Open service innovation model has in recent years attracted the attention of both practitioners and academia. In essence, the practice of open innovation is a result of recognizingthe enormous potential for developing innovative products beyond the internal capacity of a firm. Based on literature review, this paper discusses the concept of open innovation and subsequently applies the framework to describe and draw lessons from mobile financial services in Tanzania. A case study of the partnership between National Microfinance Bank (NMB) and a mobile network op-erator - Vodacom Tanzania is presented. From this case it is vivid that open innovation approach has been key to redefining the distribution channel of the bank, which subsequently has the po-tential to benefit all stakeholders involved. Finally, by reflecting on the essence and impact of open innovation as illustrated by NMB and Vodacom case, the paper presents key lessons that may be relevant for SMEs and SME policy.

1. Redefining distribution channels through open innovation
Lessons from Mobile Financial Services in Tanzania
Authors:
Otto M. Muba and Deodat E. Mwesiumo
SkCommercial Ltd
Toward a Shared MFS Agents Networks

2. Agenda
Objectives of the paper
Highlights on open innovation
Case study: Collaboration
between NMB and Vodacom
Lessons from the case study
Conclusion
01.07.2015

3. To illustrate open innovation in a developing country context
To draw lessons from the case relevant for MFS Agents
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4. Highlights on open innovation
What is it?
Commercialization of external (as well as internal) ideas by deploying outside
(as well as in-house) pathways to the market (Chesbrough, 2003).

5. The mechanism
Systematic acquisition and exploitation of resources and capabilities for
innovation undertaken both internally and externally (Lichtenthaler, 2008)

6. Potential benefits of open innovation
Potential for reducing innovation costs and risks
(Belderbos et al., 2004)
Potential for reducing challenges of adaptation to dynamic
environments (Dittrich and Duysters, 2007)
Potential for accessing and leveraging external
complementary resources (Miotti and Sachwald, 2003)
Potential for generating higher revenues
(Faems et al., 2005)

7. Potential pitfalls of open innovation
Source: Enkel et al. (2009)
Leakage of knowledge
Higher coordination costs
Loss of control
Increased complexity

8. Case study:
The partnership between NMB and Vodacom

9. Key facts
Fully-fledged commercial bank listed on
DSE
149 branches: present in 124 of 134
administrative districts
The largest branch network: 34% of all
bank branches in Tanzania

10. NMB old innovation approach
Closed innovation

11. Key facts
Leading telecommunication company in
Tanzania by number of subscriptions.
10,288,972 subscriptions as per December
2013.
The first to introduce Mobile financial
services in the country: M-Pesa.
Extensive network of agents: of over 40,000
agents countrywide.

12. The partnershibetwp
Rapid growth of Mobile Financial Services changed
business landscape in retail financial services
NMB realized that in order to cope with the changes
innovation was inevitable
NMB could hardly develop on its own a fully-fledged
Mobile Financial Services
Being the leading mobile network operator, Vodacom
became an obvious choice for NMB

13. The partnershibetwp
The partnership became reality on 28th February 2013
This meant over 40,000 agents of Vodacom M-Pesa
became part of NMB distribution chain
The service would enable more than 729,000 NMB
customers to make transactions via M-Pesa

14. The mechanism o of the partnershibetwp
Open innovation model

15. Implications of the partnership
The collaboration demonstrates how firms can exploit
external linkages in persuasion of market opportunities
The case illustrates feasibility of open innovation in a
developing country and service sector contexts.
All parties involved will benefit from the partnership:
NMB, Vodacom, Customers and regulatory authorities

16. Lessons relevant for MFS Agents
MFS Agents should tap into the external knowledge and
expertise.
Open innovation works even for MFS Agents
(van de Vrande et al. 2009).
Through collaborations MFS Agents can mobilize their
technological and marketing opportunities
(Chesbrough, 2003, 2007).
Collaborations can increase the chances of MFS Agents to
access financial resources.

17. Lessons relevant for MFS Agents
Type of innovation
Motivations of the potential partners
The business model.
MFS Agents that intend to collaborate on innovation should
carefully assess the potentiality and feasibility. Things to watch:
Source: Boudreau and Lakhani (2009)

18. Lessons for policy makers
MFS Agents need deliberate policy-based support for
creating the right atmosphere for innovation
MNO and partners could promote innovation by prioritizing
offerings tabled by MFS Agents Networks.
Encouraging MFS Agents Networking

19. Conclusion
The case shows that open innovation is one of the ways firms
can use to exploit market opportunities
And even MFS Agents in developing countries can access and
leverage resources beyond their boundary thus accelerate
their growth and indeed their role in economic growth

20. THANK YOU!