Posts Tagged ‘metrics’

Dynamic vs Static Metrics: Attributes for an African Measure of Competitiveness

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“No Data Available Gray Area”

For analysts everywhere, the challenge of considering each economy in its own right seems to be far too much trouble, and so they tend towards sweeping generalizations which lump all metrics under one label – “Africa”. Some find even that far too exhausting and aggregate Africa along with Europe and the Middle East.

These regional groupings might be fine for executive Vice Presidents responsible for regional sales in a globe spanning multinational but for anyone seeking to assess and evaluate the emerging opportunities sparking interest in the continent, these aggregate metrics only serve to obfuscate and confuse the issue.

Static vs Dynamic

What distinguishes the majority of the emerging African economies from the more established ones is the prevalence of informal business activities, in addition to agriculture.

informal GNP SSA 2000
As I wrote previously, from my research on the underlying rhythms of the informal, there are two forms of income – one that is static, and thus predictable, like a regular monthly salary, and one that is dynamic i.e. volatile, such as the irregular cash flows that those in the informal sector tend to rely on for their household expenses. For many households, their cash flows have a combination of both forms – a predictable static paycheck from formal employment as well as bits and bobs from informal livelihood activities.

One can extrapolate the presence of this dynamism into the larger context of the entire operating environment – when there is a significant component that is irregular and unpredictable i.e the cash flows from the informal sector, and consider this as a key attribute that distinguishes these economies.

That is, instead of seeking metrics which maybe static, could we perhaps instead seek those that convey a measure of the dynamism that’s best characterized by the hustle of the informal marketplace?

Acceleration and Growth Trends

A great example is the rate of mobile phone penetration. Here is a snippet of data extracted from the GSMA’s statistics showing just a couple of years of change in phone penetration. Can we see how fast Ethiopia’s subscriber numbers grew, almost doubling in just 2 years?

change1Here’s another chart that truly visualizes this dynamic activity

Five-Reasons-why-Africa-is-Fertile-Ground-for-Blazing-E-Commerce-Growth_Guest_Post.docx-Google-Docs.clipularAnd if this doesn’t suffice to convey the rapid pace of change happening on teh ground, then lets take a more detailed look at trends related to this mobile phone penetration activity.

SOTIR 2014 over timeThe point is that measurements that are static, or slow to change over time, aren’t conveying dynamism of the African markets nor their opportunities. With such a low base of development, static measurements lead to African nations being ranked low on indices. But when we consider the rate of change or the acceleration of growth, we see entirely different trends than if we were looking at absolute numbers alone.

I chose these measures because mobile phones are rapidly evolving into powerful and portable computing devices, while the proliferation of mobile money solutions reek of business activity, transactions, payments and the flow of cash circulating in an economy.

ecommercessaIn this table, for example, both Egypt and South Africa lead the pack in terms of size but are they the leaders in terms of opportunity for growth or ROI?

Nigeria’s e-commerce sales grew 400% in the same time period as it took for South Africa to double and for Egypt to grow by 80%. Ghana and Ethiopia grew 300% while Kenya came in close enough. Where would you place your bets for e-commerce investment?

Connectivity and Communications

The final attribute that emerges from the patterns I’ve seen in the ‘prepaid economy’ and the informal and rural markets is that of flexibility and facetime. This isn’t the post to get into those details, which are available on demand, but the point here is to look at local and social activities, fuelled by the phone, that are hallmarks of the increasingly connected emerging consumers.

mobile phone

Source: http://www.biztechafrica.com/article/mobile-africa-2015-african-phone-use-decoded/9962/

You’ll find me on Facebook” is the de facto business card of the African informal sector and/or startup, SME, telco or bank. The ability to communicate, thus negotiate, is key to the flexibility of the informal, and the perceived intimacy of social media mimics the hyper-local, social trusted networks of transactional flow and culture. As I write these sentences, I realize that embedded within each is volumes of densely packed insights that I promise myself I’ll return to in subsequent posts and articles.

These are the trends that drive adoption of Uber in Lagos and Nairobi, and the emergence of local variations for informal services. These are also connected to increasing visibility of geek culture and tech savviness among that favourite metric of demographers – the African youth.

