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.

Cognitive dissonance and smartphones in East Africa

via twitter, a modern day kanga from East Africa

Its jarring to see high level INGO messaging still talking about “ICT4D” not doing it’s part to bring about technology driven transformation in rural or informal sector Africa when every other sign from the continent points to a mainstreaming of ICT that goes beyond the individual’s capacity to tweet.

The kanga is a traditional item of women’s clothing worn all along the Swahili coast of Eastern and Southern Africa. Probably originating from the monsoon driven textiles trade with the west coast of India long ago in the mists of history, the kanga is rather well known for incorporating Swahili proverbs and aphorisms within its design.

While traditional sayings might refer to love or social relationships, warnings and idiomatic sayings, this photograph of the kanga, now making the rounds on social media, which I’ve shared above, provides clear evidence of the ubiquity of smartphone technology and social media communication in local culture.

Surely your screenshot is waiting in your inbox isn’t a traditional proverb nor an age old Kiswahili aphorism.

Improvising when work gets in the way of a laptop breaking down

Aalto Design Factory, one Monday in January 2014

Just over a fortnight ago, I nudged my coffee cup over a corner of the full size design award winning keyboard embedded in my rather obsolete but much beloved Lenovo.

Today was a very important deadline that my team and I had to meet. And my work involved writing over 5000 original words in response to a wicked problem, one of those that would wring your heartstrings if you knew.

Simultaneously, I had an entire market entry strategy to complete and submit for a client project that had been ongoing since earlier in the spring. My intent had been to get that done and dusted before the 1st of June leaving me the balance of time available to focus on the complex analysis and synthesis of a narrative by today’s deadline.

A few drops of coffee was all it took to disrupt my intended plan of action.

I’m sharing this anecdote here, now, because I learnt something about myself that I’d not have noticed had this not happened.

Improvisation is the key to success in challenging situations where the infrastructure we take for granted, or the tools we come to rely on, refuse to perform the way we expect or they should.

Slow down during a crisis, and you will have that unique center of calm grounding you instead. It may seem counter-intuitive at first glance, but if you step back and consider the whole, this singular moment in time – infinity – can allow you an unprecedented opportunity to envision the whole, recognize the landmarks, and the obstacles, and then, plan your navigation all the way through to your goal. That is, instead of diving in deep into the urgency, take a step back off the edge of the cliff instead.

Then, and only then, when you have your roadmap in mind, take that critical first step forward to begin.

We submitted over 10 megabytes of materials last night, well in advance of our deadline. And, after a day or so of letting my poor old tired eyes rest from switching back and forth between two screens and flipping the trifocals on and off, I’ll sit back down to complete the interrupted strategy for my patiently waiting client.

Systemic design thinking and complex adaptive systems

Going back to first principles has been a refreshing exercise. Even as our work has taken us into some wholly new places, there’s comfort in knowing that others have thought deeply about the concepts, though not in our context. I’m a firm believer in not re-inventing the wheel. Consider it a working prototype to be tested in a new environment, rather like I’ve been doing with Vijay Kumar’s innovation methods.

Here’s the context of the thinking I’d been doing on iterative programming for complex, adaptive systems – that is, taking on the wicked problem space of international development where the operating environment is rather greatly different from the predictable regularity of the developed world:

People-centered systems design thinking for complexity
Pivoting from “best practice” to “best fit”: An interdisciplinary perspective (Intro)
An Interdisciplinary Approach to “Best Fit” for International Development: Process and Tools (Part 1)
Enabling development’s paradigm shift from ‘best practice’ to ‘best fit’(Part 2)

Thus, it was with pleasure that I dived into exploring Peter Jones’ publications on social transformation. Two, especially, caught my attention.
The first lays the groundwork in the work of bringing together the two disciplines – systems thinking and design. From the abstract of his Systemic Design Principles for Complex Social Systems:

