Coronavirus side-effect: Transformation of China’s business models, logistics, and service delivery

A guest collects food delivered by a robot at a Huazhu Group hotel (source)

Just the way the SARs epidemic kicked off China’s e-commerce revolution back in 2003, the ongoing COVID-19 containment strategies maybe triggering an even larger transformation of the Chinese economic ecosystem. I went looking today for the earliest signals of what might be underway.

Rural China is facing the biggest challenge right now as the spring planting season is critical for a bumper harvest and for ensuring fresh produce supplies later on in the year, as well as regular supplies of fresh veg. There are a few things happening at different stages of the last mile of the farm to fork value chain.

At the planting end, a “shared economy” is emerging on digital platforms that allows farmers to order everything from seeds, fertilizer, and rent agricultural machinery online. Even labour is being ‘shared’ between cooperatives and villages as the impact of quarantines and illness is still being felt.

Yang Zhengguang, a ginger grower in Shandong, punches in every day via an app to ensure that he only works within a certain range to avoid cross-infection. The purchase of fertilizers, machines and seeds can all be done online and delivered to their doorstep.

Agricultural experts also go online to instruct local farmers to take care of their land. “We can receive detailed instructions through a WeChat group every day,” said Wang Cuifen, a farmer in Shandong’s city of Gaomi.

At the other end of the value chain, digital services on the mobile platform are helping farmers sell their harvests directly to buyers through livestreaming,

On Valentine’s Day, Taobao’s first-ever philanthropic cloud concert, featuring 21 celebrities and musicians performing from their homes, attracted 4 million viewers and helped sell 380,000 kg of agricultural produce while also raising RMB570,000 ($81,428) for Wuhan.

while a veritable army of couriers has gone back to work packing fresh food like meat, vegetables, seafood, and fruits for non contact pickup by customers ordering groceries online. All of retail is transforming.

Advanced technology is also being deployed in a variety of innovative ways, with expected impact on future R&D trajectories.

For example, industries that are directly involved in epidemic prevention, including medical care, logistics, robots and security sectors, will likely see a sustained surge in demand for 5G and AI after the epidemic, driving related technologies and industries such as cloud computing, to usher in a new era, Xiang said.

Chinese researchers have developed a comprehensive system in contactless body temperature screening and identification recognition, targeting to facilitate the prevention and control works of the novel coronavirus pneumonia (COVID-19), according to its developer. Huanggang, a coronavirus-hit city in Hubei Province, has launched a telemedicine 5G-based platform capable of facilitating remote consultations, remote imaging, ultrasound and electrocardiogram diagnoses for 14 designated hospitals fighting COVID-19.

The Chi­nese cen­tral bank called for do­mes­tic pay­ments or­gan­i­sa­tions to adopt a range of mea­sures to re­duce the risk of in­fec­tion dur­ing ef­forts to con­tain the dis­ease. In particular, these include curbing the use of facial recognition technology for payment, given the need for facemasks.

A ‘contactless’ economy is said to be emerging. Hotels, travel, hospitality and food service, just about any business with a high degree of face to face contact is facing the need to transform and innovate. Tiny restaurants contemplate overnight business model disruption,

“I’m training my employees online and also learning new business models such as take-out food and non-contact orders. I think these measures will help me resist the damage of the epidemic in the future,” Zhang said.

and the 3rd China International Import Expo (CIIE) will be prepared via noncontact means such as phone calls, video calls and emails in response to the epidemic, according to its organizers. As the Chinese state press states,

The SARS virus that infected thousands in China back in 2003 is widely seen as a catalyst for the country’s fledgling e-commerce industry. Nearly two decades later, as the coronavirus outbreak put dozens of residential communities and areas on lockdown, contactless services backed by 5G technology and Internet of Things are helping people battle the epidemic.

I think the long term effects are going to go beyond just ‘battling the epidemic’ and the status quo itself will have transformed by the time the Year of the Rat is over. Digitalization and its benefits would have proven themselves to rural and urban residents alike, and they’re less likely to go back to the way things were. Logistics, retail, distribution, delivery of both goods and services, even payments and communication are all undergoing a massive redesign at a systemic level.

