Is M-Pesa an example of a ‘sustainable innovation’? Use the three characteristics of
a sustainable innovation to explain your answer. (250 Words)
M – Pesa: A tale of global
prosperity
By: Christensen Institute
Dec 18, 2018
This guest blog was written by Katie Zandbergen, community manager at The
Forum for Growth & Innovation at the Harvard Business School. Katie earned her
PhD in Comparative Social Policy at the University of Oxford, and is particularly
interested in how the Theories of Disruptive Innovation apply to poverty and
education.
M-Pesa, Kenya’s largest mobile-money transfer service, made headlines last
month when it struck a deal with Western Union to launch M-Pesa Global. The
Venmo-esque service is the protagonist in a tale of global prosperity to which
we all can look for lessons on the impact of market-creating innovations—yet
the company’s roots are far more humble.
Prior to its introduction in Kenya, the situation was such that many
breadwinners from rural areas travelled to urban centres for work and then, to
get the money they had earned back to their families, often endured long trips
home or had to trust someone else to deliver the funds. As Vodafone explains
on their website, “These people didn’t have access to financial services, and in
rural areas there was little, if any, traditional banking infrastructure.” In fact,
the traditional banking system had largely ignored this group, as they didn’t
have much money and the majority didn’t have access to brick-and-mortar
bank branches. However, where many would-be entrepreneurs might have
looked at this situation and seen little potential for successful enterprise, MPesa saw opportunity.
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Though they may not have used the term, M-Pesa’s leadership came to realize
that their future customers had a Job to Be Done—that is, in a given
circumstance (in this case, struggling to get money back home without the
necessity of an arduous journey), people wanted to make progress in their lives.
In 2007, with this knowledge in-hand, Vodafone’s Safaricom launched an
affordable, accessible, and simple solution to fulfill that job: a person-to-person
money transfer service, known as M-Pesa. Using M-Pesa’s services, anyone who
had access to a mobile phone could, regardless of whether they had a bank
account, send and receive money. Though Bob Collymore, the CEO of Safaricom,
described the service offering as “far from elegant” compared to other tech
products, Kenyans with this ability in the palm of their hands saw radical
improvements in their daily lives.
M-Pesa’s money transfer service is what we call a market-creating
innovation—it created an entirely new market by transforming a formerly
complex service (banking) into one that was simple and affordable, such that
many more people who formerly lacked access could use it. In doing so, what
began as a small venture to fill a gap in Kenya’s formal banking network has,
over the last decade, emerged as an explosion of growth, new developments,
fruitful partnerships, and exciting opportunities for both Kenyans and for the
company.
From the perspective of those using M-Pesa’s services, the ability to easily send
and receive money has enabled users to conveniently pay for a myriad of
products and services, both at retails stores and online, for instance, through
Safaricom’s Little Cab, using the music streaming service Songa, on the ecommerce platform masoko.com, and with Bonga, a messaging service.
Furthermore, a 2012 study out of MIT found that M-Pesa helps Kenyans to
better manage circumstances in which they face financial uncertainties, such as
when in poor health or during a drought, because M-Pesa customers have
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access to a broader support network, one through which they can quickly
receive payments from family and friends when in need of a financial crutch.
As is common with market-creating innovations, M-Pesa has also contributed
to the economic development of the countries in which it operates. The service
has, for instance, empowered many Kenyans to start their own enterprises,
with increasing numbers opting for employment in the business sector over
farming. This has helped to lift significant numbers out of poverty. M-Pesa’s
boost to commerce in Kenya has also spilled beyond the country’s borders, as
the company now employs over 285,000 agents in ten countries and is hoping
to make future inroads into Ethiopia, a market with enormous potential.
In Kenya last year, M-Pesa’s revenue increased by 14.2%, to nearly 63 billion
shillings/$615 million USD. M-Pesa also dominates the country’s mobile
money service market:
Given M-Pesa’s success, the company was able to establish the M-Pesa
Foundation, which invests in projects that improve social and economic
conditions in Kenya. Along these lines, M-Pesa has employed its platform to
introduce convenience and accessibility to other much-needed areas. For
example, M-Pesa plays a crucial role in the Vodafone Foundation’s health
services, allowing people in rural areas to pay for transport to treatment
centers and helping doctors to track patients in remote areas; the company
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partnered with M-Kopa, permitting anyone with a mobile phone to buy solar
energy; and a partnership with Ericsson enables residents in local villages to
make M-Pesa payments at clean water pumps. Constantly innovating and
expanding its reach, the recent launch of M-Pesa Global grants customers a
connection to Western Union’s 500,000 agents in over 200 countries. Imagine
what the future holds! Clearly, M-Pesa has created a ripple effect of tremendous
positive impact, and the company has thrived.
The moral of the M-Pesa story is that in order for prosperity to take root, it is
to market-creating innovations that we should turn. With an eye to lowincome countries, innovators need not wait for strong institutions to first
be founded, for the right regulations to be enacted, or for strong
infrastructure to be in place before considering these markets as fertile
ground for building and sustaining successful enterprises. Entrepreneurs
would be well advised to put on a new set of lenses, first looking to find
unfulfilled Jobs to Be Done and then working to address them through the
development of market-creating innovations. Society has much to gain when
companies work to establish solutions that help people who are, in a particular
circumstance, struggling to make progress. Truly, as we’ve seen in the case of
M-Pesa, the impact of market-creating innovations, for both companies and the
communities they serve, is immense.
Christensen Institute
Source: Christensen Institute 2018, M-Pesa: A tale of global prosperity, Christensen
Institute, < https://www.christenseninstitute.org/blog/m-pesa-a-tale-of-globalprosperity/?_sft_topics=global-prosperity,business-model-innovation-globalprosperity&sf_paged=7>