Posts Tagged ‘strategy’

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.

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…

Japan’s Indian Strategy for the African Consumer Market

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One of the most high-profile events Kenya has hosted since independence begins this week when heads of state from across Africa and the Prime Minister of Japan Mr Shinzo Abe jet in for the Tokyo International Conference on Africa Development (TICAD). It will be the first time that Ticad has been held outside Japan and it is an honour to Kenya to have been picked to host this event. ~ Daily Nation editorial

The Nikkei Asian Review has been preparing for days with longform articles on the African consumer market, and other opportunities for Asian businesses. While Indian B2C investments have been closely analysed (and embraced), it is clear that the East Asians are eyeing each other as their closest competitors.

Africa was once dominated by Western investors, due to ties forged in colonial times. But Chinese companies have muscled their way in, and Indian, Japanese and South Korean players are arriving and thriving. This intense competition is no longer just about extracting minerals and materials. It is about tapping the next big consumer market.

Their articles are well researched and provide ample insights for businesses contemplating these new markets. Here are some highlights that caught my eye:

Vivek Karve has a clear picture of the ideal African market. The chief financial officer of India’s Marico, a maker of hair and body care products and other fast-moving consumer goods, said his company targets countries with “per capita GDP under $5,000, many mom-and-pop shops, low penetration of multinationals and political stability.”

There’s little handwringing over lack of data or missing middle class metrics. Inadequate infrastructure and informal retail in Africa is no different for your average Indian FMCG brand than their domestic market, thus the concept of the ideal market being one full of little mom and pop shops.

Marico’s strategy for achieving that includes promoting local brands familiar to African consumers, rather than pushing products that are popular in India. It uses multiple distributors to cushion itself against credit risks.

The Japanese, having already faced off with the Koreans in India’s large, diverse, and fragmented markets, are ready to take a leaf from the Indian playbook for their foray into the African market.

The gap between Asian and Western rivals is expected to narrow over time, with China making up much of the ground. About 3,000 companies from China — Africa’s largest trade partner since 2009 — are doing business in sectors such as infrastructure, resource development and telecommunications.

And even this focus on infrastructure development and large scale investments is changing. The Chinese idea is to boost purchasing power across Africa and turn the continent into a massive consumer market.

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Nissin Foods launched locally sourced sorghum noodles in Nyama Choma flavour in Kenya

The Japanese are preparing the ground to apply their own strengths in Africa. Japanese companies see Africa as a lucrative but daunting challenge — one they would rather tackle with a partner or subsidiary that is familiar with emerging markets.

This, again, is where India comes in. Toyota Motor, Honda Motor, Nissin Foods Holdings and Hitachi all export from their factories in India to Africa. The Japanese government is actively working to help companies make inroads in India as a springboard to Africa.

A couple of years ago, the Ministry of Economy, Trade and Industry compiled a list of potential Indian partner companies with strong African operations in 16 fields, including beverages, consumer goods, retail, electronic parts and auto components. Godrej Group and Marico were among them.

The lessons of the last quarter century are driving a new collaborative strategy. My rupees and yen are on Asia.

An Interdisciplinary Approach to “Best Fit” for International Development: Process and Tools

This post follows on from the previous one which introduced the concept of a ‘best fit’ approach to the ‘wicked problems’ in development. There I posited that consumer facing private enterprises looking at the African market would benefit from considering Development’s thought-leadership in this regard, given their experience in the challenging operating environments of the developing world.

I also noted that while the ‘best fit’ concept was a welcome paradigm shift for addressing complexity, the siloed thinking common to academia left far too many gaps in their approach and process.

In this post, I will begin to explore the seminal thinking (1) at the intersection of business and design  – also known as innovation planning – for methods and tools to address complexity in a holistic way, all the while keeping in mind that we need to ensure the end users (the rural poor, the people, or the beneficiaries) are at the center of the strategy (Chambers 1988).

Where is the gap?