As the tiniest of enterprises look for new ways of doing business, new operating models, even new product development (here’s a story of an educational robotics maker successfully launching a new line of automated health check units) and receiving financial support both direct and indirect, the nascent seeds of a modern technological society are being planted. Imho, as early as 2025 we’ll look back to this as when China leapfrogged itself into the 4th industrial revolution.

I also think this will have far reaching ripple effects throughout the global supply chains which have China as a critical node in the value web, given the changes already being forced on the domestic value chains from farm to fork.

Krish Raghav, source: https://www.newyorker.com/culture/cultural-comment/quarantine-cooking-finding-relief-from-coronavirus-anxiety-in-the-kitchen

Krish Raghav (@krishraghav aka beijing brown) was the first whose tweets offered me a hint of life under quarantine, which ultimately led to the digging I did today. He would tweet about musicians entertaining shut ins by livestreaming concerts and finally wrote it up in an article. Its not just business or technology that is changing due to the coronavirus. The experience has left its mark on people and society as well. Let us wish them all well, shall we?

Posted in Analysis, Business Models, China, Commerce en ligne (e-commerce), Consumer Behaviour, Culture, Distribution, Economy, Ecosystem, Emerging Futures, Informal & Flexible, Innovation Planning, Marketing, Migrant worker, Mobile platform, perfect storm, Perspective, Platforms, Research, Rural Economy, Scarcity, Technology, urban | Tagged , , , , , , , , , , , , , , , , | Leave a comment

From Flat to Fragmented: Observing the Impact of Sudden Jump in Complexity on Startup’s Development Journey

Source: Master’s thesis worker Anni Rahiala, based on Niti Bhan’s whiteboard sketch, Aalto Design Factory, Autumn 2019

With increasing diversity of factors that impact the product development journey comes increasing complexity in managing the product development process. For startups in particular, there is little difference between the startup’s development journey and the product development journey. Consider the phases of the startup development journey as illustrated by StartupCommons below:

Validation and Growth phases require iterative evolution of the startup’s offering as it seeks product/market fit and business model/market fit. That is, if one takes a multidisciplinary lens for evaluating these two phases, one can safely assume that in addition to the Technology and Engineering required for the service delivery (startups, as opposed to SMEs, tend to be based on some sort of novel technology or its application),the startup must also remain cognizant of the elements that will impact the design of the business model and the last mile interface between them and their future and potential customers (aka end users). That is, the nature of the startup itself implies the need to take a multidisciplinary lens to product and venture development, over time.

The sudden shock of the increase in complexity of the operating environment, such as happens when a Finland based startup seeks to enter the Kenyan market, has direct correlation to the concurrent increase in uncertainty and ambiguity that the startup development team must contend with as they seek to pilot, and iterate using the gathered feedback data, and discover a desirable, feasible, and viable product/market fit and business model/market fit, over time.

When operating environments have a significant amount of uncertainty and ambiguity, even more than startups in the developed world silicon centers experience, there are usually some factors in common across the consumer markets of the developing world. Lack of data, present or past, on consumers and their preferences & behaviours; inadequate marketing and business support systems; greatly different business and regulatory environments; a greater degree of variance in quality and availability of the necessary infrastructure and systems as enjoyed in the developed country context; are all factors common to the emerging and frontier markets. Here, tech startups focus on the mobile platform for delivery of their products and services, and, in many markets, to close the loop of transaction with an exchange of value as payment received.

Fintech, agritech, health tech, mobile money, remittances and cross border payments, loans and credit, insurance and healthcare requirements, are among the most popular verticals for startups to address in the various regions and countries of the African continent.

 

 

This blogpost was written by Niti Bhan on 24th February 2020 at 1824 hours EET, and is based on data gathered as part of the first data set required for her dissertation.

