the auspices of “Financial Innovation Now”. Together with Intuit and PayPal, the other three giants Amazon, Apple and Google put together the coalition to act as a lobby that would help policy makers in Washington D.C. to understand the role of financial innovation in creating a modern financial system that is more secure, accessible and affordable. This is where it gets interesting as they twist the knife into the back of traditional banks, “Financial Innovation Now wants policymakers to understand how new technologies can help solve today’s policy challenges.” In other words, we need lawmakers not to be bottlenecks as we help sort out critical voter issues like access to financial tools and services as well as helping voters to save money and lower costs. Win-win for everyone, except the banks.

Once lawmakers start to understand the benefits of low cost, secure financial solutions that do not require deposit taking mechanisms, it is likely that they will apply a much lower prism of regulatory restrictions that are currently straitjacketing the financial industry. You don’t have to go far: look at the Mpesa functionality and the strict segregation of Mpesa funds from Safaricom deposits which was the regulatory compromise for accepting the service in the first place. Neil’s fifth reason for the financial perfect storm is that pressure from customers, staff, regulators and all stakeholders is growing. And his final reason was the ultimate challenge for all businesses beyond the financial industry: Customers are changing. A study presented at Europe’s Finovate 2015 showed that 30% of today’s workforce is made up of millenials, 85% of who want banking to be disrupted. Have you seen those young people whose eyes are constantly glued to their devices and would rather starve than not have data bundles? The solution is hand held and your solution had better dovetail into their solution.

Closer home, the impact may be less harsh. For now. But our homegrown financial institutions are morphing into regional powerhouses and it won’t be long before a few float to the top of the pan-African heap. The successful ones will be the ones that grow their customer base on the back of technological innovation rather than bricks and mortar. To quote Larry Page, one of the founders of Google: Companies fail because they miss the future.

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Twitter: @carolmusyoka[/vc_column_text][/vc_column][vc_column width=”1/3″][/vc_column][/vc_row]