Archive for the ‘Value’ Category

On Seeing

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Microtrader’s market stall, Karatina market, Kenya (Photo: Niti Bhan 2013)

Michael Bierut writes a paean to the power of observation in his introduction to the new print run of George Nelson’s How to See. His concluding words resonated deeply:

The unifying theme behind all of Nelson’s lectures – and, indeed, behind his life’s work – was a simple, and optimistic one: by seeing more clearly, one could make better, more thoughtful, and ultimately more humane choices about our manmade environment, that world “God never made.”

Not only did it make me want to run right out, on a snowy Sunday night, and buy the book – I’ve made a note to myself – but it made me reflect on my own work and it’s underlying philosophy of Understanding and Sensemaking before attempting to design for complexity and diversity.

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How value flows in informal trade networks, Busia, Kenya (Photo: Niti Bhan 2016)

When I read Michael’s words describing Nelson’s methods for photography and documentation, I recognized my own. And more importantly, I recognized George Nelson’s contribution to the discipline of industrial design, even down to his undeniable influence on curriculum along with Charles Eames.

My first exposure (yes, you saw what I did here) was in 1989 at the Eames’ inspired National Institute of Design where the introduction to photography as a design tool included developing your own black and white snaps in the darkroom. It changed the way I thought about the function and utility of a camera – from vacation accessory to appendage and tool. Three decades later, my preferred choice is a small point and shoot that comfortably and inconspicuously fits into the palm of my hand.

Niti with her camera, Mamelodi Township, South Africa (Photo: Dave Tait 2008)

I learnt to look for patterns in the photographs, at night, after the end of each day out, when the daily routine of downloading, sorting, filing, and transferring a copy to the external drive took place.

The first two or three days are often just noise, the stimulation of the overburdened senses in the sights and sounds of the bazaars and the landscape and the people. But soon, if you know you’re looking for it, the chaos starts to coalesce into signals that begin to weakly emerge and this then helps refine the focus of the discoveries and the directions for further exploration.

Eastern Cape, South Africa (Photo: Niti Bhan 2008)

And, sometimes, if you’re very, very lucky, that series of snaps taken from a speeding car, can turn up a thing of beauty. Or a mundane visit to the wet market provides a composition of harmonious hues and textures.

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Kibera Market, Nairobi, Kenya (Photo: Niti Bhan 2011)

I’ve never been able to do it as deliberately and consistently as professional photographers, but it doesn’t stop me from taking my camera out whenever something catches my eye.

As global firms (MNC) pull back from emerging markets, what does this mean for Africa?

tumblr_nwsbz0ytDw1qghc1jo1_500Last week’s issue of The Economist drilled down deeper to cover the retreat of globalization – at least in the most visible form, that of the multinational brands dotting cityscapes around the world. The retreat of the global company, they trumpet, the end of Theodore Levitt’s vision.

Credit Suisse takes a concise yet comprehensive look at these weak signals in their well-written report that frames the situation as a transitional tug of war between globalization and multipolarity – an inflection point, rather than a retreat. They make it sound like missing the turn at an intersection and having to come back to the traffic lights to figure out which way to go.

Duncan Green of Oxfam captured the essence well:

But the deeper explanation is that both the advantages of scale and those of arbitrage have worn away. Global firms have big overheads; complex supply chains tie up inventory; sprawling organisations are hard to run. Some arbitrage opportunities have been exhausted; wages have risen in China; and most firms have massaged their tax bills as low as they can go. The free flow of information means that competitors can catch up with leads in technology and know-how more easily than they used to. As a result firms with a domestic focus are winning market share.

In the “headquarters countries”, the mood changed after the financial crisis. Multinational firms started to be seen as agents of inequality. They created jobs abroad, but not at home. The profits from their hoards of intellectual property were pocketed by a wealthy shareholder elite. Political willingness to help multinationals duly lapsed.

Of all those involved in the spread of global businesses, the “host countries” that receive investment by multinationals remain the most enthusiastic.

The first thing to note is that the global MNCs being considered by The Economist are primarily the legacy ones  – fast food chains like McDonalds and KFC (Yum Brands) – whose shiny logos used to represent the liberalization of the closed markets of India and China.