Posted in Articles on Design and Innovation, Design, Ecosystem, Education, Emerging Markets, Frameworks, global, Innovation Planning, Kenya, Marketing, Mobile platform, Perspective, Platforms, Prepaid Economy & Informal Sector, Projects and Reports, Research, Strategy, Sub Saharan Africa, Systems, Technology | Tagged | Leave a comment

Value Webs: Structure and Characteristics of the African Market Economy

When these markets are analyzed, moreover, they turn out to have a structure very unlike those of the West. ~ The End of Corporate Imperialism by CK Prahalad and Kenneth Lieberthal, HBR “Best of 1998″

When Prahalad and Lieberthal wrote this sentence over twenty years ago, they were referring to the huge consumer markets of India and China, based on quantitative metrics alone, eg. size of population segments. It, however, can also describe the situation on the African continent as long protected regional markets liberalise and open, such as Ethiopia’s or Nigeria’s, or as rapid adoption of mobile telephony digitalizes the ecosystem, best known in Kenya, but now being seen to be happening in Senegal or Ghana. Very few countries on the continent can’t be said to be digitally transforming the everyday lives of the mass majority, most of whom are employed informally and more than 95% are on prepaid/pay as you go purchasing plans for their smartphone or mobile internet services.

I use the label prepaid economy to categorize this digital economic activity only because of the dominance of the model regardless of white collar or blue collar, urban or rural, or educated or not. However, the description below is what is more important than what it is called. I first noted the emergence of this ecosystem almost exactly a year ago, written on 7th January 2019:

We were exploring the emergence of commercial activity on digital platforms in Kenya, and debating whether it could still be considered as an element of the existing informal economic ecosystem, or, was it something wholly novel and different?

What is emerging is not simply the digital version of the existing informal economy, its a novel hybrid that deserves consideration in its own right. Yet, calling it simply the digital  or the app economy would conflate it together with the developed world’s version, overlooking the unique characteristics that distinguish it as very African. ~ Africa’s emerging digital, social, mobile economy is neither formal nor informal but a bridge in between

Today, what I am writing to do, is put this theoretical wordplay together with the visual modeling we did of the informal trade ecosystem’s value flows that allowed us to map the webs of supply and demand – B2B and B2C – at the last mile of the East African Community’s regional trade ecosystem.

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Posted in Africa, African Consumer Market, Analysis, Business Models, East African Community, Economy, Ecosystem, Frameworks, Mobile platform, Perspective, Platforms, Research, Sub Saharan Africa | Tagged , | Leave a comment

Less Technologically Advanced Societies are not necessarily backward or primitive: Assume at your own risk

This illustration by Jeroen Meijer of Jam Visueldenken of Amsterdam, The Netherlands, was created for our team during a workshop to capture the insights from a feasibility study on agritech we had completed for the Dutch government’s sustainable agricultural value chain development at Wageningen University’s Economic Research unit back in mid 2013.

I’m pulling it out again now because I think it helps me communicate the complexity of the human-digital economic ecosystem we see across East Africa, especially as it links the rural and urban, as well as the formal and informal. Today’s blogpost will be based on the case of Kenya.

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Posted in Africa, African Consumer Market, Afrique francophone, Airtime, Analysis, Assumption filter, Base of the Pyramid, Biashara Economics, Business Models, Cashless transactions, Consumer Behaviour, Design, East African Community, Ecosystem, Emerging Markets, Frameworks, Indigenous & Traditional, Informal & Flexible, Innovation Planning, Kenya, Marketing, Mobile platform, Perspective, Prepaid Economy & Informal Sector, Research, Rural Economy, Strategy, Sub Saharan Africa, Technology, UCSD, Value | Tagged , , , , , , | Leave a comment

When digital ecosystem development is far faster than physical ecosystem development

I have the advantage of having seen the evolution of the crop of company sponsored student projects (10 to 12 annually) for at least 7, if not 8 of the annual PDP Galas at the Design Factory (which is only 10 years old) New product development direction is moving towards artefacts and services that integrate into a wholly new hybrid physical-digital ecosystem.

In late 2017, BCG’s Henderson Institute posted an article on theme, but from the more industrialized legacy infrastructure context of countries which developed in the past century. Here’s a juicy snippet from the middle of their introduction of the concept of hybrid ecosystems.

