Seeing signs of increasing competition around as next evolution requires interconnectivity and platform agnosticism.
One of the most surprising things that struck me over the past couple days of running around doing recce visits for our upcoming rural research was just how rapidly and how well the concept of the user centered design (UCD) process and thus, the human centered approach to research and development was not only understood by our rural hosts but how much it was appreciated. As others in the field know, it can often be a challenge to explain to clients why user research is critical and what kind of difference it can make, more so in the former rich world.
Even the local councilor’s political protege beamed when he heard that it was critical to understand ‘his’ people first and their daily life before coming up with any product, service or plan. In fact it makes me wonder whether his little part of the world is in for any changes?
Mind you, we were extremely blessed during our visit to Makueni district – one of the more challenged parts of Kenya, where the arid landscape can suffer from insecurity of such essentials such as food and water. Our contact there introduced us to his old friend, who was in between contracts, and Rafael (whom I’m sure I’ll be mentioning more in future posts) turned out to be an experienced expert in poverty alleviation programs and a trained anthropologist to boot. Our initial meeting rapidly turned into a project planning session.
But that’s a welcome side note. I started this post because as we were discussing the methodology and approach that I intended to use for our consumer insights research, I found that not only was the UCD process grasped rapidly by all the others at our table, its value was also appreciated and understood.
As our local businessman friend explained, too often products for their market were simply direct imports or secondhand and shoddy goods “sent to Africa”. The fact that their community’s lifestyle and daily challenges were considered important enough to be understood first before the development of any strategy or device was felt to be a mark of respect.
It makes me ponder whether we do the economically or infrastructurally challenged a disservice to continue to think of them as the BoP – no one, if asked, would ever consider themselves the base or bottom of anything. And I wonder if that’s why so many of these socially beneficial products or poverty alleviation products and programs fail because to embrace them would imply to one’s peers and community members that one was ‘beyond hope’ or ‘poor’ regardless of one’s one economic challenges?
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.
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.
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).
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.
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.
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.
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?
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.
If someone were to purchase a mobile broadband modem but was unaware of data bundles, how quickly would 500 shillings worth of airtime disappear into cyberspace? I’ve been there – not knowing what ‘converting to data’ meant – and going through euros worth of airtime while surfing in Helsinki until the shop assistant gave me a printout of texts to send after uploading in order to enable the unlimited monthly deal for just e 20.
Customers who’d done the same in their ignorance came back to the cyber to surf and I had to bite my tongue not to ask the owner why he hadn’t informed them about data bundles? Why should he lose his captive audience and his regular income stream? Whose responsibility was it to educate new customers of broadband modems about the best way to access the internet or to help set up their phones for browsing?
Was it any surprise that cyber operators were beginning to charge customers for helping them open an email account or set up their Facebook page, since this initialization still required a computer and could not be done through the mobile phone. One such enterprising individual charges 300 shillings to help you browse using your phone if its not genuine. Even the IDEOS – which apparently sold like hotcakes in Nakuru when it was first launched quickly gained a reputation for gobbling airtime and battery power with its always on services coupled with the lack of awareness among owners on the difference between voice and data airtime rates.
So while awareness of the internet and the knowledge it is able to bring to your fingertips is increasing exponentially particularly where educational facilities are sprouting and the student population grows, the so called mobile phone internet revolution is stumbling around in ignorance while the cyber cafe industry enjoys the boom.
In the meantime, I wonder if this might have anything to do with the fact that as operators see their data sales increase, their ARPUs are still dropping?
This idyllic garden paradise is our favourite hangout and interestingly enough, our cyber cafe, in the literal sense of the words, since it provides free wifi along with your coffee and butter cream cake. Given our recent single minded obsession with internet access and cyber cafes, it was only natural to fall into a conversation with Cake Plaza’s personable young manager, Ken about his wifi set up and his observations. Ironically (or naturally) this short exchange gave us much food for thought.