A careful review of the working paper provides evidence that the challenge faced by international development practitioners when considering a ‘best fit’ approach to programme design is the lack of a robust methodology proven to take one from A to B. Here, we can think of point A as their original ‘best practice’ paradigm, and the attendant methods learnt through study and experience. Point B would be a validated process, with an accompanying toolkit, for applying the ‘best fit’ approach. One can confidently say a How To Handbook is missing, and the siloed thinking creates the barrier to developing one within the field.

What is the challenge?

While Ramalingam et al (2014) recognize the need for tools and processes from other disciplines more familiar with complex systems, one can gather a sense that they don’t know where to start. One cannot simply throw various methods and tools at problems, like spaghetti on the wall, to see which sticks. Even in mathematics, formulae are carefully selected based on the variables available, and the answer to be calculated. One doesn’t blindly throw data at all the available equations hoping to discover the one that fits the problem statement.

This challenge is better articulated in Matt Andrew’s blogpost which posits that the ‘best fit’ approach to policy and programme design is akin to choosing a new suit of clothes. The implication is one must try many different suits in order to discover the ‘best fit’. This is wasteful and time consuming.

What can people centred innovation planning offer?

First, the fundamental premise of human centered design firmly focuses the outcome of the processes on the context and needs of the end users. This orientation offers design a headstart in considering Robert Chambers’ emphasis on putting people first. The entire discipline is eminently suited to take on this challenge for international development, in an empathetic and holistic manner.

Second, addressing complex systems designed for human interaction is another key facet of the field of design, particularly the specializations that deal with computer human interaction of all types. This means there is a vast body of work created over decades meant to consider exactly this point.

Third, rather than wasting time and money on “trying on different suits” for ‘best fit’, there are proven approaches developed to minimize the failure rate of innovations introduced in the consumer market, and maximize the adoption rate by the end users. In particular, the areas of design thinking, design planning and design innovation have years of expertise in considering exactly this.

Finally, for development policies, and programmes to provide value for money, and sustainable, beneficial outcomes for their target audience, they must be designed such that they are viable, feasible, and desirable. This requires a holistic approach to solution development integrating elements from more than just one discipline, whether its design or development.

The philosophy of the methodology required to leap from “We must pivot to ‘best fit'” to bridging the gap of knowledge of “How to map the wicked problem and assess the context for programming” will be covered in the next article.

 

(1)

Strategy as a Wicked Problem by John Camillus (HBR 2008)
Living with Complexity by Don Norman (MIT Press 2010) Chapter 1 PDF
A Short Grandiose Theory of Design by Jay Doblin (STA Design Journal 1987)
Wicked Problems in Design Thinking by Richard Buchanan (Design Issues, 1992)

Pivoting from “best practice” to “best fit”: An interdisciplinary perspective

There has been an evolution in thinking about development practice. Buckley and Ward (2015) found a broad consensus for a shift from a ‘best-practice paradigm’ (Chambers 2011) to one of ‘best fit’ — that is, development interventions that are ‘optimally adapted’ to the socioeconomic, political and ecological context at any given moment (Ramalingam et al. 2014: 3).

While the private sector’s approach to consumer marketing and product innovation offers much to improve the success rates of government policy and development programming, there are lessons from development’s thought leadership that offer global brands a strategic advantage when considering the frontier markets on the African continent.

One of these is the pivot away from the ‘best practice paradigm’ – Robert Chambers anticipated the contemporary concept of design thinking in his lifetime’s body of work – to design for ‘best fit‘, an approach to crafting solutions to ‘wicked problems’ embraced recently by the UK’s DFID. Indeed, the UNECA’s recently released Transformative Industrial Policy for Africa explicitly mentions the need for industrial policy designed for ‘best fit’.