Systems theory and design thinking both share a common orientation to the desired outcomes of complex problems, which is to effect highly-leveraged, well-reasoned, and preferred changes in situations of concern.Systems thinking (resulting from its theoretical bias) promotes the understanding of complex problem situations independently of solutions, and demonstrates an analytical bias. Design disciplines demonstrate an action-oriented or generative bias toward creative solutions, but design often ignores deep understanding as irrelevant to future-oriented change.While many practitioners believe there to be compatibility between design and systems theory,the literature shows very few examples of their resolution in theoretical explanation or first principles. This work presents a reasoned attempt to reconcile the shared essential principles common to both fundamental systems theories and design theories, based on meta-analyses and a synthesis of shared principles. An argument developed on current and historical scholarly perspectives is illuminated by relevant complex system cases demonstrating the shared principles. While primarily oriented to complex social systems, the shared systemic design principles apply to all complex design outcomes, product and service systems, information systems, and social organizational systems.

And once I noted there was a bit of an overlap between the references I’d drawn on for my initial exploration of design planning as the discipline from which to source methods to address the challenge of complex, adaptive systems as currently explored in the development space, I was relieved to see that I was on the right path for our own theoretical evolution.

This paper is a great starting point for our methods development for the context of the informal sector in the East Africa, particularly outside the urban centers. And, a second paper by Jones – Design Research Methods in Systemic Design validates many of our assumptions while working with only the methods and systems thinking from one school of thought – the Institute of Design’s philosophy and approach.

In future blogposts, I will attempt to triangulate the thinking from all of these disciplines – design planning, human centered design, systems thinking, and international development. There’s a paper I’m hoping to write by the Autumn, if all goes well and the abstract accepted for a conference at the end of the year.

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:

Looking for patterns
Exploring systems
Identifying opportunities
Developing guiding principles
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.

How the African movable assets bill can unleash innovation opportunities for the rural economy

Somewhere in Kenya, 4th June 2012 (Photo: Niti Bhan)

As Kenya joins Zambia and Zimbabwe in ratifying a Movable Property Security Rights Act, there’s a sense that the floodgates to innovation in access to finance might be taking place in rural Africa, south of the Sahara and north of South Africa.

Kenya’s law also goes beyond the cows and goats and allows a borrower to collateralise future receivables arising from contractual relationships.

How it ends up being implemented will set the stage for the next big disruption in financial inclusion. In the meantime, let’s take a closer look at the opportunity space for innovation in the informal and rural economy that dominates these operating environments.

1. A whole new bank, designed to meet the needs of rural Africa

Last night, a tweet by Charles Onyango-Obbo struck me forcibly, and reminded me of our Banking the Unbanked proposal crafted for ICICI back in January of 2007.

The very fact that contemporary thoughtleaders in the Kenyan banking industry are unable to take the concept of livestock as collateral for loans seriously, taken together with the deeply embedded assumptions of the formal economy’s financial structure leaves the door wide open to disruption.

It would not be too difficult to conceptualize a rural, co-operative bank custom designed for the local operating environment. In Kenya, where the mobile platform provides clear evidence of the viability, feasibility, and desirability of innovative financial tools and services that work for irregular income streams and provide the flexibility, reciprocity, and negotiability inherent in the cooperative local economies, such a bank could change the social and economic development landscape overnight.

In fact, one could conceivably foresee this “bank for rural Africa” scaling far beyond Kenya’s borders.

2. Insurance sector must respond to banking disruption

The domino effect of disruption in the banking sector should kickstart the stagnant insurance industry that has been ineffectually attempting to scale outside of the formal economy’s neatly defined boundaries. Bankers willing to take livestock as collateral for loans will therefore require insurance on their movable asset as a surety against the risk of disease, or drought.

Current products tend to emerge from the international aid industry, seeking to insure smallholder farmers against the shock of losing their livestock to climate related disasters such as prolonged drought, or an epidemic of illness. There is a dearth of relevant and appropriately designed insurance products from the private sector targeting the needs of the rural economy. For all the talk of African urbanization, even the most optimistic projections show that East Africa’s rural population will continue to dominate.

Thus, this an opportunity ripe for the plucking, given the right mix of product, pricing, and promotional messaging.