An African Index of Competitiveness

Biashara is teh Swahili word for business, and a better descriptor of the informal trade and business sectors, as it covers the smallest livelihood activity that every family must conduct. A Biashara Competitiveness Index that could reflect the true picture, incorporating as it would the dynamic aspect of the informal sector, one that has failed most other attempts to measure and define.

Are the metrics I’ve displayed necessarily the ones that would contribute to this index? I don’t know, at this point, but I do know that when we look at the opportunity space and overlook the changes taking place and the innovative solutions in industries like financial services, cross border transactions, e-commerce etc we’re missing out on the ground reality by relying on metrics more suited for formal and/or developed economies for comparison.

If we can find a way to convey the pace of change, the acceleration of innovation and the flux, to capture and communicate the dynamism of the operating environment, we’d be better able to assess which markets offer us the best opportunities or where future growth may lie than static indicators. I’ll continue working on this.

Related posts
Questioning Convention: Comparison Metrics for Competitive African Markets
African E-Commerce: Successfully Leapfrogging The Metrics of Fail

Questioning Convention: Comparison Metrics for Competitive African Markets

Taking the question of appropriate and relevant metrics by which to assess competitiveness (rather, attractiveness) of the emerging African consumer markets further, I decided to dig up some analytical infographics to compare and contrast their approaches.

Urbanization is a current favourite, and here are two similar looking visuals from two different perspectives. The first is Knight Frank’s report on real estate opportunities on the continent, while the second is from PwC’s African section of the WEF Global Competitiveness report.

urban growth knightfrank

Knight Frank 2015

urbanization (2)

PwC 2015

Leaving aside the question of whether Dar es Salaam will show greater than or less than 120% growth in the next 15 years, here’s a clear indication of how choice of metrics impact outcomes. Granted, PwC selected countries on which to focus, thus the cities they list differ from Knight Frank’s, and each report has a different emphasis. Otoh, should there be a difference of ~ 10% in growth estimates for Nairobi, for instance, or Ibadan? No wonder these reports lead many to decry the quality of statistics and data from Africa.

Anyway, the point isn’t to debate whose method was better or if Dar will be the fastest growing capital on the continent or not. Until the dust settles down in the current scramble for African reportage, its best to take multiple sources of data into consideration and triangulate on the most reasonable estimate.

Questioning Convention and Convenience

The point is to ask if the conventional way we approach assessing the size and value of a market opportunity might itself need to be questioned when it comes to the African market?

For decades, South Africa was the closest thing to a developed economy south of the Sahara and until last year, the largest and strongest of all. This led to it becoming the de facto frame of reference through which to evaluate the others. PwC’s report shows this heritage in these analytical charts which compare regional (and continental) economic powerhouses of Nigeria and Kenya against South Africa.

NG pwc

kenya pwcIn today’s world, you’re highly likely to be looking at Nigeria in West Africa and Kenya in East, if you’re looking at Africa at all. What you’d want is a means to compare the two, or more, rather than compare each against a third country whose operating environment you may not be familiar with.

PwC countries

This choice of metric – the lens by which they assess competitiveness – seems to make sense at first glance. But is it helpful in any way, shape or form to any organization without experience of the South African context by which to judge the relative rankings of the others?  South Africa’s historical economic development lends itself to favourable rankings on the conventional metrics used for a globe spanning index while much of the others fall behind in contrast.

Yet they are distinguishing themselves in unique ways, contradicting what the metrics seem to imply – we saw the same challenge, in different form, with the E-commerce readiness index proposed by UNCTAD. South Africa’s current economic trajectory as compared to projections for either Kenya or Nigeria (or quite a few of the others) is quite dismal and the outlook gloomy, quite unlike the healthy exuberance of these two – compare SA’s 2.1% with Kenya’s 6.2% or Nigeria’s 7.3% – like I said, I’d be wanting to compare these two against each other, and maybe Ghana or Ivory Coast or Rwanda etc .

Is it time to think about developing metrics that better reflect the complexity and potential of the African operating environment?

African E-Commerce: Successfully Leapfrogging The Metrics of Fail

Postal networks are critical elements of the e-commerce chain, a UN report said, including home postal delivery as an indicator in a new global index to measure countries’ readiness to carry out business-to-consumer (B2C) e-commerce. ~ source

By these metrics, countries on the African continent such as Nigeria rank 101st on the global index, far below South Africa at 67th place, and Cote d’Ivoire isn’t even on the readiness list.  Why should this matter?

