Immersion in rural Kenya

Next week's office

We start the immersion phase of our project tomorrow and leave for our first location in rural Kenya today. Our focus is to better understand household consumer behaviour and our methodology is inspired by the early stage of the human centered design process.

Ukambani has been the traditional homeland of the Kamba people for at least the last four or five centuries. Although oral history acknowledges that the Kamba came from the south, in the region of Mount Kilimanjaro, the creation myth which is most popularly cited places their origins in the heart of Ukambani: Mulungu (God), who created the universe, also created the first Kamba man and woman, and placed them on top of Mount Nzaui in the fertile Mbooni Hills (roughly 20km north of Emali).

We’ll be based in the market town of Wote, capital of Makueni district.

Why so much “BoP” marketing fails in the developing world

Consumer electronics stall in informal market, Nairobi Kenya 23 January 2012

Increasingly I have been getting the sense that there are some fundamental issues with the way BoP focused organizations are developing, creating and implementing their market entry strategies.  Here are four of the most obvious errors that I’m seeing:

Assuming there’s no competition

Most of these firms, particularly those coming in from the outside and seeking to serve the ‘poor’ in the developing world seem to be operating in a vacuum. Observing their market entry actions point to an underlying assumption that they are entering a virgin market where  no competing solutions for their product or service exist.  If this fundamental premise is mistaken then every element of their marketing, communication, distribution and pricing strategy will naturally suffer.

A caveat here is that it might indeed be a virgin market for branded international solutions in the formal market but this is where overlooking the informal markets and existing practices in user behaviour can be far more dangerous since this is where the competition will come from in the form of substitutes or alternate solutions.

Because of the above assumption, little effort is made to uncover information about the customer, the market or competition or the operating environment. Whether this is due to a vacuum of information on BoP markets or the developing world, or this subject simply not being taken into consideration, the fact remains that this oversight then gives rise to a series of errors (like the domino effect) – those in marketing strategy viz., marketing communications, value propositions and positioning not to mention pricing.

Conflating company mission with marketing strategy

While this is most commonly found among well meaning social enterprises entering these markets for the first time with their life saving products for the poor, large multinationals with previous experience in the developing world are not immune the minute they choose to focus particularly on the BoP (or poor) market.

Tata Nano is the most obvious example of this although here one wonders how much of this had to do with their actual marketing communications and advertising for the Nano and how much to do with all the media hype around the car being specially for the ‘common man’? All the positioning and branding in the world through formal advertising and communication channels could not overcome the public perception of the ‘poor man’s car’ created by every other article – from engineering news to international styling – on the Nano.

Similarly, if all the marketing communications, press reports and online information is geared towards the ‘poverty alleviating” mission of the company then this lack of clear focus or understanding of who the target audience is will come through in the positioning and branding of the product in the marketplace.  And no one will aspire to buy the ‘poor man’s product’ if it means a clear signal of having failed to succeed or admitting defeat among their friends and neighbours.

Confusing value proposition with need

This lack of clarity and understanding about the target audience for a product or service and thus, its marketing communications and messaging then snowballs into incorrect positioning of the product or incorrectly identifying the value proposition for the end user.

The end result might be the same – the customer choosing to buy your product – but the pain points may differ tremendously across geographies and regions, not to mention socioeconomic strata. An example is water saving flush toilet mechanisms being sold in Nairobi as a sustainable, greener alternative – that is, the same positioning and value proposition as that used in the eco-conscious parts of the Northern European continent. Sales are sluggish. But when you take into consideration that there is a water shortage or that many communities need to purchase water in tankers to fill their household storage tanks, a simple shift in positioning to “Spend less money flushing down the toilet” or some such clever quip could in fact make a more sensible approach in this situation for the very same product.

This gets more obvious the lower down the income stream you go – Mama Mboga with her vegetable stand may not have the same priorities nor relate to the same value propositions that social impact investors do.

Overestimating the ability of a faceless brand to communicate value

There is probably a snappier sentence to capture this aspect but at this stage of understanding the BoP markets and their challenges its perhaps better to be clear than pithy.  Some have called this issue one of Trust and in the past, I’ve referred to it as Commitment but the fact remains that this aspect is the most challenging and difficult to overcome as a barrier to acceptance.