3. Disrupting assumptions of Poverty and Purchasing Power

Whether it is Kenya’s significant non profit sector or the nascent consumer oriented markets, the redrawn lines defining assets, collateral, and the floodgates of access to finance will require a complete overhaul in the way the population is segmented and measured.

Once these hundreds of movable assets have been valued, insured, and registered officially, even the most reluctant banker must now count the pastoralist among his wealthiest local clientele, able to draw a line of credit against his true wealth to the tune of thousands of dollars without feeling the pinch.

4. Triggering a rural investment and consumption boom

From mabati for a new roof and simti for the backyard wall, to the latest model smartphone or pickup truck, the concurrent boom in investments and consumption provides an ample playing ground for new products and services tailored for the contextual needs upcountry. Finally, Farmer Joe can install that solar powered irrigation pump for his orange groves in time to reap the next big harvest. And Mama Mercy can think of building up a nest egg of investments faster from the income provided by her farmyard animals.

Kagio Produce Market, Kenya, April 2013 (photo: Niti Bhan)

This might turn out to mean upgrading to a breed of high yield milch cows or being able to provide them with better quality feeds and medicines, but the financial bridge that a well designed strategy leveraging this movable assets bill and it’s timely implementation could mean the difference between the brass ring or treading water.

5. Trade and Commerce will open new markets

Given that the Kenyan Movable Property Security Rights Act 2017 goes beyond livestock to include other stores of wealth and value creation, there will be an undeniable impact on regional and cross border trade. No trader will give up the opportunity to leverage their existing inventory if it qualifies for additional credit that can be plowed back into the business.

On the road to Bungoma, Western Kenya, February 2016 (Photo: Niti Bhan)

Trader’s mindset and the documented biashara growth strategies already in evidence point clearly to the productive economic use of this access to finance rather than passive consumption alone. As their business grows, they will require a whole slew of tools and services tailored to their needs. This could be as simple as a basic book keeping app or as complex as customized commodity (assets, livestock, non perishable foodstuffs, grains and cereals) exchange platforms that integrate the disruptive new services percolating through the entire ecosystem.

In conclusion

These few steps outlined above are only the beginning of laying the foundation for disrupting the current social and economic development trajectory of small town and rural Kenya. I see immense potential for both direct to consumer as well as business to business segments for forward looking organizations seeking a foothold in the burgeoning East African markets.

We, at Emerging Futures Lab, would be pleased to offer you customized white papers on the opportunities for new products, services, and even business models, based on this emerging financial environment recently signed into law by President Kenyatta. Contact us for an exploratory conversation on the scope and scale of your particular industry’s needs. Our experienced team can help you maximize these opportunities from concept design and prototyping all the way through to path to market strategies.

Livestock as movable assets and financial collateral: Collected insights

Mama Mercy’s farm, Nyeri, Kenya (Photo: Niti Bhan, April 2013)

Following in the footsteps of Zimbabwe, Kenya has just passed a law on the use of movable assets as collateral for loans.

President Uhuru Kenyatta has signed into law a Bill allowing borrowers to use household goods, crops, live animals and even intellectual property to secure commercial loans in a move aimed at boosting access to credit.

This is an important move, because unlike Zimbabwe, the “Kenyan Movable Property Security Rights Act 2017 paves the way for the formation of a centralised electronic registry for mobile assets that financial institutions can use to verify the security offered.”

The implications for the rural economy, entrepreneurial smallscale farmers, and the informal trade sector are enormous, and I will take a deeper look and analyze the implications in subsequent posts. First, I will begin by collating the past decade’s writing on the role of livestock in household financial management, clustered broadly by theme:

On The Role of Livestock
The multifunctionality of livestock in rural Kenya ~ literature review
“households will treat livestock similarly to a savings account or stock portfolio and typically (and perhaps reluctantly) only sell livestock to cover cash shortfalls when certain necessary expenditures arise”
The Role of Livestock Data in Rural Africa: The Tanzanian Case Study
Only provides evidence of the importance of investing in same
The role of the cow as an investment vehicle in India: Insights on Return on Investment