Corporate strategy consulting tends to rely on the ‘best practice paradigm’, and this is demonstrated in the slew of analysis and reports by large firms, and boutiques. While the African continent’s markets are still considered nascent, this approach may pass scrutiny, but as the South Africans are discovering to their cost, their own legacy of ‘best practices’ are not always fit for purpose further north of the SADC.

What can we take away from the field of development research?

Ramalingam et al’s abstract for their working paper “From best practice to best fit: understanding and navigating wicked problems in international development” starts with,

The methods of complex systems research are increasingly being used and valued by international development organisations. These approaches enable a shift away from existing tools and business processes that reinforce a focus on static, simple and linear problems. The evidence is that these methods can help development partners better navigate the complex, dynamic realities they face on a day-to-day basis.

However, scanning their references shows gaps that emerge from siloed thinking natural to narrowly focused academic research. Businesses of all stripes daily navigate complex, dynamic realities with greater vulnerability.  An interdisciplinary perspective, as espoused by Aalto University, would thus encourage the consideration of adding a soupçon of Business and Design, to the Engineering, prior to synthesizing the key elements of ‘best fit’ for new market entry strategy, viz.,

Strategy as a Wicked Problem by John Camillus (HBR 2008)
Living with Complexity by Don Norman (MIT Press 2010) Chapter 1 PDF
A Short Grandiose Theory of Design by Jay Doblin (STA Design Journal 1987)
Wicked Problems in Design Thinking by Richard Buchanan (Design Issues, 1992)

As we can see, business, and then design, both have given much thought to this space now being touched upon by development researchers and theorists. This will be the topic of the next post, what lessons my teachers might have to share with the practice of development. For now, we’ll consider the value inherent in their explorations of the subject matter.

Development’s value to the practice of business strategy and innovation (design) planning lies in its deep and decades long experience in developing countries. As Ha-Joon Chang et al state:

Insofar as most African economies look rather similar to each other economically, it is not because they are in the same continent but because all economies – in whichever continent they are – at low levels of development look rather similar to each other, due to the lack of specialisation and diversification in the production structure, which then leads to high degrees of homogeneity in occupational structures, social organisations, and lifestyles.

What the Development industry brings to the table is experience in operating in the challenging operating environments of the erstwhile third world, especially among the lower income segments of the population, and outside of the population dense conurbations. Only a handful of consumer facing global brands have anywhere near this type of experience, and that too from the profit maximization point of view. Emerging market consumer firms, hyper local startups, and others in the distribution chain with such ground level expertise in traditional markets tend to keep their strategies close to their chests and their trusted relationship networks even closer.

Till now, ‘best practice’ as conventionally approached by private sector and social enterprises keen on addressing these untapped opportunities has been to partner logically with local NGOs for local expertise. But the last mile of customer experience has always struggled to translate itself from thinking of satisfying demanding consumers to resonating with established mindsets of passive beneficiaries. This has had its own problems.

So, what does ‘best fit’ mean, then, in this context?

Matt Andrews, at the Harvard Kennedy School, thinks of it as choosing a new suit of clothes. However, this description I’ll hold on to for the next post as it contains the problem statement that our interdisciplinary methods are designed to address.

Ramalingam et al’s original version with authors’ formatting:

‘Best fit’, a concept stemming from governance efforts, describes aid programmes that are optimally adapted to the political, social and economic context. Such programmes can take advantage of a plurality of possible solutions, which can be deployed flexibly. They often work at multiple levels simultaneously – from community to national and even global policy levels – in order to facilitate and bring about change.

Businesses contemplating the African consumer market would do well to take such a holistic approach to their market entry strategies, and the design of products, services, and business models. Adapting to the complexity and challenges inherent in the developing world’s operating environment for ‘best fit’ becomes even more critical for successfully bridging the disparities of context.

This shift in orientation requires questioning the dominant logic of existing corporate best practices, and, instead, a willingness to explore, discover, and experiment with crafting wholly new approaches to sustainable business practice, on multiple levels simultaneously. They have the advantage of proven and robust methods and tools from the disciplines of design and business, requiring only a little tweaking of the lenses. Understanding customer needs should already be in their DNA.