Even megabrands accustomed to instant global recognition such as Google may find that not only is their brand unknown and unheard of in these new and emerging markets but others may have gotten there before them.  Which, in a way, brings us back to the first point in the assumptions made at the very beginning of considering market entry strategies in the rising global middle class.

Fuel, Food and Fone – The necessities of modern life

Highway stands, Kirinyaga, Kenya 19th January 2012

“The Largest Mobile Money Network”

Kirinyaga, Kenya 19th January 2012

Seeing signs of increasing competition around as next evolution requires interconnectivity and platform agnosticism.

On the New Silk Route

Bangkok's Suvarnabhumi Airport, Jan 13th 2012

The 21st century’s version of the old Silk Road that led caravans of traders from around the world to China and back is the flight path between the African continent and China. Bangkok Airport is one of the oasis on the New Silk Route, where I caught the Kenyan Airways flight on its stopover between Guangzhou and Nairobi. Sitting next to me were entrepreneurs – the lady from Kigali returning after deal making in electronics and new clothes and the Congolese traders from Brazzaville exuberantly enjoying their after dinner cognacs, all chattering away in French.

Extent of the old Silk Road. Red is land route and the blue is the sea/water route (source: Wikipedia)

It was the onboard announcement made just prior to landing in Nairobi that made me realize what I had just experienced – connecting flights out of Nairobi reached across the Sub Saharan landscape from Accra to Kigali, Harare to Lubumbashi – exotic names in distant places, yet gathered under one roof, if only for a short moment in time. How different was this from caravanserais of yore as the mishmash of “small small English” mingled with la langue francais et every mother’s tongue? Kenya Airways had Thai stewardesses and I heard each safety instruction being repeated in fluent Mandarin, Gujerati and Swahili as well. Only the technology and the means of transportation and communication have changed, the bazaar is still the marketplace for exchange of goods and services as it has always been.

Until now I’d only read about increasing trade between these two far flung places, the majority of which emerging from the so called informal economy or Neuwirth’s systeme D. But this short immersion in the energy flow in between underlined the reality and scale of what was happening. The flight was full and there were few getting on in Bangkok, the vast majority of passengers returning to their various destinations after their short sojourns in Guangzhou. The other flights out of Bangkok – to Brisbane or London – were full of holidaymakers but not this flight unless one counted the group of young Koreans going on a volunteer trip with an NGO.  Perhaps its time the old Silk Road map was updated with current day flight paths in bright purple.

Here’s a snippet from an article article translated from the Japanese on the unique model of globalization displayed by “Little Africa” in southern China:

 Including undocumented immigrants, it is estimated that there are an astounding 150,000 Africans in Guangzhou, a majority of them male. It should come as no surprise then that among Guangzhou’s foreign residents, those from Africa make up the largest proportion. These immigrants essentially operate on an individual basis. Working in China as buyers, they can be seen determinedly ranging the streets of central Guangzhou’s wholesale district. There are variations in density, but among the passersby on some bustling streets, half will have African features. There are those from East Africa and West Africa, of all kinds of builds from all different countries. They come to stock up on goods ranging from clothes to cosmetics and sundries, even fake brands – probably collected from factories forced to compete with prices in the Guangzhou region – seeking out deals for everything. Gathering together enough to fill a shipping container, they send these miscellanies home and then flip them for twice the cost, with Guangzhou’s customs duty apparently accommodating such motley trade.
[...]
The individual buyers are supervised by North African or Middle Eastern controllers, and when night comes they gather at restaurants to carry out microloan-style finance meetings. There are several such restaurants near Xiaobei station, all observing Halal practice. Based on their appearances, the staff at these family-run establishments seem to be Chinese Muslims – probably from Xinjiang – who are recruited through ethnic networks. As night deepens, the restaurants become sites for the buyers to exchange information among themselves, with groups of men gathered around different tables, all speaking intently in any number of languages. (On one visit coinciding with the recent revolutions in North Africa and the Middle East, several men looked as though they were about to be sucked into a television relaying broadcasts from Al Jazeera.) All the services necessary to support their lives are concentrated in these enclaves. There are restaurants serving cuisine from the Congo and Nigeria, stalls with cheap telephone rates to Africa, mobile phone brokers, specialty barbers, vendors hawking cassettes and CDs of African music, and in some buildings that have been completely occupied by African tenants, the rare African-run intermediary wholesaler doing order-made customization.

