Building the Bridge: Design methods for success in the informal economy

The above is a screen cap of my research plan submitted at the end of March 2019 as part of the doctoral admissions process. Everyone understands its only a working title for a yet to be defined problem statement, which is the purpose of doctoral studies as I see it from the user’s perspective. Both the title and the content are expected to evolve and change as one proceeds with research.

Right now, as I work on my application for a personal working grant so that I can focus on studies fulltime, I am playing around with the title you see as the title of this post: Building the Bridge: Design methods for success in the informal economy

Its self descriptive, provides a hint of the primary discipline, implies the merger of design methods in the business context, and provides all kinds of clues on what the academic verbiage of the doctoral research plan might mean in terms of scope and focus.

However, it too is a work in progress…

I have been granted right to study at Doctoral level by Aalto University School of Engineering

That is a friend’s restored vintage Porsche I’m standing in front of, on the day I heard about my admission to the PhD programme in Aalto University. I’m officially admitted to the department of mechanical engineering, or konetekniikka as its known in suomi.

In the Finnish system, I was admitted as an enrolled student as soon as I signed my acceptance form and I have already received my email address, log in details, and student number. I can, if I want, start taking classes in the summer programme but I will wait until the Fall to begin. I want to take this summer off and enjoy the liminal space between running a business for 12 years, and fulltime studenthood.

Right now, I’m running around figuring out the Finnish financial aid system for living expenses while doing fulltime research. The tuition itself is free, and, as a permanent resident I do get a small amount from social security as well as a fulltime student. I’ll write about that once I get through this week’s deadlines.

I’ll collate all my blogging on this topic of going back to school in your early fifties under the category Education, with the tag PhD.

My slides for re:publica in Berlin today, #tl;dr 2019

Here are my slides. In PDF form.

Kenya’s informal economy clambering on to the information highway through their smartphones

Sometimes cliches are the only way to communicate the sheer breadth and depth of the transformation now undergoing in the informal sectors, such as trade and light manufacturing, thanks to affordable smartphones and data bundles.

I began calling it digital and not online yesterday when we discovered many people didn’t recognize the word “online” in a question, and thought of it as their smartphone or an app. The next billion online, with their prepaid airtime on low cost devices, have recognized the market potential of the “internet” in the form of Facebook but do not yet recognize the concept of either “online” or the internet.

It was commonly perceived as things you could do with a smartphone that you couldn’t with a feature phone. MPesa, with its robust USSD system, could be used with a 15 year old phone, and thus, like sending a text, or making a phone, has become a basic feature of their mobile phone.

Everything else is magic.

Kenyans have leapfrogged more than just landline infrastructure in their embrace of mobile telephony. They also leapfrogged conceptual understanding of the internet, websites, HTML, and pages, that those of us who began with desktop or laptop computers had visualized conceptually as a model for our own need to understand the system.

We’re seeing wholly new ways of thinking about apps, tools, and services in the “digital world” – which, I find, is the easiest way to describe the span of technologies that most developing countries must straddle – from 2G to 4G and 5G, African countries can’t afford to turn off 2G like Singapore can. Too many people are still using old Nokias, and I was able to purchase an unboxed 2009 model Nokia for $25 in Nairobi’s Central Business District last week.

The future will remain unevenly distributed in the digitization of the informal economies of developing countries, but this is giving rise to interesting developments. Where the system is technologically “backward” as compared to the linear progression in the developed world, it will not have a development path to follow but will and does go off in its own direction of transformation.

What we are seeing here in Kenya is a hybrid digital economy that can be accessed by both featurephones and smartphones, the only caveat being the tradeoff made on the richness of information streams available for each category of device.

This to me also feels like what the mobile internet experience will be like for another decade in Kenya, and a local approximation of societal and demographic change for any other developing country context.

What will not change is the vast majority data management habits – 97% of Kenyan mobile subscribers are on prepaid airtime plans, although there does seem to be a segment of customers who are beginning to see the advantages of postpaid services. I met one of Kenya’s 3% – a Safaricom Platinum customer.

The role of the grey market in Africa’s mobile telephony boom years

The grey market refers to goods which have been manufactured by or with the consent of the brand owner, but are sold outside of the brand owner’s approved distribution channels – which can be perfectly legal. (1)

In Africa’s teeming business districts and electronics mega markets, the concept of grey market products underwent an evolution over the past two decades as it reflected the development and eventual maturity of the mobile phone market. Always, however, price arbitrage drove the parallel industry.