 

 

 

 

NB: Interdisciplinarity involves the combining of two or more academic disciplines into one activity (e.g., a research project). It is about creating something new by crossing boundaries, and thinking across them.

Tsunami of change – design, brands, marketing and the mobile phone

In the 10 short months since I wrote on the market forces influencing the global mobile phone market, and the implications of the democratization of innovation whose early, weak signals I could already foresee, matters have come to a head. I had written:

The locus of innovation in handset design, product planning and market strategy has moved its center away from the erstwhile first world to the former developing world i.e. India and China.

And along with this re-centering, ideas on business models and profit margins have changed to reflect those prevalent and appropriate for these new operating environments. Just look at this statement from Xiaomi’s Hugo Barra from an interview last week:

“Innovation is not a luxury item. Innovation is for everyone.”

The implications of this positioning are enormous, particularly given the conventional wisdom currently prevalent in the industry that the latest, greatest, cutting edge technology is a much sought after premium piece of hardware.

What are the current manifestations of this seismic shift in the source and diffusion patterns of innovation?

The era of the Apple product/pricepoint strategy is over for everyone, including Apple. Big ticket flagship devices released to much fanfare and  the lining up around corners by fanbois may still continue to work for Apple but even for them the size of this target market has reached its limit. That is, they’ve captured all they could of the share of the market  likely to rush out to buy the latest, greatest shiny at whatever price.

IDC’s latest forecast for smartphone sales until 2019 has this little snippet tucked in:

Markets with the biggest growth opportunity are extremely price sensitive, which IDC believes will not change, and this is the main reason Apple will be challenged to take Android share throughout the forecast. Even if Apple were to introduce another low-cost iPhone (e.g., C version), IDC believes the price will struggle to compete with Android OEMs that are focused on portfolios aimed at price points of $200 and less. This isn’t to suggest that Apple’s success with the iPhone won’t continue, and IDC believes its efforts to maintain significantly higher margins compared to its competitors are much more valuable than chasing share.

The implication is that new entrants should focus on the “cheap smartphone for poor Africans or Indians” shtick. But this would be the biggest mistake any self respecting brand could make. The entry level segment is completely saturated with Shenzen makes, refurbs, grey market boxes, and a hodge podge of low end models from all and sundry. This is the commodification we saw coming 6 years ago.

Here is where I see an opportunity for a maverick like Xiaomi to capitalize on Hugo Barra’s statement that innovation is not a luxury but for everyone.

The growth markets might be price sensitive but they’re neither stupid nor resigned to their fate. Whether it was the poor man’s car – the Tata Nano, or the slew of wellmeaning first worlder’s introducing frugal low cost technology for the social and economic wellbeing of the downtrodden, the downtrodden have turned up their noses to it all.

Not since Nokia’s heydays has any brand succeeded by flaunting its low cost solution as its USP – and Nokia never flaunted their affordability, they just ran a truck over their phones and let you make a call after. You couldn’t help but realize it was worth the price, offering the biggest bang for your buck. Many of us still reminisce over teh good old days of long lasting battery power and rugged Finnish engineering.

In the past 10 years, everything has been changed by the rise of the internet and proliferation of social media. The connected consumer’s aspirations have found their own level, like water, on a global scale.

People have learned that affordable phones don’t feel necessarily cheap

There is no tradeoff to be made if you’re in the market for a new smartphone. This is the result of the democratization of design, exemplified by Xiaomi, and the result of the race to the bottom of the pyramid. Growth markets are part of the prepaid economy, and the considerations around brand positioning, price point and marketing strategy are not what you have been led to expect.

Here are most demanding customers on earth, operating in the most challenging environment. The mass majority for mobile phones isn’t localized anymore, not even on a regional or continental level – its global. And this is tailor made for affordable innovation, a customer experience that makes you feel as special and as unique as any fanboi without the accompanying price tag.