To put it simply, Guangzhou’s African enclaves can be seen as an effect of globalization. African buyers seeking cheap products come to China, “the world’s factory.” Yet if globalization is generally understood as the reproduction of standardized conditions across the world – as with the buildings of Pearl River New Town and McDonalds franchises – the African enclaves present an exceptional case study of globalization.

Observations on emerging opportunities in upcountry Kenya

Louis Majanja is a photographer who maintains the wonderful ‘Daily Struggle‘ photoblog capturing life in and around Nairobi and Kenya and his latest post captured not only my imagination but also the changes he’s observed upcountry in his rural home region when he went back for the holidays.  Here, I want to share that insight with you:

Photo Credit: "Daily Struggle" by Louis Majanja

He writes:

The signs on the premise speak of 3 different phenomenons that are reshaping rural life in Kenya – Cycle parts, Mobile repair, and New Kinyozi (barber shop)  represent  3 businesses that would not have existed 10, even 5 years ago. The spread of inexpensive Chinese motorcycles, has improved rural mobility dramatically, cheaper cellphones have improved communication and rural electrification is is enabling new businesses and new businesses are growing around this new opportunities.

Systems thinking and the mobile for economic impact and wealth creation

Photo credit: Muchiri Nyaggah, May 2011

I have been meaning to write this post for quite some time now, percolating as it has in the back of my mind but it was Mark Kaigwa’s recent comment that finally spurred this writing. This is not all about MPesa, though it will take a look at some of the issues why its runaway success in Kenya has not yet been duplicated elsewhere, beyond the obvious brought up in most articles of “its the banking regulations” or “its the distribution network”.

Much credit of the fundamental thinking that will underlie this post’s premise must go to Wambura Kimunyu of Cellulant with whom I’ve discussed these issues in Twitter.  Furthermore, I believe that if we can frame the problem (and thus the potential solution) correctly, we may be onto something that could in fact make a big difference to the many ways  we attempt to enable and support social and economic development.

Some background
The topic today is the mobile phone (which I’ll also refer to as the mobile platform, since the phone aspect is but a feature of this handheld device) and its role among what is popularly known as the BoP or those at the Base or Bottom of the Pyramid, yet when I think about the very many pilot programs and attempts to spur development via the mobile platform or, as in the case of MPesa, to launch game changing mobile money transfer et al systems elsewhere, what immediately comes to my mind is a reflection on the issues that plagued the analysis of the success of Asus’ eeePC when it was first launched back in late 2007.

We take very affordable and very portable netbooks for granted today but back then in time, the category did not exist until Asus launched their 7″ linux based, open source, rugged and durable beauty for around USD 400.  It was referred to as a “subnotebook” back then and caused much head scratching among the developed world’s leading lights, even as it spurred all manner of competitors to focus on the two most obvious elements of its perceived success criteria – “price” and “form factor”.  Whereas I argued, that what made the Asus eeePC so successful was its fundamental premise – to be an easy to use affordable device squarely aimed at emerging markets and how it was this positioning that drove every other element, including its form factor and price. By focusing only on the obvious, without taking the holistic thinking and underlying value proposition into consideration, competitors were overlooking many of the details that supported its initial success.

Some framing
I see something similar happening with one of the most obvious success stories in the “Mobile as a platform for economic development of the BoP” bandwagon.  MPesa shows up in most analyses of “Business models or mobile thingies that are helping the poor” reports churned out so faithfully by researchers everywhere, yet the question arises, should it be even considered in that sandbox of things that help the poor in the first place? And by doing so, are we overlooking some of the factors of what makes it work so well in Kenya as well as misinterpreting that it was meant to be used only by the poor?

When the first reports of MPesa’s hiccups in South Africa came to light, it was then that Wambura first tweeted about the lack of the banked that were critical to spur the unbanked and thus the overall uptake of the service.  That is, if the MPesa ecosystem did not have enough banked people with money to circulate, then there wouldn’t be enough unbanked nor would there be enough money to circulate etc etc leading to the challenges that they are facing in South Africa now.  You needed the banked to bank the unbanked.  It sounded counter intuitive to me back then but over time as I observed many different facets of this activity across different strata in Kenya it came to me just how much sense this made and also how relevant this aspect was for the success of anything that should be considered as a means to improve incomes among the BoP when using the mobile platform (or otherwise, to be honest).