[…], we believe the acquisition is not an isolated occurrence but part of a broader trend: the shift from the largely digital ecosystems that dominate today to ones richly exploiting both the digital and the physical worlds. This shift signals opportunities not only for digital giants but also for physical incumbents to build new digital-physical ecosystems. Orchestrators of these hybrid ecosystems must follow some new principles and adopt a set of behaviors different from those that purely digital ecosystems require.

So, my anecdotal observation on the direction of evolution of new product development is being supported by the think tanks that feed management consulting verticals like corporate strategy and future roadmaps.

I am right now in Nairobi, Kenya. And all around me, a rapid digitalization triggered transformation of the everyday economic activity is taking place in front of my eyes. I was here doing user research among informal sector businesses with a digital footprint earlier this year in March, and that too was following up on first movers we’d met back in early 2017.

Kenya’s digitalization trajectory resembles that being described by BCG Henderson Institute and I have the visual documentation backed by interview write ups going back the same duration of time.

I think what I am seeing here is that the developing world has been able to leapfrog on the back of the mobile but the impact of this is still unevenly distributed based on each specific country’s state of mobile economy. Its high time GSMA put out the major telco markets for their own specific ecosystem reports instead of lumping it all as sub Saharan Africa.  Kenya’s digitalization on the mobile platform may not take the exact same outcomes and solutions to begin modernizing its economy; but parts of it are definitely converging with the digital global value chains.

The digital global value chain – DGVC – has connected up the digitalizing informal trade sectors of vast swathes of the developing world. In early adopters like Kenya, we know the smallest woman trader, sitting on the side of a busy road with her goods laid out on a tarpaulin is aware of the digital marketplace potential of social media apps on her smartphone.

I can map the emergence of the Kenyan hybrid digital-physical ecosystem, with emphasis on linkages between the rural and the urban; the formal and informal; and all parts in between. What I must figure out how to do is disaggregate the static parts from the dynamic parts; or, at least cluster them by whether the change is  short term one or one likely to take a longer span of time. Only then would my approach and methodology be one that can capture the context in a dynamic fast changing environment of uncertainty.

Which, in turn, describes our current era as handheld digitalization and social media are transforming so many aspects of daily life and work. Ergo, Kenya is digitally developing far faster than its physically developing but this should not imply that it cannot become a developed nation digitally first.

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The Research – Practice Gap for a Kenyan Mobile Startup Business

There is very little literature on business operations management, and product development methodology  that actually helps African SMEs and startups to navigate their own operating environment with its local characteristics. Analysts struggle with frameworks and processes developed in highly industrialized contexts as a means to evaluate the strategies of businesses and solutions with local or regional ambitions.

The gap in information is particularly visible for mobile startups and technologists navigating the challenges of their own operating environment rather than that of Silicon Valley, which tends to dominate technology oriented business news and actionable content.

After meeting with Kenyan startups and technology oriented SMEs I am inclined to work on a plan to address this gap. I don’t yet know what form it will take. I know that the 2008/9 prepaid economy research badly needs updating in the age of digitalization, and this is a start towards mapping the mass majority’s digital operating environment on the mobile platform.

Posted in Africa, African Consumer Market, Analysis, Biashara Economics, Business, Business Models, Design, Frameworks, Innovation Planning, Mobile platform, Perspective, Strategy, Sub Saharan Africa, Technology, User research | Leave a comment

Is Design Prepared to be Responsible?

Last week, I was invited to join a 60 strong group of pan African thinkers in law, human rights, gender, debt and related issues to convene in Nairobi to explore the concept of predatory lending now being delivered direct to your handheld device. As a human centered designer, I was rocked back on my heels to discover the human rights related impacts and consequences of what might be thought of as a simple mobile app design.

Yet, designers are rarely, if ever, introduced to the concept of human rights and how to design responsibly with awareness of the outcomes and inadvertent impact on the target audience.

The earliest stages of the design process – also known as the fuzzy front end of innovation – are where the maximum control can be made to bear on the final outcome, including its cost of deployment. As fintech designers, do we know how the safeguards and filters we’re building into the digital service make the end user feel?