Only two to three years ago, Xiaomi was just a copycat. Ignoring Xiaomi’s ambitions is a big reason why Samsung is now facing a crisis.

Now, we have to ask serious questions: “Who are you, Xiaomi?” and “Where are you going?” Only when we figure out the answers will we know where we will be heading, too.

JoongAng Ilbo, July 27, Page 32

Just a quick search to see where they’re going offers up such tidbits as ordering a new Xiaomi phone online to be delivered by Uber. Who they are is what their competition isn’t – an opportunity seeking conglomerate leveraging gaps in the innovation ecosystem. Business models, marketing, distribution, design planning – they are re-inventing the conventional to suit the flexible, social, frugal world of the prepaid economy’s connected consumers. Its a whole new ballgame. As I said 10 months ago, the era of big brand cellphones manufacturers is over.

 

The Big Shift for Device Design

  • The market is global, local, social
  • Aspirations will drive purchase decisions
  • Innovation is not a luxury
  • Experience has a price tag

“No Ordinary Disruption” – Africa’s Transformation

McKinsey consultants have released a new book – No Ordinary Disruption – looking at global mega trends and market forces that are forcing a rethink of the foundations of their intuitive knowledge. Assumptions are to be challenged and questioned, they say, as these changes impact a deeper transition in the way the world works. Even as all eyes are on Asia, the fastest growing region on the planet, it behooves us not to overlook the second fastest growing and often overlooked opportunities of the African continent.

“Well, there was a reason why: growth has moved elsewhere—to Asia, Latin America, the Middle East.”

B6vtjfTIYAAq1mfLet’s look at their key points and reflect upon Africa’s transformation.

McKOneThe first trend is the shifting of the locus of economic activity and dynamism to emerging markets like China and to cities within those markets. These emerging markets are going through simultaneous industrial and urban revolutions, shifting the center of the world economy east and south at a speed never before witnessed. […] Perhaps equally important, the locus of economic activity is shifting within these markets.

FG-Seizing-Africas-Retail-Opportunities-2Numerous reports are pointing out the immense potential inherent in African urbanization and population growth, for retail, for real estate and for opportunity. Not all 54 countries on the continent are seeing economic growth as its unevenly distributed, just like in Europe. Some points of note:

Nigeria became the largest economy last year, surpassing South Africa the traditional leader, after their economy was re-based. Kenya has just been ranked as the 3rd fastest growing economy. Rwanda is also expected to show similar growth – both are in the 6 to 7% range. Ethiopia is making strides in infrastructure and industrialization – attracting manufacturing as well as high street brands like H&M and Primark. China has been looking closer at the lower costs of labour on the African continent.

What is notable is that instead of the usual sources of wealth like oil or other natural resources, most of this emerging  economic growth is coming from modern sectors like telecom and services. Entirely new industries such as mobile gaming are gaining traction and e-commerce is another fast proliferating area. Cote D’Ivoire has gained visibility with its embrace of online marketplaces while the Nigerians’ penchant for shopping has captured attention at home and abroad.

All this urbanization means a boom in construction – transportation infrastructure, power plants, dams, houses and malls – cement magnate Dangote has already invested over a billion dollars across the entire continent while competition hasn’t dented LaFarge’s healthy profits.

mckTwoThe second disruptive force is the acceleration in the scope, scale, and economic impact of technology. Technology—from the printing press to the steam engine and the Internet—has always been a great force in overturning the status quo. The difference today is the sheer ubiquity of technology in our lives and the speed of change.
[…]
Processing power and connectivity are only part of the story. Their impact is multiplied by the concomitant data revolution, which places unprecedented amounts of information in the hands of consumers and businesses alike, and the proliferation of technology-enabled business models, from online retail platforms like Alibaba to car-hailing apps like Uber.[…]Entrepreneurs and start-ups now frequently enjoy advantages over large, established businesses.

hubs-overview-large

Source VC4Africa

The impact of the democratization of technology has already made itself visible. Incubators and tech hubs are popping up across the African continent. New startups are emerging almost every other day. One of my favourites is Cladlight –  a safety jacket with indicator lights to be used by motorcycle taxis.

