These are the archives of the writing on Africa and the emerging consumer markets of the subcontinent that I did between March 2011 and February 2012 on a different website. They include the Cyber Cafe series (see categories) of posts from the Village Telco project in late 2011 as well as other thoughts from the field.
I’m continuing to write on these topics on Perspective, my blog.
Shredded cabbage for sale, Wote, Kenya 3rd February 2012
Convenience can mean different things to the household consumer, depending on their location. In urban Chicago, its stocking up the freezer and pantry with a trip to a megastore like Costco while in Singapore it might be the ubiquitous neighbourhood hawker stand where rice, meat, two veg can be had for as little as $2.50 per person. Here in the mostly rural, arid Makueni district of Kenya where the concept of leftovers is moot and only bars and restaurants tend to have a refrigerator, convenience means stopping by the cabbage lady for just enough for tonight’s meal.
Kerosene sales, Wote, Kenya 4th Feb 2012
Purchasing patterns observed previously among those on irregular income streams have been clustered into four major categories:
1. Prepaid or pay as you go
2. Bulk purchases of non perishables
3. Sachetization or as its called here in Kenya, kadogo
4. On demand, for immediate use
The shredded cabbage, being sold by weight or “amount” (half a cabbage or quarter) is a clear example of the last pattern and common across the world while the way kerosene is being sold could be said to be closer to a ‘sachet’ or small purchase as it tends not to be a daily or on demand purchase.
Interestingly, here I saw bulk purchasing for firewood or charcoal rather than foodgrains since most families have some land where they grow maize. The maize is first and foremost for household use and only the surplus is sold.
So why have I called this ‘convenience as a service’?
There is a premium one is paying for the convenience – whether its the shredding being done for you or the difference in price of kerosene between the town and the village. Someone has saved you the time and effort thus it costs money. There’s an entire economy around water and its supply chain that I’ll be taking a closer look in a forthcoming post.
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.
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.
Highway stands, Kirinyaga, Kenya 19th January 2012
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?
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.
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 experienceThen 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?
We’ve finally reached the point in our work for Village Telco where there’s been enough time for some reflection after the intense weeks of travel and observations across Kenya. I can cluster our learning into three broad areas: our approach, methodology and team work; Kenya’s people and the informal economy; and finally, the role of the mobile phone and the internet across the country.
Facebook
Top of mind, what I would really like to do is take a deeper look at all the factors Why a social networking site like Facebook has become so popular – is it like Mxit, a far more affordable and convenient way to stay in touch with extended social networks or are there reasons beyond the obvious? Given the variance in socio economic backgrounds and education among all those who were active on this platform, I wonder whether there are learnings of value for the larger goals of what ICT can do to enable social and economic development. Instinctively I feel its not Facebook per se that is the critical factor, like a Mxit in South Africa or an Orkut in Brazil, it simply happened to be there. However, given my approach to increasing understanding of a particular demographic or validating a hypothesis, my first principle is to question my own instinct and subsequent assumptions.
Mobile Phones and the Internet
Our assumptions and inferences from the surplus of information and data available on mobile phone use in Kenya, for both online use as well as regular use, were seriously jolted. You could say we had the veil torn from our eyes. A future post that has been percolating is one that turns my entire thinking about the Mobile and the BoP upside down, from the point of view of “the mobile as a platform for social and economic development” for the individual.
A big realization was that it was technically impossible for people to go online – if it wasn’t just the initial peek at Google or Yahoo or what have you – from their mobile device without visiting a cyber cafe (or using a computer) first. If you are a first time internet user and plan to use the mobile as your primary device to check your email and update your status in Facebook, you are unable – at this moment in time – to create your email account, and subsequently your Facebook page, without the use of the personal computer.
The second was that very few of these new internet users were cognizant of the way mobile operators structure the cost of browsing and data bundles. Safaricom, the country’s largest operator, had at least 3 different prices that I’d seen on their billboards and posters – Ksh 4 per minute if you simply went online, Ksh 2 per minute if you sent an sms for data conversion and finally, purchasing a data bundle or browsing package (unlimited by the day or bundle) which brought the cost down further. Thus many reverted back to browsing at cyber cafes where at least one knew what one’s cost would be or could estimate it in advance. Consumer education will be more critical for the uptake of the mobile internet since it is currently not to the benefit of either the operators or the cyber cafes to inform users about their cheaper options.
Kenya is different
We sensed this, we discussed it with Steve Song and we also heard it from others with years of experience of doing business in Sub Sahara. Kenya, as a representative sample of Sub Sahara or even East Africa, is a very different kettle of fish, all in a good way. It wasn’t just luck that most of the cyber cafe owners we met around the country were enterprising, articulate and opportunistic. Neither was it chance that very rarely was I unable to communicate – at least the basics – in English, no matter where we went.
Internet costs, mobile data and voice costs are significantly lower than in most countries and this factor, taken together with the maturity of the urban cyber cafe market and penetration of computing devices – laptops and desktops – meant that this was a very sophisticated market regionally. One cannot generalize our findings for other countries, in fact one would hesitate to do so. Rather, as we discussed with Steve, we’ll take Kenya as a leading indicator of shifts to come in the near future for the rest of the region. For example, VoIP as a service has atrophied into two or three neighbourhoods ever since international calling rates have stabilized at around Ksh 3 a minute (USD 3 cents or thereabouts) on the other hand, wifi is slowly demonstrating its future ubiquity.
However, some other factors would also play a part in this – literacy is at 85% here; what kind of difference does that make when it comes to uptake and popularity of text based communication mechanisms such Facebook, email and of course, the SMS. Education makes a difference, since most of the time, even when passing by some of the technically most impoverished parts of the country, I kept feeling that it was in far better shape relative to similar locales in India. This is all good and bodes well for the future of the nation and the region – if I had to launch a wholly new product for the Sub Saharan market, I’d select Kenya for an environment with the lowest barriers to the adoption of innovation. The BoP market is sophisticated and mature while still demonstrating the core values and buyer behaviour seen everywhere else I’ve been.
In conclusion
We now have an innate sense of the Kenyan landscape when it comes to ICT: the technology, the internet and the phone. A gut feel for the where and how and why the diffusion is taking place, outward from the urban metro that is Nairobi and an instinct for the pulse of the country’s progress. The critical role of the cyber cafe was made apparent by the focus of this project and our philosophy and methodology in approaching this problem to be solved – answering Steve’s questions – has been validated and refined. For example, we found that the figure for our estimate for proportional penetration of internet between two regions differed from the Kenya ICT Board’s Access Gap Analysis data only by 0.2
We learnt that no two projects will ever be alike and the only certainty is uncertainty. There are no prepackaged ready made solutions or processes for the challenges we’ll face in our chosen line of work, however we’re on the right path for discovering the ways and means to use the tools available at our disposal in order to best address them.
Today, we’re confident enough to put it in writing that if you’re seeking answers to the unknown, in untapped or overlooked markets and when none of the regular methods and frameworks for addressing your marketing, strategy or design needs seem to work – give us a call or drop us a line. I believe we can help you.