Why so?

Some systems thinking
That is, for any solution designed to enable the flow of wealth – mobile money transfer for example – or improve wealth creation at the BoP – it was not enough to simply target the poor alone. It would not work as a “Solution for the BoP” primarily because the BoP do not have any liquidity,  even if they do indeed have assets especially in rural areas, or they do not have the cash for it to flow through the system in the first place. Thus solutions aimed at improving economic activity for the poor needed ‘non poor’ actors in the ecosystem in order to inject cash into the system and thus make it flow (and one hopes, grow).

Taking this thought one step further, MPesa – assessed as a holistic ecosystem for financial transactions – has been so very obviously successful in the Kenyan context primarily because it is used by everyone, regardless of their economic standing or bankedness (if I may coin a non word).  In fact I believe that the number of banked actually surpasses the number of the unbanked – there is a link there that right now is not in the scope of this post but we can look at it later.

And thus, when ‘Solutions on the mobile to help the BoP or poor’ are considered, they should be looked at in terms of the complete ecosystem including the critical question of Where will the money come from into the system in the first place?  Without which, they will limp along as a cash poor system with little wealth to circulate, achieving nothing for the BoP in question. Look at this article on MPesa repositioning itself in South Africa towards higher income brackets and away from the original target audience of poor rural women. QED.

Solutions meant to improve economic conditions for the BoP cannot be focused only on the BoP.
Rather the focus needs to shift to complete ecosystems that fill a vacuum of need – usually in infrastructure or services – that include actors from differing socio economic strata in order to make a viable difference to larger population involved.  Not only is MPesa a clear example of this framing – it filled the vacuum of “how to securely and affordably send money” – but it did so for everyone and anyone who wanted to do so.

Similarly, when I consider my favourite example of the Mumias Sugar Company and their payroll management pilot program for their daily wage sugar cane cutters, I see the same potential for a greater impact on social and economic development for the lower income demographic involved in this system. The solution is one that is win win for all stake holders – from the company who doesn’t need to send armed guards with cash into the fields to the workers who now not only have savings accounts but don’t need to carry lumpsums of cash around with them on payday.

I also hear that real time inventory management and other enterprise level solutions for supply chain management are also moving onto the MPesa/mobile platform in Kenya – again involving the tiniest duka as well as the big name manufacturers or distributors.  Again we can see the potential impact on inventory management and thus, cash flow, even at the bottom of the retail pyramid, where its most critically needed and we can project the potential that it will improve the economic standing or at least help smoothen the variability of income streams that these smallest players in the informal economy require.

Will all stakeholders benefit? Yes. And will the members of the ecosystem who happen to fall into the so called BoP category benefit? Most likely. And more likely than if only the lowest segment was involved in a system of this sort rather than participating in the larger ecosystem of buyers and sellers.

Bottom line
Bringing all this back to the framing of the solution space or rather, the analysis of the success factors, I believe that a simple shift away from seeing only the obvious – mobiles! money! BoP! -  system level solutions that fill critical infrastructural and service gaps in locales where there are few or inadequate alternates and that serve many including the BoP can and will do far better to improve the economic wellbeing across the board of society that those that focus on one demographic alone.

M-PESA and the service innovation framework (extract)

A former student of mine just mailed me this article “Extracting Key Lessons in Service Innovation” (pdf) by S.Wooder and S. Baker, recently published in the Journal of Product Innovation Management, January 2012 edition. Here is the abstract of the article:

This paper describes how Sagentia—working with Vodafone, Safaricom, and other organizations—played a significant role in the creation and delivery of a landmark mobile money transfer and payment service for emerging markets, starting in Kenya. In this profile we examine the organization aspects and approach that contributed to the success of the service: the lessons we learned as the technology provider and how the experience has informed and strengthened our service innovation processes.

Reading through, what I found most valuable among the basic principles so simply and clearly articulated, was this insightful description of service innovation, as pertaining to the ways that a human centered design innovation team can work to improve the customer experience for any company, large or small:

What Is Service Innovation?  Creating and Delivering Value

We are familiar with service innovation examples such as music download, loyalty programs, franchise chains, ticket/check-in kiosks, and online tax returns.

