Bargaining for bananas in rural Rwandan market could not have been completed without the use of the mobile phone’s calculator function. While a combination of broken Swahili, Kinyarwanda and English was used by the customer and the shopkeeper, the transaction’s clarity was increased by piling goods on the table and then using the clear numerals offered by the phone.
At first, I did not know what these two young men were upto during an enforced halt on our way to Kisii at the end of February this year. The road had been blocked by the local community demonstrating about land rights just a few kilometres outside of Narok, in the heart of Maasailand and the driver pulled the car back and to the side to park out of reach of any rocks if they were going to be thrown. Soon enough the traffic was backed up and a little community sprung up during the few hours we were there, waiting for the road to open up. While waiting I noticed these two in action.
First, one took the stage, expounding at length on what was going on and emphatically giving his opinion on what needed to be done by the government and the leaders of the community, while the other captured this on video (a smartphone obviously). Then they would review the video snippet,
These few minutes, gratefully captured on camera, exemplify to me what is the current day situation in rural Kenya when it comes to everything we write and talk about the way smartphones and social media are enabling an information revolution in Sub Saharan Africa. Their response to being confronted with an unexpected political demonstration was no different from anywhere in the world today – whip out your smartphone and capture it on video.
Their intent however was one step ahead of simply uploading the action on YouTube – by adding their own commentary on the situation and capturing the ‘common man’s’ opinion, they quickly turned this opportunity into an exemplar of citizen journalism, to be shared freely on social networks like Facebook.
The World Bank’s Wolfgang Fengler has recently written a blogpost titled “Learning from the Kenyan revolution” referencing the penetration and use of not only ICT devices but also mobile money services. He makes optimistic predictions for the futures, viz.,
What are the lessons of Kenya’s ICT revolution for the broader economy of Kenya and for other countries? First, this revolution is not just for the young tech-savvy programmers that huddle at iHub. ICT is no longer a niche sector of the economy. It has become mainstream and affects virtually every actor and every sector of the economy. It’s misleading to talk about a so-called “new economy” because it has in fact changed the way the old economy is operating. Over the next years, the biggest innovations will probably come from the incubation of technology in “traditional” sectors. The financial sector is already in the midst of this transformation, with mobile money as the most visible sign.
This is truly a revolution on many levels observable and prevalent across socio economic strata – those who may choose set a different bar – without contextual understanding of the local landscape – are welcome to miss the boat when its left the harbour.
From small market towns in rice growing districts (where we’re told 3-5 mobile broadband modems are sold each month) to urban metro malls piloting pay as you surf (by mobile money) wifi hotspots in cafes and restaurants, the internet landscape (the ICT or even mobile landscape even) is rapidly evolving so much so that different parts of the country display a fragmented distribution on the market maturity curve.
The two urban metros of Nairobi and Mombasa have plateaued (wrt to cyber cafes as the key access point thus leading indicator given their role as gatekeepers to access) and are showing signs of decline even as the number of personal computing devices imported into the country show 100% growth year on year. Increasing policy driven digitization of government and educational services – from tax return pin numbers to examination registration or even booking bus tickets – mean that the smaller population centers are now steeply on the growth curve, with signs in certain provinces that this diffusion will only spread further outward.
Couple this with more and more affordable and ubiquitious smartphones and data enabled handsets, those who otherwise wouldn’t require either computers or the internet for their work, are now going online due to the pull of social networks like Facebook. For an extremely socially connected and communicative society, this fact alone is driving data sales for mobile operators as the Facebook generation goes online – Kenya has an 85% literacy rate and the median population is in their mid teens.
Is it changing the way people do business or is it a revolution quite unlike one that could have emerged from Silicon Valley or Bangalore? I do believe so – as the critical mass of mPesa users as well as dropping costs level the playing field, enterprise level solutions traditionally the purview of large corps like an Oracle or a SAP such as payroll management and real time inventory control, are migrating – cheaply and effectively – on to the mobile platform, able to reach the hitherto unconnected or unbanked on irregular income streams such as manual laborers or the tiniest village kiosk.
It is this shift where the mobile platfom innovation will truly revolutionize – it has yet to occur in a more “tech” oriented India, but it won’t be long before these cost effective and technologically relevant solutions to securely pay farm labour by phone without trucking cash into fields yet being able to manage wages for 5000 or more migrate to the Indian environment. The solutions make too much sense not to consider them, perhaps the next leapfrogging will be over the desktop/mainframe divide.
The caveat however is that we should not assume that people will go online the same way we do in our broadband nations with unlimited bandwidth and years of contextual knowledge not to mention the plethora of relevant content, nor should we assume that the observed ICT revolution would necessarily follow any previously mapped trajectory of other regions or technology clusters. The environment is in extreme flux yet it is this plasticity that also makes it an extremely inviting opportunity for innovation in services , with all the potential for positive change that yet-to-be crystallized environments imply.
