Cre­at­ing new mar­kets in­stead of new com­pe­ti­tion

Finweek English Edition - - INSIDE - BY LISA ILLING­WORTH

The i dea of u ncon­tested mar­ket space is a novel one t hat e v er y ent r e preneur as­pires to hav­ing – es­sen­tially a f r ic t ion­less mar­ket i n which to op­er­ate as op­posed to one teem­ing with com­pe­ti­tion.

The strat­egy of cre­at­ing un­con­tested mar­ket space puts for­ward the no­tion that try­ing to com­pete in over­crowded mar­kets can­not be sus­tained and that high per­for­mance is not pos­si­ble to main­tain in the long run. The in­creased pace of in­no­va­tion makes cre­at­ing and op­er­at­ing in a f r ic­tion­less mar­ket nearly im­pos­si­ble.

The ba­sis for a fric­tion­less strat­egy is not to f ight your com­peti­tors headon for mar­ket share, but to move the bound­aries of t he i ndustr y, t hus mak­ing your com­pe­ti­tion ir­rel­e­vant.

Steven Kark, who started ATM So­lu­tions 15 years ago and trans­formed it into Pay­corp Hold­ings, ex­plains how he keeps from get­ting caught up in the “blood bath” of over­sat­u­rated mar­kets by con­stantly in­no­vat­ing.

“We en­tered t he mar­ket at a time when the need for ATMs far out­weighed the bank’s sup­ply of them and man­aged to cre­ate f ric­tion­less space (also re­ferred to as “the blue ocean”) with a sig­nif­i­cant com­mer­cial op­por­tu­nity by tak­ing ATMs closer to where peo­ple shop, work and live. By be­ing dis­rup­tive in our busi­ness model and in­no­va­tive in cre­at­ing ad­di­tional rev­enue for re­tail­ers, we man­aged in the f irst t wo years to in­stall 650 in­de­pen­dent ATM ma­chines which, we be­lieve, was more than all of the big four banks com­bined over the same pe­riod.”

Kark put i n place f un­da­men­tal and in­cre­men­tal in­no­va­tions in what looked like a highly-con­tested mar­ket space to grow a busi­ness that staged a man­age­ment buy-out co-funded by Ac­tis for R937m in 2013.

Those in­no­va­tions took the form of al­low­ing mer­chants to re­plen­ish ATMs t hem­selves and a l ong with other in­no­va­tions that re­duced costs, the bank’s foot­print was ex­tended with­out them hav­ing to in­cur high in­stal­la­tion and main­te­nance costs as­so­ci­ated with re­plen­ish­ing cash.

“All our ma­chines have a ‘ dip-in’ card reader which means that cards are never swal­lowed, thereby re­duc­ing t he need for ser­vic­ing due to card er­rors and can be so­lar pow­ered in ar­eas i mpacted by power out­ages,” he says. Ac­cord­ing to Kark, stay­ing well-in­formed of move­ments in the mar­ket, be­ing able to dif­fer­en­ti­ate t he noise f rom t he re­alit y and not hav­ing any “sa­cred cows”, or pre­ferred prod­ucts, keeps the busi­ness cre­at­ing un­con­tested mar­ket op­por­tu­ni­ties out of the ad­vanced and sat­u­rated fi­nan­cial ser­vices mar­ket.

“Peo­ple have a propen­sity to get com­fort­able. I am a bad sleeper and con­stantly alert to op­por­tu­ni­ties so, as an avid reader, I stay abreast of any­thing and ev­ery­thing as far as is pos­si­ble,” he says.

WHAT IS THE BLUE OCEAN LIKE?

The idea of cre­at­ing a new mar­ket seems like an ideal place to be in where there are no other com­peti­tors and the mar­ket is yours for the tak­ing. But in re­al­ity, the blue ocean is vast and wide with dan­gers that are hid­den and there are no other fore­run­ners to help you pre­pare for the po­ten­tial dan­gers.

David Gluck­man, an econ­o­mist and now so­cial en­tre­pre­neur, and his part­ner Fran­cois Pe­tousis de­vel­oped a town­ship fire pro­tec­tion de­vice that has won lo­cal and in­ter­na­tional in­no­va­tion awards. The most re­cent was the lo­cal Chivas Re­gal Win the Right Way award that will send the en­trepreneurs to Sil­i­con Val­ley to run against the other global com­peti­tors.

How­ever, the swim through the blue ocean is not as ro­man­tic as it may sound, Gluck­man ex­plains. “The blue ocean or un­con­tested space with an in­no­va­tion such as ours might have more pit­falls than the tra­di­tional start-up in­no­va­tion. We know there is a need with the high rate of shack fires in our coun­try and around the world, so what might seem like a blue ocean is ac­tu­ally one fraught with tsunamis.

Steven Kark

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