Service innovation can be described as a combination of technology innovation, business model innovation, social-organizational innovation, and demand innovation, with the objective of improving existing services (incremental innovation), creating new value propositions (offerings), or creating new service systems (radical or transformational innovation) (IfM and IBM, 2008). The key components of service innovation can be distilled down to “participative” value delivery; [...]

So if the service is considered to be:

• something that may or may not entail physical product delivery or consumption
• a value delivery mechanism that connects the enterprise to the customer
• the combination of a value proposition, a delivery mechanism, and a customer’s experience

Then service innovation is simply innovation applied to one or more of the following areas:

• new concepts and/or value propositions
• new delivery mechanisms and/or business models
• new experiences

[...] Successful service or product innovation encompasses progress from the creative act (the so-called fuzzy front end) to the commercialization act (execution) and beyond that to sustainability and evolution of the innovation. Our simple framework for service innovation is shown in Figure 3

 And finally, they share with us the mapping of MPESA on to this service innovation framework.

The authors conclude their informative article with the following words:

Key lessons that were highlighted by our experience with M-PESA include:

• Learning in a detailed sense the needs of users in new markets and ensuring that it is possible to implement these needs and requirements as part of a pilot process;
• “Keeping it simple”; particularly in the early stages of the service, it is important to focus on a small set of compelling, marketable functions and features;
• Ensure that flexibility and agility, the ability to react and to respond to changes in the business model, are designed into the system; and
• For a service to succeed, it requires a critical mass of users as soon as possible; identifying mechanisms to motivate users to take up the service is an important part of the service innovation process.

The results of the study cannot claim to be generally applicable; however, it has allowed the “usefulness” of the conceptual stages in the service innovation framework to be empirically tested in a real-world example, and the vulnerabilities and strengths are better understood as a result.

The ingenuity economy: grassroots social enterprises abound

Since I’d recently completed my review of Robert Neuwirth’s book, Stealth of Nations – The rise of the global informal economy, it struck me that what best characterizes this economic activity is captured by him here:

The French have a word that they often use to describe particularly effective and motivated people. They call them débrouillards. To say a man is a débrouillard is to tell people how resourceful and ingenious he is. The former French colonies have sculpted this word to their own social and economic reality. They say that inventive, self-starting, entrepreneurial merchants who are doing business on their own, without registering or being regulated by the bureaucracy and, for the most part, without paying taxes, are part of “l’economie de la débrouillardise.” Or, sweetened for street use, “Systeme D.” This essentially translates as the ingenuity economy, the economy of improvisation and self-reliance, the do-it-yourself, or DIY, economy.

Do those words not capture the spirit of innovation we so often discuss here?  The ingenuity economy seems to capture that essence somehow, though I doubt it would ever make it into general parlance. In any case, here are such two stories from Kenya – one regarding household solar power and one on potable drinking water – traditionally the purview of design students and social entrepreneurs everywhere.

Charles Otieno Ogwel is a school dropout who makes custom inverters for household consumption drawing energy from solar power. From yesterday’s Daily Nation article:

Mr Otieno is now lighting up rural homes where Kenya Power has not yet reached to provide electricity. At a cost of Sh12,000, a homestead will get electricity as his inverter converts solar energy into high voltage alternating current. One needs a solar panel, an accumulator, and the specifications of the domestic appliances to be used. Mr Otieno then determines, through calculations, the type of inverter, in terms of capacity, suitable for that home. He then makes an inverter that suits his clients’ need.
[...]
The father-of-three says he has spent more than Sh250,000 on research to come up with the modified gadgets and has sold close to 10,000 customised inverters.

Why aren’t all the solar power enterprises snapping up fundis like Mr Otieno? And from a slightly older article from the Business Daily  comes the story of these enterprising women from Kirinyaga who brought an organic, affordable and natural solution for water purification back from the Sudan. Here’s a snippet:

Victoria Kamwenja is one of the women now working to spread the word on the water purification in training sessions.

“When added to water, the crushed seeds attract particles of dirt that are floating in the water, including certain disease organisms. The dirt attaches to the seeds and they fall together to the bottom of the jar. Then you pour off the good water to drink,” said Victoria.

“The dirtier the water the more seeds you will need”.