Jumia, one of the rising giants of pan African e-commerce, just opened 6 new hubs across the Cote d’Ivoire, and happens to be headquartered in Nigeria. On the other hand, South Africa has been struggling to get its e-commerce industry off the ground to meet its full potential.

While the reports such as these may  indeed be organized collections of tastefully analyzed data and well presented charts and graphs, are they able to offer any meaningful insight? This report presents The UNCTAD B2C E-commerce Index as a means for countries to assess their readiness for e-commerce and identify the areas that need further development and investment.

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Konga Warehouse, Lagos, Nigeria

Yet, on the ground, the “least ready” countries seem to be leaping forward, building brands and developing ecosystems for the emergence of supporting services, employment opportunities and even, niche platforms.  How does all the hard work that may have gone into the creation of such reports help them?

Metrics – the attributes by which to rank or measure – may not always be universally appropriate, nor will they always represent the real world operating environment. As African economies emerge onto the global platform – both real and virtual – they may require new ways to measure opportunity and success.

Metrics that can realistically reflect their unconventional characteristics of cutting edge communications commingled with undeveloped infrastructure. Else the growth opportunities such as those in Cote d’Ivoire, which isn’t even listed in the UNCTAD B2C E-commerce Index may pass under the nose of international players.

Yes, Africa is starting from a very low base, but early investors like Rocket Internet’s Jumia know that its only here that one can show results like 900% growth in sales in as many months.

 

More or Less: the flexibility of the informal

One of the things that stood out for me during the recent household consumer behaviour study was the lack of weights and measurements used to sell foodstuffs and commodities in the market. There were no weighing scales at all, unless they themselves were for sale. Instead, some form of “socially accepted” measure was used to display various quantities and their price.

Shelled green peas can be purchased by quantity displayed, and similar containers can be seen for dried fish and ground coffee as well. When asked, the shopkeeper may refer to each measure by “weight”, saying this is “half a kilo” or that is a quarter but in reality, these are simply approximations.

The dried fish has been more generously piled than the shelled peas, and this too is an interesting variance – primarily across product category rather than different shops. In a market, shopkeepers with similar products act like a cartel and offer similar quantities for similar prices (unless bargaining brings down the amount or a lagniappe is thrown in.)

Note how the ground coffee, which is slightly more expensive, is displayed in far small containers, catering to the purchasing power of the consumers frequenting the market.

This is called a ‘deben‘ and it is a standard measurement for charcoal across the entire country of Kenya. Prices naturally fluctuate between rural regions and city centers, but the container itself is ubiquitious though the actual amount piled on top might change according to the frugality of the seller.

This bagging was a surprise though, as I’d only seen it otherwise in rural Philippines (in informal markets, not supermarkets). This is not common.

These so called “social measurements” are intriguing to me. They are rough estimates and approximations and no two piles or containers will ever be alike, yet customers are quite willing for them to be priced the same. There is no pressure to measure exactly or purchase by weight of commodity, something so common in the wet markets of Asia. It seems to me there’s a link between this behaviour and the level of informality of the local market, as well as a greater willingness to accept that something might be “more or less” okay. How does this relate to local perceptions of time and money, the two key uncertainties in these challenging operating environments?

Your thoughts?

The difference between what and why

Today’s meeting threw up an interesting observation that made me think about problem areas, how they’re identified and how they may be deconstructed. In simpler terms, the difference between the “what” and the “why”.

Take two regions in a country, one far more fertile and having a better overall economy than the other. Yet both areas face the same lack or unmet need. Take a product which fills this need. Yet it’s sales in the far more economically challenged area are more than double that of the first region. Why?

The numbers provide the managers a means to identify a problem. But they are not able to provide any explanation for the discrepancy.  It was the numbers themselves that originally identified the first region as one which would be a good location to launch a product – average income was X, unmet need was felt by almost 90% of the population etc etc.

This is where putting people first, followed by supporting metrics (data) makes sense. Or rather in the case of those who attended today’s meeting, where their data now needed answers that only the people generating those numbers could answer themselves.

Data, charts, graphs, metrics and numbers all have a role to play but when they are about human beings (and not just the number of cars per minute produced in an automated factory line) I believe that role is a supporting one, not the Oscar winning star of the show.