Archive for the ‘Consumer Behaviour’ Category

TEDTalk video: Recognizing the value creation and economic contribution of the informal economy

My talk given at the TEDGlobal conference in Arusha, this August, went live on Ted.com at some point during the night a couple of days ago. At that very moment, I was on a Finnair flight from SIN to HEL, so with a wee bit of delay, here’s the link to the video of the talk. Also available is a recommended reading list I curated, along with footnotes.

I just want to add that its high time we considered the informal sector as a commercial operating environment in its own right. This change of perspective will transform the way we think about poverty, it’s alleviation, and, importantly, open the doors to innovating products and services that can help boost productivity and revenues for micro, small, and medium sized businesses across the developing world, but particularly in Africa and India.

By doing so, we can recognize the economic contribution and value creation by women who make up the majority of such entrepreneurs, and put dollar values to their investment capacity and growth opportunities. As long as they’re lumped together under the umbrella term “informal sector”, with its unquestioned assumptions of low skill and low productivity, they’ll remain invisible, and solutions meant to support their development will never reach them.

Time to acknowledge the social cost of mobile and apps driven disruption

Abandoned makeshift recharge cards stand (Source: Punch Newspaper, Nigeria)

From Lagos, Nigeria comes this moving human interest story that looks at the downside of modern technology and it’s impact on livelihoods. For those who must hustle to make a living, send the kids to school, or put food on the table, smartphone driven digitization of the services they used to provide are disrupting their incomes.

“On the negative side, it has seriously affected our business with about 40% drop in passenger traffic. There is nobody among us (cab drivers) that would say he’s not feeling the pain.”

Whether its Uber and Taxify grabbing customers from traditional taxis, or the ease of an online purchase of airtime eating into Mama’s recharge card sales, the long awaited and much hyped transformation of African economies by ICT is arriving at a much higher cost than noted anywhere in media, or in research reports on mobiles for “social good.”

Literate youth quick to pick up new skills have no choice but to adapt and adopt. Its the older traders, the taxi drivers, the less literate, the long established service providers in the urban informal economy who are shouldering the brunt of this disruption.

“Even the prices charged by ‘those phone things’ are not realistic. I just pity the people who are rushing to them. A time is coming that they would increase their fares. And by that time, people wouldn’t be able to do anything about it, because they would have killed the competition. They just want to destroy the taxi business, which many of us are using to take care of our families,” Baba Ayo added.

Whose responsibility is this anyway?

Disruption is what every techno bling startup seeks, blaring it in their press releases, as they launch an app for this and that. What falls by the wayside is consideration of the social cost of this disruption – much more expensive in developing countries like Nigeria where there is no social safety net, no welfare department, and certainly no old-age pension for those whose livelihoods are lost to look forward to.

“I have been selling recharge vouchers for about 10 years and I can tell you that the situation has never been this bad. It’s as if someone commanded people to stop buying airtime. I accused some of my customers of patronising other people, and some of them said they usually top-up their phones online whenever they run out of airtime,” she explained.

The entrepreneurial will adapt, or move on to other services that apps have not yet replaced. The article is illustrated with photographs of abandoned recharge seller’s makeshift stalls as the line of business fades away in the big city.

But who will think of all the rest who may not have the energy or youth to start over, and whose responsibility is it to ensure that technological progress is not exclusive?

This post is a reminder to us all of the tradeoff we make when we choose to innovate or disrupt in societies where the margin between hunger and full belly is as slim as this year’s latest smartphone model.

Absolute Numbers 2007-2017: The “Developing” World Now Dominates the Internet

Source: http://tmenguy.free.fr/TechBlog/?p=161

Traditionally, the data on ICT usage across the world tends to be presented proportionally – per capita usage, or penetration in the form of percentage of population. This made sense 10 years ago, when the world had just begun to notice the rapid growth of mobile phone adoption in developing regions. The typical example shown above was extremely popular – many of you will recognize it – Africa was outstripping the world in phone sales, and the prepaid business model had opened the floodgates.

At this time, however, devices were still at the feature phone stage, and Nokia owned the market. Voice and SMS were the real time communication disruptors, and smartphones only just entered the public consciousness. Internet penetration was still in the future.

Recently, however, I came across current data on internet usage presented in absolute numbers – shown above – of people online. The difference is rather stark, when compared to the proportional representation – see below.