Whether its Uber or grocery delivery in Lagos and Kampala – apps that leapfrog the lack of adequate infrastructure and distribution systems are disrupting their local markets. Technology, both at the front end and the back is expected to change the face of retail and service delivery.

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This is the Ethiopian capital’s new light rail system.

And its not just computers and smartphones – a variety of solar powered products, distinguishing themselves with payment methods and business model innovation, are lighting up the formerly dark continent, while China’s ambitions in high speed rail will soon connect the unconnected.

mck3The human population is getting older. Fertility is falling, and the world’s population is graying dramatically. While aging has been evident in developed economies for some time—Japan and Russia have seen their populations decline over the past few years—the demographic deficit is now spreading to China and soon will reach Latin America. For the first time in human history, aging could mean that the planet’s population will plateau in most of the world. […] But by 2013, about 60 percent of the world’s population lived in countries with fertility rates below the replacement rate. This is a sea change
Euromonitor-populationCall it the demographic dividend or the African youth bulge, but the cradle of mankind remains the youngest continent on earth. This is one of the reasons why Africa matters for the emerging future.
mck4The final disruptive force is the degree to which the world is much more connected through trade and through movements in capital, people, and information (data and communication)—what we call “flows.” […] “South–south” flows between emerging markets have doubled their share of global trade over the past decade. The volume of trade between China and Africa rose from $9 billion in 2000 to $211 billion in 2012. […]the links forged by technology have marched on uninterrupted and with increasing speed, ushering in a dynamic new phase of globalization, creating unmatched opportunities, and fomenting unexpected volatility.

aftzIncreasing regional integration for trade and commerce are changing the economic landscape of the continent. At the forefront is the East African Community, who have already issued a single tourist visa for Kenya, Rwanda and Uganda whilst pushing forward with infrastructural development and various trade related initiatives to tighten their financial and commercial links.

smdc-silkroad-21st-mapFlows of information mean increasingly connected consumers, as smartphone penetration and mobile subscription growth puts the internet in the hands of even the nomadic pastoralists. Social media use is moving beyond friends and family to become platforms for informal trade and banking. And mobile money’s ability to provide financial inclusion profitably is driving the continent’s telcos to overcome their competitive nature and join hands in interoperability.

CDV_KdpWIAAiT23.jpg large

Afropolitan, Africapitalist, Afro futurism – all of these are ways to name the basic trend that Africans are finally reaching out to grab their turn on the global stage. Most recently Credit Suisse named Tidjane Thiam, originally from Ivory Coast as their new CEO. Africa’s future is being transformed by the global forces shaping the world and cannot afford to be overlooked.

As the authors conclude:

The fact that all four are happening at the same time means that our world is changing radically from the one in which many of us grew up, prospered, and formed the intuitions that are so vital to our decision making.[…] Yet we work in a world in which even, perhaps especially, professional forecasters are routinely caught unawares. That’s partly because intuition still underpins much of our decision making.[…] If we look at the world through a rearview mirror and make decisions on the basis of the intuition built on our experience, we could well be wrong. In the new world, executives, policy makers, and individuals all need to scrutinize their intuitions from first principles and boldly reset them if necessary. This is especially true for organizations that have enjoyed great success.

Strategy and Operational Excellence: Trade-Offs Made in Design and Thinking

“Managers must clearly distinguish operational effectiveness from strategy. Both are essential, but the two agendas are different.

The operational agenda involves continual improvement everywhere there are no trade-offs. Failure to do this creates vulnerability even for companies with a good strategy.

The operational agenda is the proper place for constant change, flexibility, and relentless efforts to achieve best practice.