We’ve finally reached the point in our work for Village Telco where there’s been enough time for some reflection after the intense weeks of travel and observations across Kenya. I can cluster our learning into three broad areas: our approach, methodology and team work; Kenya’s people and the informal economy; and finally, the role of the mobile phone and the internet across the country.
Top of mind, what I would really like to do is take a deeper look at all the factors Why a social networking site like Facebook has become so popular – is it like Mxit, a far more affordable and convenient way to stay in touch with extended social networks or are there reasons beyond the obvious? Given the variance in socio economic backgrounds and education among all those who were active on this platform, I wonder whether there are learnings of value for the larger goals of what ICT can do to enable social and economic development. Instinctively I feel its not Facebook per se that is the critical factor, like a Mxit in South Africa or an Orkut in Brazil, it simply happened to be there. However, given my approach to increasing understanding of a particular demographic or validating a hypothesis, my first principle is to question my own instinct and subsequent assumptions.
Mobile Phones and the Internet
Our assumptions and inferences from the surplus of information and data available on mobile phone use in Kenya, for both online use as well as regular use, were seriously jolted. You could say we had the veil torn from our eyes. A future post that has been percolating is one that turns my entire thinking about the Mobile and the BoP upside down, from the point of view of “the mobile as a platform for social and economic development” for the individual.
A big realization was that it was technically impossible for people to go online – if it wasn’t just the initial peek at Google or Yahoo or what have you – from their mobile device without visiting a cyber cafe (or using a computer) first. If you are a first time internet user and plan to use the mobile as your primary device to check your email and update your status in Facebook, you are unable – at this moment in time – to create your email account, and subsequently your Facebook page, without the use of the personal computer.
The second was that very few of these new internet users were cognizant of the way mobile operators structure the cost of browsing and data bundles. Safaricom, the country’s largest operator, had at least 3 different prices that I’d seen on their billboards and posters – Ksh 4 per minute if you simply went online, Ksh 2 per minute if you sent an sms for data conversion and finally, purchasing a data bundle or browsing package (unlimited by the day or bundle) which brought the cost down further. Thus many reverted back to browsing at cyber cafes where at least one knew what one’s cost would be or could estimate it in advance. Consumer education will be more critical for the uptake of the mobile internet since it is currently not to the benefit of either the operators or the cyber cafes to inform users about their cheaper options.
Kenya is different
We sensed this, we discussed it with Steve Song and we also heard it from others with years of experience of doing business in Sub Sahara. Kenya, as a representative sample of Sub Sahara or even East Africa, is a very different kettle of fish, all in a good way. It wasn’t just luck that most of the cyber cafe owners we met around the country were enterprising, articulate and opportunistic. Neither was it chance that very rarely was I unable to communicate – at least the basics – in English, no matter where we went.
Internet costs, mobile data and voice costs are significantly lower than in most countries and this factor, taken together with the maturity of the urban cyber cafe market and penetration of computing devices – laptops and desktops – meant that this was a very sophisticated market regionally. One cannot generalize our findings for other countries, in fact one would hesitate to do so. Rather, as we discussed with Steve, we’ll take Kenya as a leading indicator of shifts to come in the near future for the rest of the region. For example, VoIP as a service has atrophied into two or three neighbourhoods ever since international calling rates have stabilized at around Ksh 3 a minute (USD 3 cents or thereabouts) on the other hand, wifi is slowly demonstrating its future ubiquity.
However, some other factors would also play a part in this – literacy is at 85% here; what kind of difference does that make when it comes to uptake and popularity of text based communication mechanisms such Facebook, email and of course, the SMS. Education makes a difference, since most of the time, even when passing by some of the technically most impoverished parts of the country, I kept feeling that it was in far better shape relative to similar locales in India. This is all good and bodes well for the future of the nation and the region – if I had to launch a wholly new product for the Sub Saharan market, I’d select Kenya for an environment with the lowest barriers to the adoption of innovation. The BoP market is sophisticated and mature while still demonstrating the core values and buyer behaviour seen everywhere else I’ve been.
We now have an innate sense of the Kenyan landscape when it comes to ICT: the technology, the internet and the phone. A gut feel for the where and how and why the diffusion is taking place, outward from the urban metro that is Nairobi and an instinct for the pulse of the country’s progress. The critical role of the cyber cafe was made apparent by the focus of this project and our philosophy and methodology in approaching this problem to be solved – answering Steve’s questions – has been validated and refined. For example, we found that the figure for our estimate for proportional penetration of internet between two regions differed from the Kenya ICT Board’s Access Gap Analysis data only by 0.2
We learnt that no two projects will ever be alike and the only certainty is uncertainty. There are no prepackaged ready made solutions or processes for the challenges we’ll face in our chosen line of work, however we’re on the right path for discovering the ways and means to use the tools available at our disposal in order to best address them.