Even at powerhouses such as Unilever, General Electric (GE), PepsiCo and Procter & Gamble, foreign profits are down by a quarter or more from their peak.

or the few examples of emerging market brands that have gone global such as China’s Lenovo which purchased IBM’s Thinkpad and India’s Airtel which bought into the African market.

What’s being touted as their competition are regional brands, who aren’t as stretch out globally in terms of their supply chains, and less vulnerable to currency volatility. Further, the majority of these global brands are heavily dependent on their B2C marketing and sales – the question of whether they ever managed to understand their new markets is a topic for another post.

And so, we ask, what will this mean for the emerging economies of Africa, who are only now seeing the first fruits of FDI? Who will come and develop their consumer markets?

India and China apparently. And strategically – through unbranded affordable commodities and the acquisition of successful regional consumer brands – rather than the legacy MNC approach influenced by Levitt. Even Japan recognizes this, as they seek to piggyback on the Indian experience.The economics of scale that propelled the first rounds of growth for the manufacturers of washing machines and the automobiles never did make sense infrastructurally for the majority of the African consumer markets.

Instead, the patterns pointed out by The Economist and Credit Suisse imply that opportunities will lie among regional stars – Equity Bank of Kenya, for instance, whose regional footprint is surely but steadily creeping outwards across the East African Community and trading partners – or, the telcom brands such as Tigo (Millicom) who innovate for each of their local markets.

The jobs and exports that can be attributed to multinationals are already a diminishing part of the story. In 2000 every billion dollars of the stock of worldwide foreign investment represented 7,000 jobs and $600m of annual exports. Today $1bn supports 3,000 jobs and $300m of exports.

Godrej, for instance would be considered a regional Indian giant rather than a multinational in the conventional sense of a Unilever or P&G.

Where [MNCs] get constrained is, they are driven by lot of processes that are global. For a smaller organisation like us, we are completely empowered; decision-making is quick and we can initiate changes very fast. We are more agile and have an advantage over them.

Yet their expansion outside India shows a “pick and choose” strategy of markets they’re comfortable entering.

The group’s acquisition strategy hinges on identifying unlisted companies built by entrepreneurs looking for capital, picking up stakes and working with them to scale up their businesses.

At least two homegrown Kenyan FMCG brands – skincare by a global giant and cosmetics by private equity – have been acquired. As have snack foods, spices, dairy products, and other products that cater to local tastes. The best known being Fan Milk of West Africa. Private equity such as Abraaj make no bones about going after consumer driven opportunities.

Given these choices, sustainable African businesses who understand their consumer markets have an opportunity to establish their brands and grow – with the financial help that’s strategically becoming available.While Chinese imports make the market highly competitive and price conscious, fish and tyres are substitutable goods in a way skincare and cosmetics are not.

African consumer companies – formal, informal, or semi-almost there-formal – need to hustle right now.

The retreat of the MNCs offers a chance to exhale, and expand, and grow, but the advent of the East implies waking up to the need for serious strategic thinking about domestic comparative and competitive advantage – one of which is incomparable knowledge of local consumers, culture, and needs, and critically, experience of their vast informal sectors and cash intensive economies.

Does the human-centered design industry believe in it’s own process?

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Generic diagram found online

Listening to users, and incorporating their feedback is considered the key differentiator for the practice of human-centered design. Yet, one wonders, if the design industry has understood that this philosophy must necessarily include the feedback from their clients as well. That is, while we are all aware of the navel gazing tendencies displayed by design thinkers and writers, we very rarely come across any pragmatic criticism of the industry itself, and it’s approach and processes, by those purchasing their services.

Yesterday, during my reading on ‘Doing Development Differently’,  I came across an incisive critique of what can only be called Big Design, by Geoff Mulgan, the Chief Executive of Nesta – the UK’s innovation foundation. His insights are worth pondering.

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Source: Ben Ramalingam http://www.nesta.org.uk/blog/development-innovation-taking-high-road

One could almost interpret this as saying that human centered designers are unable to incorporate user feedback.

As Mulgan himself says on page 5:

I’ve several times sat in meetings with designers and design promoters, alongside policymakers, where the same pattern has repeated. The policymakers grudgingly accepted that they might have quite a bit to learn from the designers; but the designers appeared baffled when it was suggested that they might have something to learn from the policymakers, or from the many other organisations and fields with claims to insight into service design: social entrepreneurs, professions, consultancies, IT, policymakers. There are plenty of exceptions to this rule: but overblown claims that design methods are uniquely placed to tackle complex, holistic problems has not always helped to inspire a culture of collaboration and mutual learning.