In the beginning, grey market products were those that met the conventional definition I’ve shared above from Investopedia. Because the majority of the African continent – barring North Africa and South Africa which were considered more investment worthy – was initially overlooked as a target audience for the world’s branded mobile phone manufacturers, African traders and merchants would source products from the Gulf – Dubai being a key hub for re-exports in consumer electronics – or ‘fairly used’ phones from the then more advanced European countries.

Thus, by the time Samsung’s Mobile division woke up to the opportunity in sub Saharan Africa about a decade after the first introductions of cellular telephony, they discovered Samsung devices being sold openly in markets they had not officially entered as yet. The challenge for them, back then, was that these handsets tended to be European models, and not really engineered to hold up under more adverse African conditions. Not only was the grey channel capturing marketshare that should have been theirs but potentially negatively impacting their brand as more fragile than the notoriously durable Nokias which were popular ‘fairly used’ models for that very reason.

The secondhand and refurbished phone market provided the necessary affordability for far more people than just the rich or upper middle class who could afford the phones and models then being sold in sub Saharan Africa.

It was only the completely unexpected great surge of growth around 2002-4 that spotlighted clearly the latent and untapped mass market opportunity for low cost mobile devices, and the trend began to develop a phone “for Africa”. Motorola won the the GSM Association’s first grant for low cost phones, priced at around $30, in 2005, but was ironically never to achieve the exponential sales and success of Nokia.

By 2009, the grey market came to mean counterfeit as cheap Chinese phones flooded the market thanks to informal traders flying to and fro from Hong Kong with suitcases stuffed with handsets. Back then, coherent brands had not yet emerged from China’s factories, and I owned a dual sim NKIAC with lots of bells and whistles as a souvenir. They were known to have their problems but offered a trade off for the aspirational owner to be – an affordable entry point online, until an established brand could be purchased.

Around 2011, however, the Chinese OEMs had woken up to the African market’s sustained double digit growth in both device sales, as well as new subscribers of mobile services. And, jumped on the Android bandwagon, sensing a boom on the horizon as big brands dithered.

This was the turning point that was to change everything about the mobile telephony ecosystem in sub Saharan Africa – Nokia’s fade out, the rise and subsequent dominance of Transsion Holdings with low cost yet branded smartphones, paving the way for the smartphone and app economy maturing rapidly across the entire continent today.

In a way, it was also the end of the gray market in terms of fakes and counterfeits, as connectivity and social media demands required functioning operating systems and apps.

In another, the original grey market, as defined, came back to it’s role in providing affordability to the aspirational and ambitious, and in Nigeria, is credited with bringing about the smartphone revolution, just as it boosted the original mobile telephony transformation of the previous decade.

Mobile Phones and the Informal Economy

Western Kenya, June 2012

Over the past week or so, I’ve been scanning literature from African researchers on the broad theme of mobile phones and the informal economy. Here are some of my top findings:

The Mobile Phone is a Business Tool and Income Generator – Regardless of the region (and cultural context) of study – Cameroon or Cote D’Ivoire, Kenya or Botswana or Tanzania; and, regardless of whether the research methodology was quantitative or qualitative, respondents across the board considered their mobile phones as a critical capital expense for running their business, important for boosting efficiency, productivity, and incomes. In these studies focusing on the informal economy, respondents were micro and small enterprises, most often owned and operated by a single individual.
Mobile phones and cellular services opened entirely new avenues of employment, particularly for youth – More visible in the earlier years of Africa’s mobile revolution, but still important enough today, are the new avenues that the ecosystem and infrastructure opened up for young people. A slew of supporting services such as airtime sales, voucher sales, mobile money agencies, phone sales, download services, call booths, et al each had their day in the sun as a promising new way to tap into the double digit growth sustained by African mobile markets in the past two decades. Most notably, mobile phone repair shops stand out as a whole new career path enabled by cutting edge technology. And, some of the best known hardware and software hackers went on to bigger things.
Mobile money agents preferred to banks – Studies on this theme – if they were conducted where mobile money had reached critical mass – noted that mobile money agents were often considered as “one of us” by informal sector businesspeople as compared to forbidding requirements and investment in time required by banks. Mobile money agents were located conveniently in the same markets, often in neighbourhood shops, were open for longer and more convenient hours, and even on weekends. They were definitely more flexible and accommodating of the needs of informal sector commercial activity, and often a critical part of the business person’s network than any bank.

These three things caught my attention as showing up over and over again the literature, regardless of whether it was a PhD dissertation, an academic’s paper, or an MBA student’s thesis.