Today, we’re confident enough to put it in writing that if you’re seeking answers to the unknown, in untapped or overlooked markets and when none of the regular methods and frameworks for addressing your marketing, strategy or design needs seem to work – give us a call or drop us a line. I believe we can help you.
NextBillion.net’s Rob Katz recently posted an Indian news snippet based on research that led the writer to argue that telco’s should focus on their most profitable customers, those at the top of the pyramid. The BoP (Bottom of the Pyramid), as the numbers demonstrate, are simply not worth it. Following some commentary, Rob added his thoughts on why telco’s should overlook these facts and in fact, find ways to emphasize their services for those at the bottom of the social and economic pyramid.
Now, its my turn to add my 5 rupees worth to this debate, luckily, at this point of time, I’m not on a project for any telco as used to be the case in 2008. First, lets put the visual of the data results here, then I’ll proceed with thoughts that have simmered and have been bitten back for quite some time now.* I’ve also had the pleasurable interlude of chatting about mobile phones with numerous people in rural and urban India, particularly those who would be considered BoP, returning just a couple of weeks ago.
What inspired this ramble were Rob’s closing lines,
Imho, the basic issue is not even a matter of analysis, simple or not, but instead, that of perspective.
The analysis itself is simple, follow the rules of the book, look at the colourful numbers above and simply apply the fundamental principle of Pareto – focus on the 9% that bring you 45% of your profits. No brainer, right? Then why are we even having this argument? Forget serving the next billion, or 4 billion or even every human being on this planet who isn’t profitable, including your three year old.
But telcos everywhere still persevere. The roads to Ranthambhore are papered over with bright red Vodafone signage. Ironically there’s no coverage outside the district capital and only BSNL or Airtel seem to work depending on the village. So why are the telcos all looking at this market? And not just telcos, why are Google and Microsoft in addition to Vodafone and Nokia, all turning to look at the BoP, unprofitable though it maybe?
Its because somebody somewhere, in fact, a lot of somebodies in a lot of somewheres, all have that niggly little feeling in their gut that if only they could crack the code, there’s gold in them thar hills. Or at least, profits. Lets start with some challenges telcos face when addressing the problem of the “unprofitable” BoP subscriber:
Internal mindset – business school programming
The Institute of Design taught me one of the most powerful lessons in design – aka problem solving – if you can frame the problem correctly, then half the solution is right there. The uppermost problem on every telco employee’s agenda is that of dropping ARPU rates. As in, “OMG, we’re adding the population of Sweden every month to our mobile subscriber base but our Average Revenue Per User continues to drop.” Duh, yeah.
Of course ARPU will drop. You’re expanding your subscriber base lower and lower down the income stream who will be, most logically, spending less and less on your services. Growth, in this case, is simply adding to the denominator in your own mathematical formula. Perhaps the metric of success when expanding into BoP markets cannot be the same as that held for your ‘richer’ markets?
The BoP are a funny thing. In one sense, they are a numbers game – there’s billions of them – but in another, they aren’t. They will NOT spend in the same way that your wealthier, professionally employed, high tech gadgeteering, mobile data surfing geeky segments are likely to do. Case in point, those 9% up there who are oh so profitable to their respective service providers.
However, the BoP will spend – but only, and this is crucial, only if they perceive the value of what they are spending for, more so when it starts to go beyond the essentials (in the case of the mobile, that’s basic maintenance of their SIM card validity and enough for an emergency call or two). Services and applications for the BoP need to demonstrate simply and clearly the answer to the question “Why should I spend good money on this?”
But before we go into what the BoP needs and why and how they make the decision to spend their hard earned cash, lets take a look at why the telcos haven’t been able to crack this problem with that holy grail, the “BoP killer app” ? (except mPesa, so perhaps that’s a lesson there in itself, eh?)
Big companies like telcos are staffed with MBAs and every decision to spend money on developing a new product (service, application, you name it) must be justified up chains of command and control with shiny numbers, excel spreadsheets, estimates of target audience, demographics and one of the biggest killers for the development of valid BoP services – the concept of “disposable” income. Those at the BoP will find the money for some expense or purchase if its deemed necessary to their wellbeing, survival or future but no penny they have is disposable.
And if you begin the design process by starting with the segment of the BoP who have the disposable income for your product rather than starting with a clear value proposition and an understanding of your target market’s mindset, what are the chances you are going to end up with a dud product that nobody wants to buy?
