The Strategic Entry of China’s Transsion into the Vacuum Left by Nokia in Africa

Branded storefront in Karatina, Kenya (April 2013)

If you’re outside Africa, you’ve never heard of them before, but a mobile phone brand called Tecno has been painting Kenya blue ever since I started fulltime fieldwork there in late 2011. It was in Mombasa that I first noticed the name and wondered what it was about. Over the years, I saw the line up of phones even in the smallest market towns and began wondering if this brand would be the new Nokia of Africa.

Transsion, Tecno’s manufacturer, has two other brands on the market – Itel, and Infinix catering to different price points and consumer segments. What sets the company apart is that they are solely focused on the African continent and do not even sell in their domestic market of China. This was a strategic decision, as a recent article says, and their rapid success very likely due to the vacuum left by Nokia. They’ve customized completely for the African market, going as far as to develop cameras suited for local conditions, something no other phone manufacturer has done anywhere on the planet.

“For African consumers, a main medium of entertainment is photos – they love to take selfies and share them with friends. The traditional camera was not optimised for the African consumer because often, for those with darker skin, the photos don’t come out well especially in low light. We did research using over 10,000 photos of African consumers to create a special algorithm to optimise the camera to attract 30% more light on the darker face. We call this ‘Africa Focus’. It’s been heavily popular. It improved our cameras and won the hearts of Africans who like to take selfies.

In fact, Itel is so popular among traders in the Uganda Kenya borderland due to its low price and long battery life, that our research associate went as far as to capture the mound of Itel packaging seen on the rubbish heap.

They’ve brought in local languages and messenger apps. They’ve established a factory in Ethiopia to show their commitment to Africa, and they’ve set a full customer care facility – something glaringly missing from any other imported brand’s portfolio.

In my opinion, they’ve done what Nokia could have and should have done, cater to the emerging markets across the developing world where they’d originally begun connecting people.

And, they’ve shown us that it is indeed possible for a consumer product manufacturer to not only focus solely on the African consumer market but to make an outstanding success of it.

Update:

Quartz echoed the story to share the factoid that in Africa, not only have featurephones sold more than smartphones but Transsion’s brands lead the way.

Trading economics: a new theoretical system

From the Financial Times, a snippet from a guest post by Wang Zhenying, director-general of the research and statistics department at the PBoC’s Shanghai head office and vice chairman of the Shanghai Financial Studies Association, summarising the arguments in his new Chinese-language textbook on economics.

“Trading economics” is one new theory emerging against this backdrop. Mainstream economics deduces the macro whole by extrapolating from the behavior of individual “representative agents”. Trading economics replaces this with a systematic and comprehensive analysis approach. It stresses that in an interconnected world, the interaction between trading subjects is the fundamental driving force behind the operation, development, and evolution of economic systems.

Trading economics first analyses the actions of trading subjects, then builds a dynamic trading network among trading subjects through trading relations, and finally reveals the operational rules of the economic system. The rules could be examined from two perspectives: short-term and long-term. The business cycle and price changes are examined in the short-term perspective. The long-term perspective would focus on the rules of economic evolution as well as changes in technology, knowledge, system, and network.

Throughout the history of economics, trading economics is the first and foremost theory to incorporate all economic phenomena into an all-encompassing logical system. It changes the long-standing scenario in the economics field, that is, the macro was separated from the micro, and the short-term from the long-term. Trading economics is a revolution of mainstream economic theories and is bound to exert a great and profound impact on all areas, including economic theoretical research and practical application.

NB: I thoroughly enjoyed reading this summary and expect to contextualize future research with some of the theoretical frameworks as presented here.

A Unique Path to Development Seen for the Informal Economy

Just recently I stumbled over this slim book < 60 pages that analyzed existing data sources in order to frame an answer to the research question they posed:

How did the informal economy―markets and the private sector―develop in the absence of legal and administrative frameworks to support it?

Some of the most intriguing insights extracted here:

And they echo my own statements regarding the East African Community that its the informal sector that’s growing faster and responsible for employing the majority of the population. This makes integration and bridging efforts between the formal and global together with the local and informal even more critical.

The path to integration as described in the book may not apply to the African economies but holds some unusual insights for those in eastern Europe which may struggle with some of the same issues of top down planning and grassroots income generation.

All in all, the step by step approach over the past decade to recognize, and thus integrate the informal sector was much appreciated and if you’re interested, you can download the book here.