Without going into too much detail about predatory lending to the lower income aka base of the pyramid, I would just like to say that in my opinion, there is also a systemic design flaw that lowers the bar to failure.

I have named this flaw the Systems Monster, and he squats there between our best intentions and highest hopes for the greatest good, and the actual outcome of our actions and strategies. How often have we heard “It is the system” when we have struggled to make our good intentions manifest themselves in the real world to benefit the unemployed, or the underprivileged?

The system is set up for the convenience of the banking and financial industry, and tend to be designed on calender time schedules – a holdover from an era when everyone had regular wages arrive in a predictable periodic cycle. Fully four fifths of Africa’s working population is informally employed, whether by the formal sector or within the informal economy. They manage their household finances on irregular income streams and unpredictable cash flows. The only thing that distinguishes the subsegments of the population is the accuracy of their ability to predict the amount and the timing of their next influx of cash/money.

Yet, the system, that is the processes and structures of the formal financial institutions such as banks, is designed around the predictable – the regular amount of salary that shows up every week or month, and the stable – this paycheck is from one source, an established and known employer such as a big company or the government. This predictability and stability allows the bank to take the risk of issuing loans and mortgages for short terms and longer durations, secure in the knowledge that the amount will be repaid on a regular, predictable, calender cycle – 500e every month plus interest for the next 15 years.

The inherent conflict between the flexibility and negotiability required to minimize the volatility between incoming and outgoing cash flows, and the predictability and regularity required by the financial institutions means that the system is set up to make you fail. You are bound to miss a payment at some point and you are penalized for being unable to negotiate with a faceless digital app.

What is the responsibility of the fintech service’s designers? To perpetuate the financial exclusion barriers within their novel design or to seek to adapt their user interface to the needs of their target audience?

Posted in Africa, African Consumer Market, Airtime, Banking, Base of the Pyramid, Biashara Economics, Business, Business Models, Design, Ecosystem, Innovation Planning, Perspective, Prepaid Economy & Informal Sector, Rural Economy, Strategy, Systems, Technology, User research | Tagged , , , , , , , | Leave a comment

Characteristics of our currently emerging future

I am tempted to leave this blogpost unwritten, illustrated only by this photograph of an analysis & synthesis workshop I did with my master’s thesis worker on the data that will drive her master’s thesis and my first journal article. I have checked the flexibility of my doctoral research plan and understood that the opportunity exists within this first semester to change it as much or as little as I please. I am grateful for that wriggle room as I set out to discover what could conceivably be a viable career path for me given that I’ll probably be around 58 years old when I finish my degree. The conversations I had were highly informative and subsequently a rather coherent vision of a consensus reality – an emerging future – can be pieced together.

Digitalization: A broad word that makes it meaning in context and is a function of face to face encounters but all of you reading along will nod in understanding when I say that this is one of the transformations that will inform your career trajectory and future path. It is the biggest difference between my father’s workspace, business landscape, and operating environment, and mine. Whilst he’s always online now, he was 60 when the internet became available to the private individual user in 1994 or 5 in New Delhi where he happened to be based at that time. For many of you, smartphones were already a part of your childhood, most likely your earliest teens. The digital divide, as currently defined, might not be vast given that the generations of early adopters have always been present with the onboarding youth, but the contextual divide is immeasurable and impossible to shorten in any optimal manner. For my digital generation, who fall in this category of earliest adoption of evolving technology, this era puts us at the edge of viability of our own careers and professional journey. Some of us find ourselves back in school. I can say that I was probably influenced by Nokia Chairman Risto Siilasma’s example of going back to school to learn about AI and related technology (he has written what is called an ‘explainer’). He is only two weeks younger than me. Regardless of our chronological age, the rapid transformations of our global “informal” social ecosystem of value exchange is one which will influence and drive our decisions regarding our employability and future directions.

Resource Scarcity: This is what I’m hearing in the Engineering school where I am a PhD candidate in the Mechanical Engineering department. This is not a development aid problem but a systemic ecosystem engineering design challenge. And it is not one the Global North can achieve on its own. After all, so much of the world’s manufacturing has moved to lower wage locations, and these tend to be mostly in the Global South. Africa’s circular economic ecosystem would keep a researcher busy for years.