Pareto’s killer principle
Pareto’s principle applies globally as well and for those telcos whose footprints span the globe, its not just the top and bottom of the same pyramid, but the difference between what’s being spent by their wealthier subscribers in hard currency zones versus their returns from the developing world. Because of those numbers, in that chart, the ones that clearly demonstrate its not worth the effort to invest in developing relevant, affordable or appropriate services for the BoP on the mobile platform, you know, the stuff they’d actually want to shell out good money for, the BoP usually end up with crap that’s irrelevant and useless. For the logic goes, lets develop something for our subscribers in X, Y, or Z OECD nation and simply adapt it for our emerging markets, yeah?
So users in Berlin get scrutinized for ideas that will conceivably make pots of money in Calcutta and CapeTown. Forget Raawal village or Soweto or the outskirts of Kisumu. Naturally, one assumes, that since a phone is a phone is a phone, what Herr Schmidt likes to download and spend money on is the same as Goverdhan Meena. They just speak a different language and perhaps, Mr Meena earns a lot less. Sigh.
Otoh, if you were to actually look at the culture and context of your emerging markets, or in the case of India, the subject of the original post, the difference in needs and spending habits of the surfing urban 9% and the aspiring rural farmer’s son or migrant worker and then developed some services and solutions that made sense to him, do you think he might not want to buy it?
The irony is that this is not unknown or rare knowledge – that there’s a gulf between the urban and rural, the ToP and the BoP or the West and the East – but it seems to me that when it boils down to it, the telco chappies still seem to think that one size will not only fit all but there’s no cognitive dissonance in the exercise either. Top down concept design and development will only go so far – that is, to the limits of those who are part of mainstream consumer culture, who seek entertainment and iPhones (well described as a phone for those who wish to consume rather than produce). LirneAsia’s research on mobile usage at the BoP had led Dr Rohan Samarajiva to proclaim that for the BoP it would be models based on production – save them time or make them money – that would work, not models based on consumption – no matter how attractive the game, your average member of the BoP would think twice about downloading entertainment.
In fact, let me digress into a story here, when I was talking to Sanjay (a factory worker) about downloading stuff onto mobiles he said that he preferred “nokia dot com” (as he called it)- he said that when wanted to download something – a ringtone, a wallpaper, whatever – he preferred Nokia because before download they told you how much it would cost to do it and then you could take the decision to spend but Airtel and Hutch et al simply download and only later you found out you’d spent Rs 20 on something you didn’t think was worth it. Case in point, your customer feels screwed. Brand loyalty is rarely built by advertising alone and the BoP are far more cynical than your average mainstream consumer. He doesn’t have that spare Rs 20 for experimenting, every penny counts.
Finally, the bottomline
That’s the biggest problem innit? The bottomline aka profits? Although I must admit that because this entire rant was triggered by an Indian analysis, I would like to take this moment to point out that there’s still little or no comprehension in India of the need to do something for the BoP, that business can still be run on the metrics of profitability alone and the next billion will either somehow manage or its the government’s job to provide.Its an attitude problem, not an analytical one.
I came back from India thinking that innovative new services on the mobile platform would not emerge or bubble up indigenously, but ironically were far more likely to diffuse from sub Saharan Africa. There’s simply no focus on the needs of the BoP there, although data now begins to show that states that have significant mobile penetration are doing far better than states where mobiles have yet to reach the lower income strata. Not to mention all the studies done on the impact of mobile phones on the GDP of developing nations. No, your average Indian techie is too busy chasing the iPhone crowd to even imagine that his driver’s mother back home in the village might want a service on her mobile. Let them eat cake.
Global multinationals are certainly focusing on the BoP markets, as Rob has pointed out in his second post, but they too stumble along using outdated methods and assumptions when attempting to design something for this new and critically, unknown, market. If Nokia can launch English language lessons in China – just think of the market for that – why do the rest of the device manufacturers cling tightly to the idea that they’re just device manufacturers? Its ironic to think that the kind of brand power Nokia has among the BoP will allow them to someday overtake the telcos in “ARPU”.
And if mPesa can capture the attention of the world, then what’s stopping the Indians telcos? Will it take their ad agency to inspire them to do something or will continue to rely on outdated lessons of how to address a new market from business school teachings or big name management consultancies who have yet to catch up with today’s global economic reality?
What will happen though if the telcos continue to think this way is that they’ll be simply overtaken by the hackers themselves. The bottom line is about enhancing people’s lives now not profitability alone.No excel spreadsheet will show you that nor Pareto’s principle apply, to be honest, we’re talking about too many billion people who cannot be ignored for emphasis to continue to the 20% who consume the most resources. Refresh your assumptions, open your eyes, look at the big picture. The future is staring right at you, its all about give and take. Help them and they’ll help you. The BoP are people too.
Update May 19th 2010: Has anything changed in the past 16 months? And if so, what and how?