Together the women are now selling the seeds to other households in other areas after offering training at a fee. Susan Kinya and Anastacia Nyawira are selling the seeds in four districts surrounding Kirinyaga where the Moringa tree doesn’t grow. They package the seeds in quantities sold for Sh10, Sh20, Sh50 and Sh100. In a single day in one district, the two women manage to sell seeds worth Sh5,000 on top of the Sh2,000 that they charge for the training. They hold their demonstrations at rivers, such as the River Chania in Thika District.

“It’s a good enterprise that has been keeping me busy since I retired as a school teacher. I am now planning to be the sole trainer of cheaper ways of purifying water in the whole province,” said Susan Kinya.

And there doesn’t seem to be any external agency involved, this is a homegrown women’s enterprise. One wonders whether they and the many others like them, particularly the makers and inventors, will ever come to the notice of investors wishing to make an impact among the communities?

Our two shillings worth on the Kenyan ICT revolution

The World Bank’s Wolfgang Fengler has recently written a blogpost titled “Learning from the Kenyan revolution” referencing the penetration and use of not only ICT devices but also mobile money services. He makes optimistic predictions for the futures, viz.,

What are the lessons of Kenya’s ICT revolution for the broader economy of Kenya and for other countries? First, this revolution is not just for the young tech-savvy programmers that huddle at iHub. ICT is no longer a niche sector of the economy. It has become mainstream and affects virtually every actor and every sector of the economy. It’s misleading to talk about a so-called “new economy” because it has in fact changed the way the old economy is operating. Over the next years, the biggest innovations will probably come from the incubation of technology in “traditional” sectors. The financial sector is already in the midst of this transformation, with mobile money as the most visible sign.

This is truly a revolution on many levels observable and prevalent across socio economic strata – those who may choose set a different bar – without contextual understanding of the local landscape – are welcome to miss the boat when its left the harbour.

From small market towns in rice growing districts (where we’re told 3-5 mobile broadband modems are sold each month) to urban metro malls piloting pay as you surf (by mobile money) wifi hotspots in cafes and restaurants, the internet landscape (the ICT or even mobile landscape even) is rapidly evolving so much so that different parts of  the country display a fragmented distribution on the market maturity curve.

The two urban metros of Nairobi and Mombasa have plateaued (wrt to cyber cafes as the key access point thus leading indicator given their role as gatekeepers to access) and are showing signs of decline even as the number of personal computing devices imported into the country show 100% growth year on year. Increasing policy driven digitization of government and educational services – from tax return pin numbers to examination registration or even booking bus tickets – mean that the smaller population centers are now steeply on the growth curve, with signs in certain provinces that this diffusion will only spread further outward.

Couple this with more and more affordable and ubiquitious smartphones and data enabled handsets, those who otherwise wouldn’t require either computers or the internet for their work, are now going online due to the pull of social networks like Facebook. For an extremely socially connected and communicative society, this fact alone is driving data sales for mobile operators as the Facebook generation goes online – Kenya has an 85% literacy rate and the median population is in their mid teens.

Is it changing the way people do business or is it a revolution quite unlike one that could have emerged from Silicon Valley or Bangalore? I do believe so – as the critical mass of mPesa users as well as dropping costs level the playing field, enterprise level solutions traditionally the purview of large corps like an Oracle or a SAP such as payroll management and real time inventory control, are migrating – cheaply and effectively – on to the mobile platform, able to reach the hitherto unconnected or unbanked on irregular income streams such as manual laborers or the tiniest village kiosk.

It is this shift where the mobile platfom innovation will truly revolutionize – it has yet to occur in a more “tech” oriented India, but it won’t be long before these cost effective and technologically relevant solutions to securely pay farm labour by phone without trucking cash into fields yet being able to manage wages for 5000 or more migrate to the Indian environment. The solutions make too much sense not to consider them, perhaps the next leapfrogging will be over the desktop/mainframe divide.

The caveat however is that we should not assume that people will go online the same way we do in our broadband nations with unlimited bandwidth and years of contextual knowledge not to mention the plethora of relevant content, nor should we assume that the observed ICT revolution would necessarily follow any previously mapped trajectory of other regions or technology clusters. The environment is in extreme flux yet it is this plasticity that also makes it an extremely inviting opportunity for innovation in services , with all the potential for positive change that yet-to-be crystallized environments imply.