Not only are the next two billion online, but the absolute numbers re-order the regions in a very different way. Asia leads the world online, and even Africa ranks higher than North America. Here’s the same data presented, by region, as a pie chart.

The distortion created by proportional or per capita presented skews the true landscape of the actual human beings who are using the internet. Ten years ago, this might have made sense given the passive content consumption nature of much of the early world wide web.

Today, given the dominance of social media, and the frictionless ability for anyone to share their thoughts, their photos, or their music video, its the absolute numbers that actually make a difference. There is more content available in Mandarin than in English, though we may not know it, and there are more Africans talking to each other every morning than there are North Americans.

I’ll be following up with more writing on the implications of this historic decade in human history – between 2007 and 2017, the long awaited next billion not only came online, but began showing us how to disrupt everything from cross border payments, to cryptocurrency adoption. They are my hope for a more peaceful, inclusive, and sustainable future for our grandchildren.

A Very Nigerian Opinion on E-Commerce and Online Fashion Startups

Folake Shoga shares her opinion on the recent spate of tech startups and apps mean to serve Nigeria’s fashion and fabric industry.

Two recent articles in Techpoint, the Nigerian online technology magazine, feature initiatives dealing with aspects of the clothing business. One is a startup letting studio space and equipment to makers, 360 Creative Hub; and one is an internet based fabric selling business, Fabricsphere. Reading up on the feasibility of these two initiatives has been an interesting experience, very much encouraged by the richness of Techpoint’s coverage of Nigeria’s tech and business ecosystem.

Having said that, as just a humble, occasional and above all provincial Nigerian, I’ll start by paraphrasing L P Hartley: “Lagos is another country; they do things differently there.” Sometimes, reading official accounts, reports etc of events in Nigeria really jarrs with one’s lived experience of the country (even though being as the standard of written professional journalism is generally excellent, this hardly every happens when reading the actual quality newspapers, Punch and The Guardian and their ilk.) In the aforementioned Techpoint articles some of the prices quoted for goods and services seem steep to me, which surely militates against takeup, but I am, as I said, provincial, and moreover brought up by Ijebu people. No doubt everything costs more in Lagos.

Startup culture is a thing in itself; current, progressive, innovative, aiming to breach new ground or disrupt! received conventions – although strictly speaking away from the comfortable global North there may already be more disruption going on than we are entirely comfortable with. But the term itself, startup, comes surrounded by an effervescence of aspiration, floating on an expectation of the power of a tech-determined state change in human affairs. “First we’ll click here, then we’ll be in tomorrow today already! Yay!!”

As recently as 12 years ago it was impossible to prejudge which casual, frivolous digital activity would end up as an engine of massive social change. Nobody could possibly have foretold, for instance, how a site for rating the comparative attractiveness of your female fellow students could have morphed into a giant data-gatherer, news disseminator and influencer of global public opinion. Or how a site for online shopping could evolve to be at the forefront of research into the logistics of drone technology and other automated delivery systems. So there is a hope and a hype around web-based startup culture, an eye for the next big thing, the next new system that will prove that from small beginnings come big changes. Nigeria, as a vast untapped market, has the potential to be a hive of new technology activity, and Techpoint in it’s many articles provides an interesting and thorough overview of the local scene, though concentrating almost entirely on Lagos.

Read On…

Work in Progress: An Introduction to the Informal Economy’s Commercial Environment


This topic is being shared in the form of a collection of essays on the following themes, each becoming hyperlinked on completion. Do bookmark this page for regular updates.


Introduction to Background and Context, some caveats apply
Fundamental Elements of Informal Sector Commercial Activity
Rural household financial management as a foundation
Linkages and Networks span Urban and Rural Markets
Underlying Principles for Financial and Social Contracts in the Informal Economy
Informal Sector Business Development Strategies and Objectives
Why A Blanket Approach to Formalization is not a Panacea
Disaggregating and Segmenting the Informal Sectors
The Journey to Formalization Cannot be Leapfrogged

 


Appendix:
Creating Economic Value by Design (John Heskett, IJD 2009)
Financial Behaviour Patterns Observed Among Households in Rural Informal Economy (IDRC, 2009)
More or Less: The Fundamental Principle of Flexibility” Slides (Informal Economy Symposium, 2012)
A Comprehensive Analysis of the Literature on Informal Cross Border Trade in East Africa (TMEA, 2016)

Financial Behaviour Patterns Observed Among Households in Rural Informal Economy in Asia

This is the original working paper of the research conducted on rural household financial management, in developing country conditions, pioneering the use of methods from human centered design for discovery, during Nov 2008 to March 2009, aka the Prepaid Economy Project. It was peer reviewed by Brett Hudson Matthews, and I have incorporated his comments into the PDF.