Emerging Futures Lab Original Primary Research
The Prepaid Economy project 2009: Original research on rural economic behaviour (IDRC & iBoP Asia) – Part 1
Observations & analysis of rural household financial behaviour – Part 2
Synthesis & Insights on rural economic behaviour – Part 3
Visual documentation from Philippines, India, and Malawi – Part 4
Rural Bottom/Base of the Pyramid and their cash economy

Application of insights for innovation in Kenya
Component parts of the rural, social economy
Seasonality as a factor in livestock export trade finance
Rural Kenya’s livestock and produce markets are a complex, economic ecosystem
Affordability, pricing strategy, and business models
Livestock’s role in path to upward mobility
From the individual to the community: the rural economic ecosystem (Dec 2013)
Importance and value of the informal food market
Creative ways to financial inclusion, by Michael Kimani

To Read More: Use this tag “movable assets” for all forthcoming analyses, and you can find a decade’s worth of my original research on informal economy, prepaid business models, literature reviews and ethnography here. The entire subject can be found under the category “Biashara Economics“.

UNDP’s 2017 Report: Universalism and Human Development

Though I’ve often deconstructed a variety of reports released by private sector actors like management consultancies, and public sector institutions like the UNCTAD or World Bank, I’ve never been moved to write about them here on the blog.

Last night, using the twitter hashtag #UNDP2017, I went through their recently released 2017 issue of the Human Development Report (their hashtag, #HDR2017*) and was rather surprised by their decision to take an unusual approach to the topic.

Unlike the majority of the reports I’ve seen till now, which tend to segregate regions by geography or continent or income (lesser developing countries, for instance, or sub Saharan Africa), this was the first time I’d seen such a holistic and inclusive approach to humanity’s development.

In fact, it was the first time I’d come across the concept of “universalism”. Almost a planetary focus, one might say, on the intertwined future of our common humanity, now mostly interconnected through this world wide web.

Here are a few more bits from the report to whet your appetite, though I do suggest taking a look through it yourself.

While things are improving, there are far too many marginalized groups of which the largest segment of humanity is women, especially those of us who were born in the formerly-known-as-developing world.

Though I must say that the skills the UNDP’s report writing team selects as necessary for our emerging future is one that can be mastered by anyone, regardless of culture, gender or education.

*You can see why I picked my own hashtag for easier readability

It’s way past the time to consider the Informal Economy as a distinct commercial environment

Brand stickers on avocados displayed for sale on a highway, Kenya. April 2013

Regardless of continent, it is now high time we accepted the informal economy (unformal or unrecognised or unorganized sectors) as a commercial operating environment in its own right.

The continued oversight is rapidly coalescing into a gaping void of hiccups and failures, by large companies, non profit institutions, and startups, alike. This issue goes far beyond “understanding the informal” or recognizing the fulltime professional status of the service providers that I’ve written about before.

It’s about the problems created by continuing to assume every individual is poverty stricken and struggling to make a livelihood simply because a significant portion of their commercial activity operates outside what is rarely defined but is assumed to be the formal, structured economy held up as the pinnacle of economic development.

It’s why academics can barely conceal their flabbergasted surprise that a person has a better quality of life, and a reasonably viable revenue stream in [gasp] informal market trading, or even agricultural work.

It’s why @pesa_africa questions the continued transplantation of e-commerce business models directly from Seattle to subSahara given that they’ve tended to wither on the vines.

It’s why market women and traders pay the price of daily harassment and abuse by those given authority over their peace of mind.

And, it’s also why the freshest produce gets to you first thing in the morning in Nairobi or Cotonou or Kinshasa.

This is not meant to be a paean to the hardworking women and men who keep the engines of commerce and trade humming in the harshest of environments with scarce resources and inadequate infrastructure.

It’s the first step in acknowledging yet another holdover from a colonial past that decades later still hampers and hinders the social and economic development that should have happened by now, by all rights.

It’s also the necessary counterpart to the recognition of agency required for design interventions to succeed once donor funding ends.

This theme is consistently covered in this blog in the category Biashara Economics and hashtag #biasharaeconomics