In summary, the free wifi is part of Cake Plaza’s marketing budget and it was installed exactly one year ago. In this time, Ken has noticed more people using their phones to browse – they have to request the password for wifi access but he’s also noticed an increase in people coming in with laptops – his thinking is that people enjoy the sense of space and privacy offered by sitting at one of the tables over the conventional cramped cyber experience. In fact, there are groups from out of town who’ve taken up the private room by the week as a temporary work space, paying 1000 Ksh (approx US$ 10) a day for the privilege of reserving it for their use.
Individuals tend to come in the evenings after work, may or maynot have their own mobile broadband modem but it seemed as though after the work day was over, this was where they relaxed with personal browsing for an hour or two before heading home for their dinners. He does have a policy of switching off the internet access for those customers whom the waitrons notice don’t order anything from the menu.
It was this last part that clicked with Muchiri, who, by the way, has the past experience of setting up a successful cyber and selling it as a going concern. The fact that wifi usage is dependant on purchase implied a business model. While Cake Plaza is an excellent bakery (the owner is an experienced Korean chef) in its own right and not in the cyber business per se, it did have a policy (and password) for its excellent free wifi.
This meant that for many of the evening browsers making the trade off between spending a 100 Ksh on a cup of coffee for 60 minutes of browsing may often be a preferable choice to spending just 60Ksh in the local cyber. That is, it was the experience that was drawing the wifi seeking traffic – we can attest to that because we did it often enough ourselves, usually spending far more than we would have at a cyber for the equivalent amount of time.
This reflects back to what I wrote about Robert’s concept of a spacious business center in downtown Mombasa offering comfort and convenience to transient CNF agents and highly mobile urban professionals. As the industry has matured, Muchiri said, it was not about “The Internet” anymore but the customer experience. Indeed, there may not be cybers in the traditional sense eventually but instead there’ll be business centers, work spaces, hot spots and coffee shops etc – just the way they are found in Singapore or San Francisco. And if so, then this evolution has already begun here in Nairobi, Kenya.
I’ve never been left with such a strong sense of enterprise and innovative thinking as I have now after this past week in Coastal Kenya. In fact I asked Muchiri if he’d been specifying some high standards for the introductions made to various cyber cafe owners or was it that we just happened upon the amazing crowd of people that we did.
What blew me away was simply their quality and resourcefulness – Moses for example, shown above talking to Muchiri in his little workspace at the back of his second cyber cafe, was a biochemist by training with a penchant for fine arts. He had a thriving business around creative services – graphic design, screen printing, photo touch ups etc right down printing your choice of photograph onto a ceramic mug for you. This was in addition to his two cyber cafes and computer training classes. He was the first to dismiss mobile phones as the perceived threat to cybers, instead pointing out that it was mobile broadband modems that were having the real impact along with easily available cheap desktops.
The common thread running through the success stories of growing sustainable small businesses seemed to be centered around a willingness to question the limitations of conventional services, spotting opportunities centered around this investment in hardware, software and access and a sense of changing trends observed among their customer base.
Moses actually mentioned that latter – almost articulating the basic idea of doing user research and incorporating the feedback into his business strategy. He calls it the number of ‘No’s he gets versus the number of ‘Yes’s as one of the drivers for his choice of services to offer.
The ones who felt the slowing down of business were more likely to be those who imagined that simply setting up shop would bring in the cash flow or had let the changes go by passively without responding. The good old days of customers waiting in a queue for a limited amount of time at the computer have gone for good. What’s emerging in the frontlines are solutions like Robert‘s in Cannon Towers in downtown Mombasa.
Noticing that many of his cyber cafe customers were walking in piles of documents they were struggling to manage in the tiny space available in the traditional cyber cafe layout, Robert realized that there was a business opportunity in catering to their needs. The majority of his business came from shipping agents and such like, most of whom would not even be based in Mombasa but in town only long enough to release their goods at the nearby port. He threw out the cramped cubicles and replaced them with spacious work stations – in effect, offering hot desks rentable by the day, week or month by the transient business workers.
Now, with fewer computers he generates more revenue at his business center than he does at his original cyber cafe still operating at a different, yet more high traffic location surrounded by educational institutions. Naturally, he already has his expansion plans in place even as the traditional cyber next door has declining revenues due to market forces.