Mobile telephony and low income customers: Market conditions drove product development and pricing

Mbarika, V., & Mbarika, I. (2006). Africa calling. IEEE Spectrum, 43(5), 56-60. Illustration Bryan Christie.

Many who were around and as obsessed by the entry of mobile telephony in the global South during the early years of this century will recall this eyecatching graphic used to illustrate the announcement by Cameroonian researchers Victor and Irene Mbarika that can now be pointed to as the moment Africa’s mobile revolution was born:

Mobile Subscriptions Skyrocket: Africa far outpaces the rest of the world in average annual growth of mobile phone subscriptions. According to the International Telecommunication Union, from 1999 through 2004 Africans signed up for cellphones at a far greater rate than Asians and nearly three times as fast as Americans. Most of that growth was in the sub-Saharan region. (text source)

Professor Mbarika‘s highly cited works (eg. Meso, Musa & Mbarika, 2005) from this era provide evidence that the market and consumer for mobile telephony – services and devices – was considered from the business perspective; framed thus and studied accordingly, with an eye towards issues of consumer behaviour, customer acquisition, affordability, ease of use, pricing, etc. This point of view also informed the product development trajectories of the market makers of the industry – Nokia, for example.

Similarly, my abiding interest in the prepaid business model for airtime – data and conventional services of voice calls and SMS – since 2008, provide me with ample evidence in the form of logged newspaper articles and research papers on the drivers of product development that underpin the service design of advance purchase of fractionalized services whose consumption was being measured in real time and deducted via a combination of hardware and software at the network operator level. I was already looking at mobile phones for low income consumers in 2006.

One of the recurring patterns I’ve been seeing of late is how mobile phones – not just the handset, but the system as a whole, have become drivers of innovation in emerging economies. (April 2006, Bhan)

The shift in public awareness of mobile telephony and mobile money in particular as a tool for social and economic innovation for the bottom of the pyramid and emerging markets can be traced to my closing keynote (CHI 2007) in May 2007 and the writing I was doing in the lead up to the visual presentation I made.

I can speak for this shift and it moves me to speak up on the matter now. The global mobile industry – GSM services in particular – saw low income customers whether rural or urban in low income countries as new markets to be served by affordable handsets and payment plans that met their constraints of lack of paperwork to prove creditworthiness required for a monthly subscription.

Even the mobile money service Mpesa was never designed as a tool for poverty alleviation or development, no matter how much retrospective research has framed it so. It was conceived as a service design innovation to capture and sustain value for the service provider first, and explicit value creation from the inclusive business perspective (Schoneveld, 2020) only emerged many years after its adoption became mainstream across income ranges in Kenya. Wooder & Baker, 2011 offer a retrospective framework for analysis based on the service they designed “for emerging markets” as shown by the figure and table below:

Upfront value creation occurs when the infrastructure investment for service delivery is deemed both feasible and viable. Safaricom had assets in the form of existing service delivery infrastructure that reached into the rural regions that they could leverage, and thus drive service innovation.

I can easily relate the just completed work on rural economic assessment and estimation to this framework from the perspective of the client company looking to evaluate various villages for their potential capacity to sustain the revenue stream deemed necessary to maintain operations. This does not mean that less capable villages will do without the service, it just means that a different business might succeed based on a different value proposition and price point, just not this one. This is a pragmatic assessment of corporate strategy and operations planning.

This line of thinking also serves to provide support for my long held conjecture that informal economic ecosystems necessitate further and detailed study that should be situated within the theoretical literature of the relevant disciplines,  building upon mainstream work, as concluded by Pels & Sheth (2017) rather than dismissed entirely or conflated with illicit and shadowy activities. Telcos like Safaricom in Kenya show the way in their seamless linkage of rural and urban markets, as well as the bridge across the formal-informal economies.

It opens pathways for research in theory building as well as doors for higher order knowledge based services such as tools for strategy and sensemaking customized for informal operating conditions. Recent conversations with a colleague in Cotonou, Benin lead us to believe that such custom designed tools leveraging deep insights on informal operating conditions can benefit SMEs and others whose supply chains cover the continuum of informality, as is prevalent in the fast growth economies of Francophone Africa.

From the rural perspective, such tools – grounded in the conditions of the informal sector – can help with organizational sensemaking, for instance, and benefit agribusinesses who work with smallholder farmers. Such an approach can help build bridges for those who must straddle the structures of the formal economy and large organizations with the peculiarities of suppliers and vendors from the informal sector. The prepaid business model did just this for the world’s mobile service providers reaping the profits from the vast markets of the global South. Why stop there?

Footnote on Mpesa in Kenya vs South Africa that supports this line of argument.

Notes

Burke, G. T., & Wolf, C. (2020). The process affordances of strategy toolmaking when addressing wicked problems. Journal of Management Studies.

Meso, P., Musa, P., & Mbarika, V. (2005). Towards a model of consumer use of mobile information and communication technology in LDCs: the case of sub‐Saharan Africa. Information Systems Journal, 15(2), 119-146

Paroutis, S., Franco, L. A., & Papadopoulos, T. (2015). Visual interactions with strategy tools: Producing strategic knowledge in workshops. British Journal of Management, 26, S48-S66.

Vuorinen, T., Hakala, H., Kohtamäki, M., & Uusitalo, K. (2018). Mapping the landscape of strategy tools: A review on strategy tools published in leading journals within the past 25 years. Long Range Planning, 51(4), 586-605.

Wooder, S., & Baker, S. (2012). Extracting key lessons in service innovation. Journal of Product Innovation Management, 29(1), 13-20.

This entry was posted in Africa, African Consumer Market, Airtime, Assumption filter, Biashara Economics, Economy, Ecosystem, Emerging Markets, Literature review, Mobile platform, Perspective, Prepaid Economy & Informal Sector, Rural Economy, Strategy, Sub Saharan Africa, Work in Progress and tagged , , , , , . Bookmark the permalink. Post a comment or leave a trackback: Trackback URL.

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