This research study was carried out with the aid of a grant from the iBoP Asia Project (http://www.ibop-asia.net), a partnership between the Ateneo School of Government and Canada’s International Development Research Centre (www.idrc.ca)

The abstract:


The challenge faced by Bottom of the Pyramid (BoP) ventures has been the lack of knowledge about their intended target audience from the point of view of business development whereas decades of consumer research and insights are available for conventional markets. What little is known about the BoP’s consumer behaviour, purchasing patterns and decision making tends to assume that there are no primary differences between mainstream consumers and the BoP except for the amount of their income – pegged most often between $2 to $5 a day.

In practice, the great majority at the BoP manage on incomes earned from a variety of sources rather than a predictable salary from a regular job and have little or no access to conventional financial tools such as credit cards, bank accounts, loans, mortgages. This is one of the biggest differentiators in the challenge of value creation faced by BoP ventures, particularly among rural populations (over 60% of the global BoP population lives in rural areas).

Exploratory research was conducted in the field among rural Indian and rural Filipino populations in order to understand how those on irregular incomes managed their household expenses. Empirical data collected by observations, interviews and extended immersion led us to identify patterns of behaviour among the rural BoP in their management of income and expenditure, ‘cash flow’ and ‘working capital’ and the significance of social capital and community networks as financial tools. Practices documented include ‘conversion to goods’, ‘stored wealth’, ‘cashless transactions’, and reliance on multiple sources of income that mature over different times.

This paper will share our observations from the field; identify some challenges these behaviours create for business and also explore some opportunities for value creation by seeking to articulate the elements that BoP ventures must address if they are to do business profitably with the rural ‘poor’ based on their own existing patterns of financial habits and norms.


The Conclusion:

In sum, it can be concluded that the challenges for value creation can be quite different for BoP ventures interested in addressing the rural markets. From the observations made in the field, we can highlight three key implications for business development. These are:

  • Seasonality – with the exception of the salaried, everyone else in the sample pool was able to identify times of abundance and scarcity over the course of natural year in their earnings. Identification of a particular region or market’s local pattern of seasonality would benefit the design of payment schedules, timing of entry or new product and service launch, for example.
  • Relative lack of liquidity – The majority of the rural households observed tended to ‘store wealth’ in the form of goods, livestock or natural resources, relying on a variety of cashless transactions within the community for a number of needs. Conventional business development strategies need to be reformulated to take this into account as these patterns of behaviour may reflect the household’s purchasing power or income level inaccurately.
  • Increasing the customer’s span of control over the timing, frequency and amount of cash required – Since the availability and amount of cash cannot be predicted on calendar time, this implication is best reflected by the success of the prepaid mobile phone subscriptions in these same markets. When some cash is available, it can be used to purchase airtime minutes for text or voice calls, when there is no money, the phone can still receive incoming calls. Models which impose an external schedule of periodicity, frequency and amount of cash required may not always be successful in matching the volatile cash flow particular to each household’s sources of income.

Samsung took its commitment to the African market very seriously

This article in the Financial Times caught my attention first for it’s mention of Samsung’s seemingly innovative adaptation to the harsh operating environment prevalent across the African continent. It reminded me of the very first exploratory user research programme I had been part of, for Samsung, back in early 2008. That was a seminal trip for me, 3 weeks by Landy through the bleakest parts of rural South Africa, in search of how people lived, worked, and played with their mobile phones.

Mobile phone repairman, Elizabeth, Eastern Cape, South Africa, January 2008 (Photo: Niti Bhan)

We discovered what I would now look back and recognize as a whole new world. This fieldtrip was the turning point in my career, and the prepaid economy project was the outcome of questioning many of the assumptions around what were then called “Bottom of the Pyramid” markets, which had been shattered, in my eyes, by this journey’s end.

