Open Economy: Confusing disruption & distortion

Open Economy: Confusing disruption & distortion

Disruption is a popular buzzword in the entrepreneurial community.
It is meant to express a scenario where a new venture alters the conventional business models that exist in a particular industry, and so creating an entirely new way of how a product or service is offered.
For instance, from the moment of mass accessibility, the cellular phone became a disruptive force in the telecommunications industry which was at the time dominated by residential land lines and switchboards.
It is this kind of industrial disruption that Zimbabweans, particularly those of the conviction that an old economy is dead, are now hoping to see spearhead the economic ascent that we all hope for.
The entrepreneurial drive in Zimbabwe carries an expectation of birthing new ventures that are of a disruptive nature.
While such hopes are indeed virtuous and largely coming from a noble place, they are regrettably conceived off a misinterpretation that has continually harmed our economy over the years.
We fail to distinguish industrial disruption from industrial distortion!
In far too many cases we have perceived industrial distortions and the opportunists who capitalise on these distortions as being disruptive entrepreneurs.  It is important then that we find clarity in the differences between the two industrial occurrences and the dissimilar roles played by the agents behind them.
Disruption is an industrial evolution that conforms to a product or service life cycle; which follows the sequence of introduction, growth, maturity, and decline.  Disruption largely takes place between the maturity and decline stage. Thus, it actually occurs less frequently than what entrepreneurship romanticists would like to lead on.
Before our economy pins its hopes on seeing multiple industrial disruptions, it would be prudent to ask ourselves at what stage key industries are in their respective product or service life cycles.
There is a valid argument in suggesting that many industries in Zimbabwe that could be the drivers of growth in the short term are not yet at the maturity or decline stages of the product or service life cycle.
As such, these industries are not yet conducive to disruption. Industries such as energy, transport, broadcasting, tourism, and mining have all not yet reached the growth stage to incite any significant disruption to create these industries anew. The slow life cycle progression is due to retained inefficiency. The problem of inefficiency is often circumvented by creating a competitive economic structure which allows industry participants to rise or fall while products or services evolve through their cycle. However, our economic structure has enabled inefficiency by a combination or any one of the following: regulatory barriers to entry for new entrants, supported relief programs, and slow institutional capacity building.  Indeed, the majority of successful disruptive ventures globally are in fact beneficiaries of fast developing industries.  This is a fact absent from our entrepreneurial consciousness in Zimbabwe! I trace this pervasive economic naivety as being explanatory to why then Zimbabwe tends to perceive entrepreneurship and disruption as capitalising on industrial distortions.  Most industrial shifts that we perceive as disruption are simply individuals capitalizing on the failures caused by retained inefficiency by our economic structure.
For instance, as ZESA has continually struggled, disruption is perceived as offering alternatives such as generators and solar panels.  As water provision is frustratingly erratic and unsafe, disruption is seen as sinking boreholes, selling water and its storage containers.
As business districts are allowed to decay, turning residential homes into office space is considered to be disruption.
As the public transport system fails to keep pace with urban mobility, disruption appears to be “mushikashika” and other informal transport alternatives.
These industrial shifts are distortions and contrary to popular perceptions, the emergent ventures do not represent disruption in an economic growth context.
Instead, these ventures more accurately reflect opportunism in a distortion context!
You will find that these ventures opened up as a result of market failures attributable to regulatory barriers to entry, guaranteed supported relief programs, and slow institutional capacity building.
One can offer rebuttal proposing that global trends are already creating an environment where infinite players are able to enter and offer energy in respective economies, thus my generic definition of the generators and solar panels business as capitalising on distortion would be incorrect.  Such a rebuttal is flawed in that developed economies have advanced to a conscious economic reorganization of market structures that forego the traditional centralized power provider protected by Government entitlement. This is not the case in Zimbabwe! We are merely adopting certain elements now such as tendering independent power providers (IPP), but the market structure is still of a protected, nationally centralized design with the aforementioned business activities profiting on the struggles of that chosen structural deficiency.
Thus, we have an economy which invites distortion and not disruption.
Legislators must begin to pay attention to matters that relate to regulatory barriers to entry, where we choose to allocate relief programs, and institutional capacity building. All three must exist to create a competitive economy that fosters efficiency!  It is this lack of efficiency that has nurtured capitalising on distortion, and not entrepreneurial disruption!

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