Global, social, local: We are all next door to each in the virtual world. The whole concept of neighbourliness has changed. I have learnt to call this a socio-technological system, and am discovering its an entire field of study with its own Master’s Degree and fulltime professor. His 5 year contract was crowdfunded through a student led initiative to raise money from the private sector. This digital world will be our operating environment in our cyborg world. This was a factor that I was debating for the past couple of weeks, just how much of an impact will digitalization have on all kinds of aspects of our life. Was it still only a confined to the screentime thing or permeating through our ‘meatspace’ as well? I have come to the reluctant conclusion that we cannot avoid it but I will not get a smartphone either.

Flux: Change and transformation will be the only constant, and uncertainty will become the norm. This is not a bad thing. Rural communities have always been recognized for their resilience and persistence in the face of adversity. Managing volatile conditions and uncertain and unpredictable cash flows builds in flexibility at the systemic level and my guess is that this happens intuitively since I have observed similar clusters of coping mechanisms that resemble each other in as far apart locations as rural Philippines, rural India, and rural East Africa. We cannot externalize risk and uncertainty anymore.

Flexibility: Thus, as a natural outcome, the ideal systems in such a described landscape are the ones with the most viable and feasible tolerance levels built in at the design level. Here, my use of the word design is very specific to engineering design and machinery that makes and runs things. One example of what I mean relates to climate change. We will see increasing variability in quality of infrastructure and environment due to the unpredictable impacts of climate change, even if we manage to bring a halt to the juggernaut this week. Our appliances need to go back to becoming the robust well engineered easily fixable electro mechanical artefacts they were and not go further into fragile delicacy and too many unknown electronics. I have written on this aspect by studying the case of Whirlpool’s world washer launch failure in India.

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Homework and Essays

My world has changed now that I have made myself a fulltime student at Aalto University. On Mondays, I have a full day of class, morning and afternoon. And I have homework with deadlines. This past week I found myself thinking how much I appreciated refreshing my worldview by going back to school. Today, I am exactly 53 and a half years old.

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Social Media Studies

Syllabus for this semester’s Social Media class in Aalto Computer Science Dept, including high school students

One of the things I’m doing for myself as I go back to school as a full time student after 30 years exactly is taking the classes that will bring me uptodate as rapidly as possible on the current state of the art in higher education and the post Millenial generation now at University. All three of my courses that started Monday this week have been over subscribed by students, and I have it on hearsay that good old fashioned engineering design of machines and moving parts has never had fewer students attend the first lecture on Wednesday than ever in its 20 year history.

Yesterday, I knew by the end of my Exploratory Data Visualization class that I was going be exercising those parts of my brain that haven’t done any exercise to keep in shape any time in these past thirty years. Oh no, what have I done to myself?

Teacher was very kind to me, after class when I went to confess I hadn’t learnt to do any programming language since BASIC in 1982-83 plus the Fortran they introduced me to in High School and which I learnt more of at Engineering college in the 1980s.

Sure, we have a unique set of skills that serve us well to navigate this hybrid digital world without flailing, even though we have not had the time to invest in catching up programmatically which we know from past experience will take us an extra effort of cognitive investment because we’ve fallen so far behind in the past thirty years we know we have a lot of reading to do to catch up even to pick up a new tool for data visualization.

The sad part is that we want to be as facile with these new fangled tools as we were with our own first generation ones. We were the pioneers in our generation. My father was an early adopter/innovator so I’ve always been exposed to buggy first concepts in the market. It tests your skills to get it to run the way you want it.

But today, the metrics of skills and knowledge for such a heavily digitized economy have themselves changed, not just the fields of knowledge. Communication requires programming knowledge if you want to maximize your audio-visual toolkit of content making. My generation of users made do with handheld digital point and shoots, basic UCD photo tools like WordPress and Flickr, we are the C in the B2C of first generation digital globalization.

Otoh man does not live on digital skills alone. Clothes must be made out of cloth and the whole must be organic, natural, and sustainable. Who will lead the way without 5G to make the human race unemployable?

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