When an overweening sense of one’s place on the team overrides ‘deep craft’, what are the future implications for the designer’s role in shaping their own environment?

And, what are the ramifications for the entire design industry, when Big Design’s Big PR hampers progress more than it helps?

Time to reach consensus on the #informaleconomy debate

As yesterday’s post showed, the unforeseen outcome of India’s demonetization initiative on the rural cash economy arose due to the lack of disaggregation of all that tends to get lumped together under the umbrella label “informal”. Segmentation would lead to more impactful design of policy and programmes.

WIEGO has an excellent review of the academic debates on the informal economy, covering the competing schools of thought. There is the Shadow Economy with its tax evasion and under reporting vs the livelihoods of the poor struggling to make a living in adverse conditions.

From WIEGO:

In 2009, Ravi Kanbur, Professor of Economics at Cornell University, posited a conceptual framework for distinguishing between four types of economic responses to regulation, as follows:

A. Stay within the ambit of the regulation and comply.
B. Stay within the ambit of the regulation but not comply.
C. Adjust activity to move out of the ambit of the regulation.
D. Outside the ambit of the regulation in the first place, so no need to adjust.

Under the Kanbur framework, category A is “formal.” The rest of the categories are “informal,” with B being the category that is most clearly “illegal.” (Kanbur 2009). […] Kanbur argues that using a single label “informal” for B, C, and D obscures more than it reveals – as these are distinct categories with specific economic features in relation to the regulation under consideration.

While acknowledging that it is useful to have aggregate broad numbers on the size and general characteristics of the informal economy, Kanbur concludes that disaggregation provides for better policy analysis.

So, why do we continue to wave our hands over the whole thing and conflate the legal with the illegal?

These distinctions are all well and good to debate in the cozy conditions of a seminar room without needing to come to any consensus, but as the human and economic cost of demonetization in rural India becomes clear, particularly the impact on the planting season, it puts a spotlight on the shortcomings of the way the rural and cash economies are currently dealt with. A pragmatic conclusion is urgently required.

My literature review on the past 20 years of research on the informal trade sector in Eastern Africa showed that this lack of distinction between what was shadow (B) and what was merely below the radar of the regulations (C &D per Kanbur’s distinctions above) gave rise to the criminalization of even the smallest livelihood activities of the local tomato seller who might cross a border to get a better price for her wares.

This in turn led to their harassment – particularly financial and sexual – by the authorities as there were no counteractive regulations in place that recognized fulltime crossborder trade as a licit occupation or profession.

What will it take for this to change?

India’s current experiences provide ample evidence of the dangers of leaving this untouched.

Unforeseen outcomes of India’s demonetization shine light on the value of our design philosophy

Informal Economy, Market Analysis and SegmentationLatest news on India’s demonetization informs us how the rural economy is bearing the brunt of this initiative.

The action was intended to target wealthy tax evaders and end India’s “shadow economy”, but it has also exposed the dependency of poor farmers and small businesses on informal credit systems in a country where half the population has no access to formal banking.

The details shed light on the consequences of implementing interventions without a holistic understanding of the landscape of the operating environment. In this case, it is the rural, informal cash intensive economy.

…the breakdown in the informal credit sector points to a government that has failed to grasp how the cash economy impacts ordinary Indians.

“It is this lack of understanding and not appreciating the importance of the cash economy in India on the part of the government that has landed the country in such an unwarranted situation today,” said Sunil Kumar Sinha, an economist and director of public finance at India Ratings.

This lack of understanding the dynamics of the cash economy (I don’t mind calling it the prepaid economy, in this context) and it’s role in the rural Indian value web has led to unforeseen challenges at a time when farmers are planting seeds for the next harvest, hampering the flow of farm inputs as traditional lines of credit face the obstacle of an artificial shortage of liquidity.

I want to use this clear example of systems design failure to explain my philosophy and approach to our work in the informal economies of the developing world. I’ve written often enough about what we do, now I have an opportunity to explain why we do it, and why it’s important.

