The Caribbean is ripe for disruption
According to the late Clayton Christensen, American academic and business consultant who developed the theory of “disruptive innovation”, disruptive innovation can be explained as “the phenomenon by which an innovation transforms an existing market or sector by introducing simplicity, convenience, accessibility, and affordability where complication and high cost are the status quo” (1997). Christensen further stated in an article published by The Harvard Business Review (2015) that “Disruption describes a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses” and “when mainstream customers start adopting the entrant’s offerings in volume”.
So, why is the Caribbean ripe for disruption? The Caribbean is ripe for disruption because the region is not fully developed in terms of technological advancements, and it offers a wide scope for improvements. The region also has a high number of persons living in poverty who are not able to afford certain products and services. The region, therefore, has the perfect conditions for the development of a sandbox environment. Based on Christenson’s definition, a classic example of disruption in the Caribbean region, and particularly Jamaica, would be the case of Digicel and Cable & Wireless where Digicel came in and disrupted the market at a time when Cable & Wireless was pursuing the greatest profitability and charging high prices. Those who could not afford it, had to go without the service. In so doing, Cable and Wireless had, unwittingly, opened the door for disruptive innovation.
Christenson posits that “Disruption may occur at either the low end or new market footholds” (2015). The situation persistent in the Caribbean region leaves ample room for both. This is based on the fact that incumbents have both been slow to change legacy systems, and very often only doing so to facilitate the needs of higher paying clients. Digicel was able to enter the region and provide cellular and internet services to a group of people who in prior years had limited access to these services due to the high costs. Another example is the case of GraceKennedy and the LASCO affiliated group of companies. Similar to what Digicel did to C&W, Lasco was able to disrupt the business of GraceKennedy Limited by catering to a market that was being left behind as GraceKennedy grew. Today, the Lasco companies, as a group is bigger than GraceKennedy. According to an article published in a daily newspaper, the LASCO group is the third largest company on the Jamaica Stock Exchange (2018).
Disruption in the financial sector
Disruption within the Caribbean region includes the financial sector. Bitcoin and other cryptocurrencies gained prominence in 2015. Since then, the financial industry, globally, has come under attack from small companies that are entering the market with the primary aim of serving people who find the costs of transactions too expensive. In the Caribbean, transactions are even more expensive than those in more developed countries. This leaves the door open for a disruption in the regional financial market. The Caribbean is not the first place that comes to mind when one thinks about technological advancement in finance. In fact, many of our systems in the financial arena are “legacy systems”.
The Caribbean, to a large extent, has been slow to adopt new technologies and practices. For many organizations, switching costs are the greatest deterrent. Further to the challenge of switching is innovation itself. No organization wants to adopt an entirely new system only for it to be made obsolete within the next few months. For these reasons, the Caribbean has lagged behind more developed regions in terms of our systems and practices. There is, however, the opportunity for smaller organizations and individuals to leap frog the traditional companies.
Caribbean Value Investor is an investment media company focused on promoting and enabling value investing in the Caribbean region.