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.

A theoretical approach to Value for Money in aid & development: Optimizing research and design for ‘best fit’ iterative programming

Last year, I briefly touched upon this concept as an approach to cost effective programme design that was still flexible enough to provide room for iteration for best fit.

Today, I want to explore the concept further to evaluate its potential as a framework for incorporating the concurrent shift in development thinking towards Value for Money (DFID) principles, in addition to designing for best fit.

Value for Money as a Process Driver

Value for Money (VfM) is not the same as traditional monitoring and evaluation which seeks to measure impact of a project, and occurs usually after the fact. In many large scale projects, this may not happen until years after inception.

Instead, VfM is defined by the UK’s National Audit Office as ‘the optimal use of resources to achieve intended outcomes’, which in turn, the DFID document contextualizes for their aid programming investments as “We maximise the impact of each pound spent to improve poor people’s lives.”

If this applies to all investments in aid related programme development, then it follows that it must also apply to earliest stage of discovery and exploration that leads to problem framing i.e. the necessary groundwork to write a comprehensive and inclusive design brief for future programming.

Thus, the conceptual approach that I introduced at the beginning of this post, which is taken from the discipline of Operations Research, and seeks to solve the challenge framed so – what is the optimal solution that minimizes resources (inputs) for maximum outputs (value creation) – fits as a potential framework that can theoretically apply from the earliest stages of implementing development strategy, even before inception of any related projects, including early stage research and feasibility studies. After all, the function of Linear Programming is optimization.

Note: Here I will only consider the theoretical aspects from the point of view of programme design research and development, and not the mathematics. That will have to wait until I have gathered enough data for validation.

Design Research for Programme Design Purposes

In this context, the primary function of such an exploratory project is to identify the opportunity spaces for interventions that would together form an integrated programme designed to effect some sort of positive change in the ecosystem within which it would be implemented, and offer a wider (more inclusive) range of cross-cutting benefits.

In the language of product development, we are attempting to build a working prototype. We cannot build and test first prototypes to see if they work, directly, because our room for failure is much less spacious for experimenting with aid related programming, ethically speaking. This is not a laboratory environment but the real world with enough challenges and adversity already existent.

Programmes are not the same as consumer products, nor are they meant to be designed and tested in isolation before being launched for pilot testing in the market. Their very nature is such that innocent people are involved from the start, often with a history of skepticism regarding any number of well meant donor funded projects aimed at improving their lives. This changes the stringency of the early stage requirements for design planning.

At the same time, the nature of the task is such that no first prototype can be expected to be the final design. So, from the very beginning, what we must do is set the objective of the outcome as a Minimal Working Prototype (MWP) that meets all the criteria for an optimal solution, and NOT a Minimal Viable Product (which may or may not work wholly as intended until tested in the field for iteration.)

That is, the first implementation of the iterative programme design must fall within the bounds of the solution space – that which is represented by the shaded area in the diagram above.

The Optimal Solution is the Iterative Programme Design

Thus, what we must be able to do at the end of the discovery phase of research necessary to write the design brief, is tightly constrain the boundary conditions for the solution space within which the MWP can then be iterated. This minimizes the risk of utter failure, and maximizes the chances of discovering the best fit, and all of this within the definitions of Value for Money and it’s guidelines.

There are numerous ways to set the goals for optimization – one can minimize resources and maximize constraints, or minimize risk and maximize return on resources invested. These will guide our testing of this framework in field conditions to validate the robustness of this theoretical approach.

In this way, we can constrain our efforts to discover best fit within predefined limits of tolerance, while retaining the flexibility to adapt to changing real world circumstances and progressive transformation of operating conditions.

Best fit, then, becomes less a matter of experimentation without boundary conditions and more a discovery of which of the many right answers – if we take the entire shaded area as containing “right answers” to the problem at hand – help us meet the goals of intervention in the complex adaptive system in an optimal manner.

The point to note from this conceptual framework is that there is never any ONE right answer, so much as the answer will be that which we discover to the question “What is needed right now for us to meet our goals, given these changes since we last looked at the system?”

It is this aspect that loads the burden of a successful outcome on the front end of the entire research and development process, given that framing the problem correctly at the outset is what drives the research planning and steers the discovery process in the direction of relevant criteria, conditions, constraints, and user needs that will not only form the bounds of our solution space, but also act as waymarkers for monitoring change and evaluating its progression.

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.

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

After 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.