References:

The diffusion and Impact of Mobile Phones on the Informal Sector in Kenya (2010) – Wakari Gikenye and Dennis Ocholla

The role played by the informal economy in the appropriation of ICTs in urban environments in West Africa (2008) – CHENEAU-LOQUAY, Annie

The Economic and Social Effects of Mobile Phone Usage: The Case of Women Traders in Accra (2015) – Dissertation, Yvette A. A. Ussher

Mobile phones in the transformation of the informal economy: stories from market women in Kampala, Uganda (2016) – Caroline Wamala Larsson & Jakob Svensson

Cell Phone Repairers in Cameroon, 2000-2013 (2015) – Walter Gam Nkwi

Africa’s emerging digital, social, mobile economy is neither formal nor informal but a bridge in between

Photo courtesy Michael Kimani

Let’s call it the prepaid economy, I told Michael in our regular weekly call the other day. 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.

For one, the vast majority of African mobile phone users were on prepaid or pay as you go plans, regardless of their income level. That is, when more than 95% of Kenyans are prepaid mobile subscribers, their digital behaviours, internet browsing, and media consumption habits are naturally going to be shaped by their preferred approach to managing costs, and, in turn, this dominant business model would influence the payment plans and business models of digital services delivered over the mobile platform.

And two, the African digital economy is not only mobile first, but mobile only for the most part. And, in 2019, we are talking about an operating environment that embraced mobile telephony wholeheartedly for more than a decade and a half; transforming social and commercial behaviours in both rural and urban contexts in big ways, and small, so much so that the disruption of how things work, and are made to happen has occurred, going almost unnoticed since it was not an overnight change as disruptions are assumed to be.

The past 15 years have nevertheless seen Kenya (and much of sub Saharan Africa) transform in response to the information and communications technology now ubiquitously and affordably in every pocket. Everybody has heard of mPesa, and everybody wants to launch their latest app or solution in Kenya.

This digital economic ecosystem bridges the formal, or “modern” economy, as the Kenyan statisticians measure it, and the informal sectors that dominate the commercial and employment opportunities. It is not unrecorded or invisible, like the traditional informal economy – in fact, Kenya is the leading destination for a plethora of instant mobile credit and loans companies all the way from Silicon Valley, able to assess your creditworthiness with the number crunching power of their technology. Yet it still operates outside of much of the institutional boundaries of the formal sector, empowering people to make their own decisions and relationships with services and solutions provided on demand, in a decentralized manner.

Look at the itinerant street vendor in the photograph Michael took in Nairobi with a mPesa merchant till number hanging on his back. Even as an individual, the gentleman concerned needs to show one week of daily receipts as part of his application – this implies record keeping. Which in turn, blurs the boundaries of our conventional thinking of the ad hoc nature of “informal” business. Here, I will just say that word informal is the problem since in English it implies a lack of organization or structure.

Back to our hawker of goods with his mobile money till number hanging on his back, offering digital (recorded) transactions as any merchant would. He explodes our assumptions of hawkers as marginalized and vulnerable economic actors with low skills and education. He exemplifies the changes that have transformed the Kenyan commercial environment, and, the emergent digital economy on the mobile platform.

He bridges the informality expected of a wandering street vendor with the documentation and record keeping of the cashless transaction completed on your smartphone.

The prepaid business model bridged this gap between the structures and documentation of the formal or modern economy and the necessary flexibility and negotiability of the informal’s unpredictable and often unknown, income streams by putting control over time and money in the hands of the customer rather than the service provider. This empowers people to manage the volatility and uncertainty we deem inherent in the context of developing countries with variability in service delivery systems and inadequate or missing infrastructure.

Therefore, it seems, that as a working label, to distinguish the informal economy from the digital one, we’re going with the oft used label of “prepaid economy” as it includes people with formal sector wage employment as well as implies the mobile platform and the digital record keeping for the informal sector’s hawkers or traders. It’s a whole new space to play in.

I stand on the shoulders of giants

On the first day of 2019, instead of looking back over just the past 12 months, I am going to look back ten years. There’s an African proverb which says if you don’t know where you’re coming from, then you don’t know where you’re going.

The photograph above was taken towards the end of 2009, at a design event in New Delhi, India. Its the only one I have, so I’m using it here though its rather unclear and blurry. I am lucky to be standing between two giants in thinking about design, both of whom were my teachers, one each, in each graduate school of design I attended on two continents, in two different centuries.

On the left, grinning through his beard, is the late MP Ranjan of the National Institute of Design, Ahmedabad, who was a legend in his own time.

The system after all, remained at the heart of Ranjan’s design philosophy. People, processes, relationships and the environment unified into an ecology within which every design solution had to exist in harmony; there could be no product without a paradigm, and no concept without a context.

On my right, is the late John Heskett, author of the book Industrial Design, and teacher of planning for design in a multidisciplinary way.

