Archive for the ‘Research’ Category

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.

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“.

Launching Our Digital Documentation Project: Ibadan’s Tailors, Traders, and Textiles by Nigerian/British artist Folake Shoga

finalcopyAfter months of hard work, I am very honoured and proud to announced our new digital documentation project by my friend Folake Shoga, a Nigerian/British multidisciplinary artist with more than three decades of experience.

She went on a journey of discovery through the twists and turns of the informal value web that holds together West Africa’s famed textiles and fashionably styled culture.

Her window to this world is centered around Ibadan, Nigeria, and she takes us through an illustrated, personally narrated documentary that spans the experience of getting a new dress, from choosing the right fabric, all the way through building a fashion brand.

Come and join us for this fascinating peek behind the scenes! You can also find this unique photo-documentary again on my portfolio page.

Not Disaggregating the Informal Economy Properly Hinders Development Efforts

Michael Kimani (@pesa_africa) brought this prize winning essay on the importance of understanding the informal economy to my attention, together with a snippet of text from our last inception report highlighting a major oversight that we believe is of critical importance.

Mike took issue on Twitter with the author’s very first sentence introducing his work as a PhD candidate in The Department of International Development, LSE, viz.,

I research smuggling, or ‘informal cross-border trade’.

and I offered to flesh out our concerns in a blogpost. Here’s the snippet Mike extracted from the tralac website:

C8oeVQ8XgAAnc-fNow, I won’t go into the full scale literature review on the challenge posed by the conflation of illicit activities such as smuggling with the licit yet unrecorded daily commerce in border markets as it’s clearly framed here on page 5 through 7 since the author is already in academia.

However, what I will do is just pull out Kanbur and Keen‘s specifically worded framing of the challenge of not unpacking the various elements of the informal economy as the first step towards understanding it better.

We think this is the wrong way to look at things. The key to policymaking towards informality is twofold. First, to specify more basic objectives, such as efficiency and equity, which transcend informality – informality and its persistence in itself is neither good nor bad. Second, to disaggregate informality into policy-relevant categories, rather than take it as an undifferentiated lump and then gauge policies by their impact on its magnitude.

Let’s take the problem of conflating smuggling with cross border trade in the context of Kanbur and Keen on Rethinking Informality:

In so far as any precise meaning is given to the term in discussions of taxation, informality is usually taken simply to mean non-remittance of tax due – failure to pay. But there are all kinds of reasons why a firm or individual might pay no tax. Maybe they are simply below the threshold above which they are legally obliged to; or maybe they are evading. Might not why no tax is paid matter for policy making at least as much as the fact of it not being paid? And how should tax systems be structured when it is recognised that their design may affect not only how much tax is paid, but the different ways in which it is not paid?

These questions lead, in our view, to a more useful strand of analysis than generalities about reducing informality.

or, in the case of this essay, to generalities about the need to understand the informal without distinguishing within it the various categories of trade that occurs across borders, both biashara and magendo.

India: Dragging the reluctant elephant into a digital, cashless future

IMG_6947

Final processing for India’s digital identity platform Aadhaar, New Delhi on 3 March 2017 (Photo Credit: Niti Bhan)

My recent immersion in Delhi a mere four months after demonetization (or, notebandi as it’s locally known) was a bit of a letdown. Oh sure, there were numerous, visible changes in the 2 years since my last trip – mostly very clear indicators of India’s socio-economic development – but none of the sense of chaos that I was expecting, having relied primarily on third party news sources, that too, in English, in the weeks leading up to my departure.

The headlines would have it that people were dropping like flies on the streets. A grand total of 187* people died visibly due to notebandi, or so I heard. The two most common responses were either sympathy – people should not have had to die for something like this and it was a sad thing to happen; or pragmatism – “people die everyday, who knows why, maybe his time had come and he was standing in line.”

The overall atmosphere was one of energy – there’s less of a sense of lackadaisical chaos that used to characterise the neighbourhood market and it’s sleepy vendors waiting for the evening strollers. There’s a sense of purpose in the hustle, as though there was money to be made. Digital money.

IMG_6950The combination of a digital identity platform and the disruption of demonetization could indeed be said to describe ideal conditions for triggering cashless India. Cards are accepted far more easily than before. “Paytm” – a local payments app – is visible everywhere, from on demand cars (Ola, Uber, Meru, etc), small kiosks, through to shiny upmarket shops. As a taxi driver told me with a smirk, everyone’s using Paytm now, even the beggars.

Rural India is said to have suffered far more, according to the reports I’d read prior to my trip. This might be unevenly distributed according to geography and growing season – a factoryworker returning from his home village in Bihar said he’d attended a wedding with hundreds of people and surely someone would have had a sob story to share.

Instead, he’d heard it was the intermediaries in the farm to fork supply chain who purchase from myriads of small farms in order to aggregate in bulk prior to selling onwards towards the cities who’d been hit harder by the sudden lack of liquidity. They were caught in the middle of the cash based chain of transactions and had to carry the burden of wastage if they weren’t able to move produce fast enough. Anecdotes included them distributing potatoes freely to farmers to use as seed for the next harvest, and tomato prices crashing.

Articles in the news state that the economy was hit harder than people would admit to but none, as yet, have complimented the common man for his endurance under conditions of scarcity and hardship, nor praised the hardworking women who kept their families fed through their social networks of give and take.

All the papers – domestic and foreign – only go on about India’s GDP, the economy, the vast business sectors, and the politics. If at all the average Indian is mentioned it is through the lens of pity – “oh, the poor farmer is suffering” or some such heartrending sob story from the “informal sector” – there’s never any mention of their ingenuity in keeping things going without cash; or the way it was all held together under conditions of adversity and scarcity.