Life is hard” became my mantra for the next couple of years, as I illustrated the vast chasm between the mainstream consumer market’s mindset of credit driven consumerism, and the cash intensive hitherto ignored reality of the townships and informal settlements. The article I wrote on the mindset and values of Africans in their guise as customers for consumer goods – who had not been conditioned by generations of advertising messaging since the poor (the BoP, the bottom of the pyramid)- went on to be cited by the late CK Prahalad himself in the revised 2010 Introduction to his seminal The Fortune at the Bottom of the Pyramid.

Next came the development of a holistic strategy to reach these untapped opportunities, with a semblance of a value system rather than be driven by the pure profit motive alone.

The core values, then and now, for a consumer appliance, device, or hardware, any durable really, was the following:

Simple
Easy
Endurance
Survivor/al
Commitment

If Samsung is established in its foothold in Africa today, and their appliances are designed to survive the environment and meet the needs of their African customers, then I am very pleased to read it.

That first photograph is of the slider that Samsung models being sold at that time had. And in Africa, as the repair guru holding the part was showing us – and two of Samsung’s own mobile design team members – was the weakest point of failure in their phones. Grit would get in and jam the part, and most such phones came in for repair within a few months of their purchase date.

Later, in London, where the Samsung Design Europe office was located, we walked into one of their phone shops – somewhere near Harrods, if I recall correctly, and asked about the longevity of their slider phones. The salesman gave us a long song and dance about how these parts had been tested to “slide” a thousand times before each model went on sale. Yes, I mused to myself, it had. In the dustfree laboratory conditions of their engineering unit, or the less harsh environment of London or Seoul. What about upcountry South Africa? Or Senegal or Kenya or even, India?

The 2009 models introduced for emerging market opportunities, such as those on the African continent almost a decade ago, were all candybars.

As for me, I’ve never stopped using a good oldfashioned “dumb” Nokia that stolid Finnish engineering and product development ensured would survive and endure anything – even being run over by a truck.

Key Competitive Advantage for Frontier and Emerging Markets

There’s a nuance, I’ve discovered, in the application of user centered design methods for entering the frontier and emerging markets of the developing world where a significant proportion of economic activity is confusingly labeled “informal”, rather than unformal as the case tends to be.

In more advanced consumer market contexts, where there are umpteen data flows, and decades of consumer research and insights to draw upon, the unquestioned assumption is that user research tends to level the playing field among contenders.

However, this doesn’t hold true, in my experience, in the emerging and frontier markets, such as those in East Africa. Simply basing one’s product development and market entry strategy on even the most rigorously designed user research program does not suffice. At the frontier, competitive advantage boils down to how well you interpret your data so gathered using design ethnography methods and quantitative surveys.

The biggest and best data collection in the world cannot help you if it’s not answering the right questions, nor the insights drive design if there are underlying biases filtering the inputs.

The key, as any trained anthropologist will inform you, is in being able to shift one’s perspective sideways, enough so as to perceive the landscape and the context from the viewpoint of the users being researched. And, perhaps, that is why increasing the diversity of experiences and perspectives of your team can make or break your new product introduction and/or your competitive strategy.

An amusing example of this kind of problem is one I discovered yesterday when poking around my twitter profile after the sudden change in UI that took place without warning. It seems that because I hadn’t input my real gender in the system, Twitter’s data analytics designated me “male” based on my tweeting behaviour.

Their age range is vast enough that they cannot go wrong, and besides, a lady never shares her real age. In the grand scheme of things it doesn’t matter if I’m considered male or female in the system. What is of concern is the underlying assumptions that the designers of the system have made when assigning behavioural choices to one or the other gender.

Now, if we were to extrapolate this relationship between initial design settings in the system, and the inaccurate output – as clear a case of their assumptions being rooted in stereotypes as any that I’ve seen – imagine for a moment what would be the case if the same sort of unthinking, unquestioned stereotypes were applied to the interpretation of user research data collected from a geography or context vastly different from one’s own?

What if this same approach was used for the system of designating assumed behaviours and user needs meant to guide the design of solutions for the rural African market woman?

If the most modern and global social media messaging systems of Twitter are unable to distinguish something as basic as gender – they state based on your profile and activity – they’d do better by stating they are unable to distinguish gender based on these factors than to make gross assumptions on “What do women tweet?” in 20 foot pink letters.

