Disruptive innovations are happening across several sectors and changing the business paradigms. This is as they seek to establish new orders in the sectors they are impacting and irrevocably changing. However, disruption and disinter-mediation comes with a tremendous responsibility alongside opportunities. It is important to realize this responsibility from a sectorial perspective and adherence to the same by the disrupts will form a key part of their eventual success, more importantly the sector itself.
In India, more so in the financial sector, there has been very little innovation over the last 40 years with the possible exception of micro finance. If you take the MFIs as a case study , the proclivity to go overboard and build volumes plagued the industry in the absence of proper regulation from a central regulator, leaving them open to risks across the regulatory , social and operational spectrum.
A few bad cases, hard collection methods and a desensitized organizational framework geared towards volumes ensured that the sector imploded in a spectacular way with several investors and companies losing over few thousand crores. Insight was that high interest rates which hovered around 36 to 54% in the MFI space led a cycle of defaults in the rural landscape and the social ethos of this country did the rest as a result paying borrowers stopped paying their installments.
Innovation and disruption needs responsibility and that is where self-regulation comes in from a business and sectoral perspective. Uber, Airbnb, Ola, low cost airlines etc. all faced tremendous opposition from a well-entrenched industry with significant political and commercial lobbying power. Existing Fleet operators, the hospitality industry all felt threatened but the disruptors were accepted by consumers simply because the value proposition was very good and some major pain points were solved by these disruptors.
These dilemmas are one of the major questions that confront an entrepreneur or CEO of a company with disruptive potential and the CEO’s role more so in the absence of external regulation.
Today with markets , VC’s , stakeholders all clamoring for traction, it is very difficult for a company to behave in a manner which meets these expectations but also ensures that the disruptor product or service doesn’t just fulfill one core part of the gap. This also ensures that it envelops the whole problem statement. This, in my opinion will determine the survivors from the also ‘rans’.
As a pioneer, a startup has the responsibility of shepherding the sector, ensuring that an ecosystem that adheres to certain self-regulated guidelines and operational processes. This arrangement is very important to establish credibility, longevity and a visionary approach.
Some of the key aspects of self-regulation will involve interest rates, KYC and credit verification norms and the need to exceed existing guidelines, transparency in communication, user information and its usage and disclosures.
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