IMG_7319That, perhaps was my biggest takeaway from my open ended conversations with a wide range of people from different socio-economic strata, professions, backgrounds, and age groups.

Their palpable pride in themselves in having come through upheaval relatively unscathed, or having the wherewithal to manage.  All the rest of it, the Aadhaar digital ID, the use of technology for transparency and accountability, the mobile platform and its ubiquity, all of these and more, I believe, will sort themselves out in time.

I’m minded to end this with a quote from Rositta J. Valiyamattam writing, ironically, on the topic of Indian fiction (page xii):

“Their novels testify to the amazing resilience of the masses in a nation wherein the commoner is rendered helpless by an often corrupt mighty polity. What stands out is the assertion of the individual will over uncontrolled powers and unfavourable circumstances. They salute the heroic struggles of ordinary Indians in times of extraordinary transformation.”

 

 

*Word of mouth number, every report has a different total, so whatever. All photographs not captioned were taken in Delhi by Niti Bhan during March 2017.

Exploring the Scope of Biashara Economics

biashara2There’s a dearth of research on the economics of biashara – the everyday commerce that keeps daily life running. And this hampers the efficacy of the design of programmes and policies meant for operating environments where the informal economy may be providing employment for more than half the working age population, and often, as high as 80 to 90% – India is at 92%, just for context.

This is not yet a literature review, although that is next on my list. It’s an attempt to capture the realization, while reading a couple of fascinating articles on the South African township economy, that the underpinnings of the informal retail and trade economy were not themselves the subject of research.

We stand firmly on the shoulders of giants, I realized, when reading these papers, though they maybe few in number. Without John Keith Hart’s body of work, none of us would be here, not even the “informal economy” –  the label itself attributed to his work in Ghana in the early 1970s. And without Martha Alter Chen’s rethinking of the informal economy, I wouldn’t have taken the path that I have this past decade.

…as long as you lump together the activities of the people like selling hotdogs door to door (although buying it from a wholesaler informally), distilling wine for the village, keeping small shops within walking distance when towns are far away or even urban services ranging from garbage disposal to dishwashing to repairing shoes – with the “firms that are hiding from formal regulations and don’t want to pay taxes etc” any formal programs or activities, whether from the social and economic development angle or the corporate profitability angle are going to act at cross purposes.

Martha Alter Chen writes in “Rethinking the Informal Economy” that India stands out as an example where the informal economy has been accepted, acknowledged and now slowly being addressed by government policy. Not in order to dissolve it or remove it but to work with it simply because the incomes of far too many people are dependent on it and no formal systems can be put into place to take care of each and every corner of the country nor her billion citizens.

One can then take what seems to be working, called “creative, resilient and efficient” by Hart, quoted by Chen, and enable systems that support it further, fostering development and increasing success rates at the touchpoints where the informal and formal meet.

So, it is with their distant blessing I will also put forth all that we’ve uncovered about the economics of informal trade and commerce, in the context of the various existing studies which overlap and provide us with insights or confirmation on our own findings. Including the tag “biashara economics”; I’ve now created it’s own category.

Snapshot of the Dynamics of the Urban Informal Retail Trade in Nairobi, Kenya

Informal Economy Dynamics - Updated

Made by Latiff Cherono – click for larger image

Latiff Cherono quickly made up this diagram during a brainstorming session with Francis Hook and myself on the ways and means to further disaggregate the general category of “Informal wholesale and retail trade” that the Kenya National Statistics Board uses to lump together the second largest sector providing employment in Kenya after agriculture.

jobs2 In urban conditions, vending and hawking of this sort is the largest source of income for the formally unemployed.

As you can see in the map visualizing Latiff’s analysis of a well known location for street vendors and hawkers to operate breaks down traffic flows not only by speed but also takes in account both static and dynamic forms of informal trade.

It may look chaotic but there are principles underlying the decisions made by both pavement vendors and mobile vendors (streethawkers in traffic) for their location of choice. These relate to the speed of passersby and potential customers – both wheeled and heeled, as Francis is wont to say – and closer analysis will most likely provide evidence of attempt to drive more footfalls to the shopfront, so to speak.

An example is the way pavement vendors locate themselves on either side of the busy bus stops, while mobile vendors who vend their way through traffic focus on the bottlenecks created by the roundabout and the traffic police.

We’re still in early days yet but time and money seem to be two of the factors that describe the attributes to segment and categorize the informal retail sector in urban Africa.

Innovation, Ingenuity and Opportunity under Conditions of Scarcity (Download PDF)

coverIn July 2009, I was inspired by working in the Research wing of the Aalto University’s Design Factory in Espoo, Finland, to launch a group blog called REculture: Exploring the post-consumption economy of repair, reuse, repurpose and recycle by informal businesses at the Base of the Pyramid*.

Within a year, this research interest evolved into a multidisciplinary look at the culture of innovation and invention under conditions of scarcity and it’s lessons for sustainable manufacturing and industry for us in the context of more industrialized nations.

reculture research bed

Emerging Futures Lab, July 2010 (Aalto Design Factory)

As a preliminary exploration, my research associate Mikko Koskinen and I timed our visit to Kenya to coincide with the Maker Faire Africa to be held on the grounds of the University of Nairobi in August 2010.

This photographic record of our discoveries (PDF 6MB) among the jua kali artisans and workshops of Nairobi, Nakuru, Thika, and Kithengela, guided by biogas inventor and innovator Dominic Wanjihia captures the essence of the creativity and ingenuity it takes to create without ample resources and adequate infrastructure.

A synopsis of our analysis is available here.

 

* The publishing platform, Posterous, died a short while later and we lost years of work. I’m looking into reincarnating REculture on Tumblr soon.