I’d have more respect for them tbh instead of feeling I’ve been put in some fluffy fuschia box, as a woman, just because the stuff I do (my profile is professional) and the stuff I tweet about (business, trade, economics, and design strategy) flags me as a male?

Extrapolating this challenge further, in the context of frontier and emerging markets, where the markets are not crowded with competitors at this early stage, nor is your brand recognized, is this the first impression that you can risk making?

I’ve often said that these are some of the most challenging markets, and affordable connectivity is only making it harder – word of mouth now flies at the speed of silicon, and a new entrant must stand up to social media scrutiny.

Frankly, in my own discipline and field of focus, it only makes me more confident of my team’s ability to offer a distinct competitive advantage.

Frame Insights: Going back to first principles in the Innovation Planning Process

After conducting research, we need to bring structure to what has been found and learned. We sort, cluster, and organize the data gathered and begin to find important patterns. We analyze contextual data and view patterns that point to untapped market opportunities or niches. Finding insights and patterns that repeatedly emerge from multiple analyses of data is beneficial. ~ Vijay Kumar, 101 Design Methods

“It’s what happens after the research that’s important” is something I found myself saying three times to three different people in three different contexts over the past couple of days. Anyone can go out and interview users and beneficiaries. What’s important is what happens during the Analysis phase.

To ponder this in detail, I wanted to go back to first principles, and drill down into the post research stage where we are expected to frame our insights.

Vijay’s slide pops out 5 key outcomes from this phase, and these are critical for solution development in the subsequent phase. These 5 outcomes from analysis of the data collected during the research phase are:

  1. Looking for patterns
  2. Exploring systems
  3. Identifying opportunities
  4. Developing guiding principles
  5. Constructing overviews

It is this stage that distinguishes the quality of the outcome. Now, in the case of our work in the informal economy operating environment, we have built up an overview of the landscape over the past several years, primarily through immersion and thick data collection using design ethnography methods.

Starting from the purchasing patterns and buyer behaviour of low income consumers, back in early 2008, all the way through to the development of guiding principles such as flexibility, we have explored and mapped the ecosystem from numerous vantage points.

Today, our synthesis of user research does not happen in isolation from the body of work – intellectual property – that has been developed over time, through experiential and practical knowledge.

This, then, is what underlay my conviction when I spoke about the importance of the quality of interpretation of the data, and the transmutation of these interpretations into implemented insights in the form of new product features, service design elements, or nuances of the payment plan in the business model.

Increasingly, the Frame Insights phase of our work has led to the evolution of our understanding of the commercial landscape in rural and informal markets where incomes tend to be irregular and volatile, and infrastructure is inadequate or missing. It is this that I’ve been attempting to capture under the category of Biashara Economics.

It’s not Africa specific. The patterns hold, give or take ~30% margin for historical/cultural/social differences, across continents. That is because these patterns are the natural response to the common characteristics of seasonality, volatility, uncertainty, and unpredictability. And this is why one can see the success of the prepaid business model around the world.

It strikes me here that this in fact validates the methodology and approach to exploration and discovery in unknown contexts, something I had framed as the starting point for the very first such project almost a decade ago. Over time, I discovered how much the methods, as delineated by Vijay in Chicago, had to be adapted for the context but that is a topic for another time.

Prepaid Mobile: The Business Model that Empowers

It feels like a long time since I last pondered the nuances of the prepaid business model, until I came across some words written by Indian social media researcher Swati Janu. She documented her observations on the infrastructure of insecurity from the tenements of New Delhi.  There’s value in reflecting on how our understanding only increases over time, and we can never say that we’ve stopped learning

This sentence caught my attention:

From a rural population that is fast going online to the resourceful teens in urban slums, the lower income demographics are choosing to buy internet, through small but recurrent amounts, which enable them to straddle the line between affordability and aspiration.

The small but recurrent amounts – the Rs 10 mobile recharge Janu writes about – are the lifeblood of the prepaid payment plan for voice, text, and data (airtime) for the now ubiquitous cellphone that has changed the landscape of the developing world.

To enable the lower income demographic’s ability to straddle the divide between their aspirations and their ability to afford them is empowering. One could say that:

Prepaid is a business model that empowers aspiration, through affordability, incrementally.

Instant gratification has never been within their purview.