Communicating clearly the value of design that designers can contribute to any organization is a continuous challenge. Understanding economic theory as it shapes business attitudes and conversely, how design can shape economic value, can be a valuable means of integrating design into business thinking.

As I reflect upon my own work, in thinking and writing about design, as well my design practice, I can see how each of these forward looking thinkers and teachers shaped my approach and methodology for problem solving in conditions of uncertainty and adversity.

Ranjan’s hands on systems approach to design blends well with John’s lenses of economics and business, particularly strategy and policy, together offer a powerful framework for undertanding the complex adaptive systems within which interventions and innovations are intended to be introduced.

Heskett once said, in class, that an invention wasn’t an innovation until it was adopted by the end users, thus gaining the critical mass necessary for transformation, an inherent quality of innovation. While Ranjan never failed to remind us of the people involved – in both creating new design solutions, and embracing them – when we undertook to intervene.

John taught me Design Policy and the impact of Market Forces on Design Planning. Ranjan introduced the fundamental methodology of the design process and systems thinking.

If I am, today, finally comfortable with labeling what it is I do as design, it is because of having had both of them in my life.

May they rest in peace.

Tips on managing African fake news articles and websites

Today, I was faced with the challenge of having to choose between two conflicting quotes attributed to the same spokesperson, during the same press conference. Attempting to uncover an authoritative source for the content in order to discern which of the two was authentic led me down a rabbit hole of fake news sites allegedly from Kenya. The exercise led me to write up my experience, and share my thoughts on navigating the minefield of fake news articles and entire websites, now that the issue has taken over African content as well.

The subject matter concerned China’s alleged takeover of Kenya’s Mombasa Port in case of default on the infrastructure loans for the Standard Gauge Railway (SGR). This has been making the headlines, together with Zambia’s purported problem with seized infrastructure. Matters came to a head today as yet another report – this time by the reasonably credible ZeroHedge – repeated the same messaging without digging further to check whether any of the anti-China allegations were, in fact, true.

At the same time, the daily news curation was churning up reports of a Chinese government spokesperson refuting the allegations that China was poised to take over the Port of Mombasa. So I went digging for more on the topic and churned up a news website that named the very same spokesperson as stating something outrageously unbelievable.

Note: All the sites linked below on How to spot fake from true have been vetted by me by reading through their advice, and their credentials. Someone has to watch the watchers!

Standard tips on distinguishing fake news from genuine tend to highlight two main points:

1. Is the article so outrageous that it makes you blind with anger? If so, it is very likely fake.

2. And, if so, check the website’s About page* to assess its credibility. This was the result when I followed through on the outrageous:

Sure looks like a credible source to me, no? Once I was able to identify the fake news website, I went looking for more authoritative sources to establish the credibility of the Chinese refutations, in case they, too, turned out to be faked.

An Embassy of China page offered the first data point that the refutations were indeed official, and later, on Twitter, Anzetse Were, linked directly to the Chinese Ministry of Foreign Affairs website, doubly ensuring that the refutations to the allegations of China’s take over were official and authentic.

Therefore, we can now state with confidence that China is NOT taking over the Port of Mombasa in case of default on the SGR loan*. And, we discover that the other African story used to support this one, that of Zambia’s ZESCO being taken over by China for default in loan payments is ALSO false, having been refuted by the Zambian government, and reported by a reasonably credible news source, in this case, Reuters.

This goes to show that the fake news problem in Africa has gone beyond electioneering, and social media, and invaded mainstream news media via search engines such as Google News. It thus behooves us to be doubly careful in ensuring that outrageous actions allegedly conducted by one global power or another are carefully verified and vetted before repeating them mindlessly like ZeroHedge had done.

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I am working on making up a list of the most common African news sites that show up in the popular news engines, like Google, to be wary of, or they are outright fakes.

* The Kenya Times was a genuine newspaper that closed in 2010. That makes this site doubly suspicious.

Emergence of a decentralized digital economy? Snippets from Nigeria and Kenya

Continuing the conversation from the recent posts on app enabled demand redistribution as well as digital platforms being used by informal sector economic actors to boost their own productivity and efficiency, I thought to share snippets from these two recent articles I just came across, as cases in point.

From Nigeria, West Africa: How WhatsApp groups are fostering collaboration in Ikeja Computer Village

“I stay because it has helped my business in so many ways. Right now, from the comfort of my shop, I can reach out to other vendors when I need an item so that when they respond, I know exactly where I’m going to get it.”

And, from Kenya, East Africa: Drivers’ group launches Bebabeba taxi app

As I mentioned in my previous post, anyone can afford to build their own app to manage demand and supply, and, spurred on by the introduction of global players like Uber or Taxify, local drivers’ associations are doing exactly that, except now, its on their terms.