Read On…

An economy of trust

_92445052_02Cash on credit is the caption given to this cartoon by the BBC. Neighbourhood groceries are offering their regular customers cash advances in addition to bread and milk.

While the media is filled with a plethora of stories of heartbreak, my own suspicion is that we’ll discover the resilience of the cash intensive informal sector lies in the relationships between people, once the hubbub has died down.

“Unlearn the past to create the future”

ckptyranny1The late Michigan University management professor, CK Prahalad, is best known for his last, and most famous publication, The fortune at the bottom of the pyramid. But to MBA students, management consultancies, corporate planners, and regular readers of the Harvard Business Review, he is also known for a long and distinguished career in management thought leadership. Identifying and recognizing the Core Competency of corporations is another one of his strategy concepts.
I bring him up because today I want to start my keynote on behalf of the Inequality and Technology opening conference by BankInter Foundation for Innovation with a point he made in a speech given at the Indian School of Business in Hyderabad back in 2009.

The tyranny of dominant logic, he called it. We are all socialized to believe, he said, that developing countries cannot be the source of innovation. And this dominant logic provides the theoretical lens by which we see the world. Developed country managers, consultants, academic researchers, all have been socialized to accept this notion.

Because of this, he said, we have never questioned the premise that innovation flows from the top down to the bottom; or, from the North down to the South; or, from the developed countries to the developing. But, as he pointed out with numerous examples in his speech, this doesn’t actually hold true. And this blinds us from seeing otherwise. We must unlearn, the past, to create the future, he told us.

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Read On…

Analysis of the mobile phone’s impact on cash flows and transactions in the informal sector

As we saw, Mrs Chimphamba needs to juggle time and money as part of her household financial management in order to ensure that expenses can be met by income. We also saw that the mobile phone was made viable and feasible by the availability of the prepaid business model that gave her full control over timing and the amount required to maintain it — how much airtime to purchase? when? how often? — all of these decisions were in her hands, within the limits of the operator’s business model. Now, we’ll take a closer look at the impact of the mobile on her domestic economy.

Readily available real time communication has helped Mrs C by speeding up the time taken for a decision on a purchase or a sale. That is, the transaction cycle has been shortened. As the speed of information exchange increases, it increases the speed of transactions — it shortens the duration of time taken to execute them from inception to completion. This, in turn, implies that more transactions can now take place in the same amount of time thereby increasing the frequency and the periodicity. When mobile money is present, one can see that as both quantity and frequency of transactions speed up, so does the cash flow. We’ll come back to this factor.

To explain using a real life example, Mrs Chimphamba does not need to sit at her homestead wondering if today someone will pass by to purchase a bottle of wine. Similarly, Mrs C’s customers do not need to go out of their way to pass by her homestead to see if the wine is distilled and ready for sale, or whether it will still take another day or two for the next batch to be ready. Further, the uncertainty of whether they’ll have cash on hand on that future day, or if they’ll return as promised are all elements that real time communication have minimized.

Now, Mrs C is able to let her regular customers know that she’s making a new batch for sale and do they want to reserve a bottle for purchase? It allows her customers to put aside cash for this purchase. She is even able to accept and execute larger orders for some future date, and even accept some cash advances if her operating environment includes the presence of a mobile money transfer system such as those more prevalent in East Africa. This in turn changes her purchasing patterns and decision making as the pattern of cash flows — timing and amount — changes. She isn’t making do anymore on an unknown and predictable sale based on sitting and waiting for someone to show up to buy her wine.

Real time communication has improved the decision making cycle for both buyer and seller in a transaction as it counteracts uncertainty and information asymmetry even while speeding up the time take for a decision.

As the quantity and frequency of transactions increase— first, in cash conducted face to face, and then later, remotely by mobile money, regardless of the size of each transaction — the change in cash flow patterns begins to smooth out the volatility (the uncertainty factor has changed completely) between incoming and outgoing, as well as the decisionmaking involved. That is, the gap between income and expense starts becoming less in terms of both timing and amount — there is the possibility of a steady stream in the pipeline. Calculus offers hints of how the curve can begin to smoothen out as frequency and periodicity of transactions begins to accelerate.

Size of transactions thus begin to matter less in that the incoming amount now does not need to be so large as to cover expenses for an unknown duration of time before the next incoming payment; nor do expenses have to be tightly controlled constantly due to the uncertainty of the duration of time before the next payment, and the types of expenses incurred during this unknown period of time.

So the boost in decision making — how long it takes to complete a transaction, how often can transactions be completed — enabled by the real time communication facilitated by the mobile phone; plus the attendant immediacy of receiving payment via the same platform is the root of the improvement in the hyperlocal economy and consumption patterns among the informal sector actors. This is why large established traders (with sufficient financial cushion) were heard to observe that both purchasing power and consumption patterns had changed in their market town (Busia, Kenya Jan 2016) in the past 10 years since first the mobile phone, and later, mPesa, were introduced into their operating environment.

Uncertainty and information asymmetry that have long characterized the fragile and volatile nature of the informal sector operating in inadequately provided environments with unreliable systems and scarce data. In the next chapter we’ll step back and take a broader look at communication, connectivity, and commerce in the informal economy starting with the description of the operating environment’s characteristics regardless of continent.

This is part of a newly launched Medium where I will write in detail on economic behaviour and its drivers in the informal economy. Much of it draws upon the original research in the field from 2008-2009 which was shared on the prepaid economy blog. I found that time had passed and increased my understanding and I wanted to explore those discoveries in writing. Much of this is the foundation for recent works on ‘Mama Biashara‘.

Professionals stand above the competition: Branding lessons from street vendors of Africa

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Zimbabwe

Farai Mushayademo’s distinctive dress sense, with a different shiny suit every day, makes him a darling of customers and helps him beat the “rising competition,” he said.

This article on the increasing competition for the burgeoning informal economy of Harare, the capital of Zimbabwe, came less than a month after we saw this smartly turned out fruit vendor plying his trade in the streets of Accra, Ghana.

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Ghana

For communicating brand quality, the Ghanaian gentleman surely deserves an award. His read to eat fruit was as smartly packaged and labelled as any consumer brand in a supermarket.

cth8lhbxyaqv0lyI’ve written before on the topic of ‘Branding the Unbranded’ – whether its the humble avocado being sold by the side of the road in upcountry Kenya, or a designer BBQ meant for the emerging middle class – but these distinctively dressed gentlemen on two opposite ends of the vast African continent come under an entirely new category of product and service innovation happening in the informal sector.

How do you set yourself apart in the unbranded informal economy in response to rising competition is a challenge. Ghanaian market women’s customer development and retention strategies in a commodity market (potatoes) were documented a decade ago, and found to rely on social skills, including non verbal ones such as eye contact and encouraging smiles. Yet, her advantage is that her potential customers are slowly walking through the market, looking for the best potatoes to purchase. She has the time to call out and attract their attention.

For these men on the streets, walking through traffic, that advantage is fleeting or nonexistent. They must grab attention *and* communicate their messaging in an instant (can they have been reading Gladwell’s blink?) – and the fruit vendor, with his spotless white gloves, and packaged fruit, clearly rises above the rest with his strategy.

The police are also, one hopes, less likely to chase a man in a three piece suit off the street. This is one pan African trend worth keeping an eye on.

Systems design and the Monster who squats between the formal and the informal

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This framing of the real challenge to development and poverty alleviation comes from Ken Wong writing on his experience in Malawi:

We can only win the war on poverty and hunger in Malawi by targeting the real enemy – and that enemy is the system of how the world tries to help. Specifically:

The system that demands foreign aid be funneled through the government or large NGOs

The system that creates a hierarchy of aid and government workers whose job security and quality of life depends not on their wanting what is good on the ground, but pleasing whoever is above them in rank

The system that discriminates against on-the-ground, local initiatives because of a lack academic credentials, English-speaking skills, and the ability to complete unwieldy applications and fulfill misguided metric targets

If we are to win the war against poverty, we need to face the truth and admit that the system has not only not worked in Malawi, it has made the situation worse.

The system itself is the barrier to progress. The System Monster, as I dubbed it, is quite a nice fellow really, rather well meaning and all that, but he doesn’t see how he’s just stuck there inbetween, unable to adapt to the context on the ground.

Here’s is a 5 minute video where I introduce the concept, from the BankInter Foundation’s Future Trends Forum on Inequality and Technology held in Madrid in early June 2016.