In contrast, the strategic agenda is the right place for defining a unique position, making clear trade-offs, and tightening fit.”

 “What is strategy?“, Michael E. Porter, Harvard Business Review, Volume 74, Number 6

With reference to my previous post, I thought to clarify my thinking a little further.

Design (not design thinking), very clearly falls in the realm of operational effectiveness, as derived from the explanation given above – let’s use that old classic, the iPod, as a commonly understood example – it is very well designed. It would not have reached it’s iconic status if it were not well designed.

But just for the sake of this thought experiment, let’s say that Apple’s strategy could be framed as “leader in the market of portable, user friendly, hard drives that allow you replay the stored information. Hypothetically, mind you, and with respect to the iPod only, for the purposes of this conversation.

Steve Jobs’ vision was clear and Apple’s unique value proposition – the user experience – well differentiated. But his strategy of maintaining leadership in this category [clearly defined, per Porter’s definition] is supported by his operational effectiveness in releasing a new product [in the same product category – strategy] with a quality and frequency that left the other players breathlessly behind.

Had he not had this clear strategy he could have done any number of things that many do to maximize the revenue generation possibilities – released an iPod clothing line, offered iPod accessories, distributed toy iPods in Happy Meals, whatever came to mind.  But any of these tactics would have moved him away from his core value proposition.

This would have been short term thinking, how to maximise the cachet of the iPod brandname or, you could say, the outcome of not having a well defined strategy from the very beginning. By continuing to make trade-offs that he did in his decision making and tightening fit, he continued to maintain his strategic agenda, envisioned in advance for Apple’s forward momentum.

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A company can outperform rivals only if it can establish a difference that it can preserve. It must deliver greater value to customers or create comparable value at a lower cost, or do both.

The arithmetic of superior profitability then follows: delivering greater value allows a company to charge higher average unit prices; greater efficiency results in lower average unit costs. – ibid

On the other hand, at the time of the iPod’s heyday, just prior to the iPhone’s full scale disruption, there was much discussion on some of the design choices made, particularly in the arena of customer service.

Some may recall that the battery could not be changed in the original iPod and customer service for the product was nowhere near what today’s CX and UX gurus would advocate.

Here’s the snippet from the wayback machine linked above:

Its battery wears down and can’t be easily replaced because an iPod can’t be opened up by mere mortals. All of these were conscious design choices Apple made.

There’s something in that and I’ll be coming back to it, but in the context of this post one wonders whether trade-offs such as these,  in operational effectiveness, make for good strategy in the long run?

Gamer Gen: Civ III as virtual MBA?

This post was written on 29th November 2005 in San Francisco

Back in May 2005, I wrote a post on the book “Got Game: How the Gamer Generation is Reshaping Business Forever” where the authors,  John C. Beck and Richard Wade, argue that gamers glean valuable knowledge from their pastime and that they’re poised to use that knowledge to transform the workplace. While their emphasis is on how the “under 34″s differ from the boomers in their strengths, abilities, attitudes and learning styles, I contend that even within the “gamer generation” there are distinct camps*.
Beck and Wade point out these attitudes in their study of the gamer generation:

  • You are an expert who not only has gotten really good at something but also knows how to bounce back from failure.
  • Everything is possible. There is always an answer, and you can find it by trial and error.
  • Competition is the natural state. You expect nothing else.
  • Teamwork can be fun, but it needs to be structured so that each person has a clear role.
  • It’s a global world in design, consumption and characters. You can get along with people anywhere.
  • You are ambitions, competitive and want your rewards to be based on results.
  • You see leaders as irrelevant and often evil. You feel you can take charge or share the leadership role.

Last month, Sid Meier’s Civilization IV was released with much fanfare. Not having pre-ordered the “collector’s edition”, I had to wait until the games were in stock last week to purchase a copy. An avid player of Civ III, I found the newest version “dumbed down” with respect to overall management and strategy with a greater focus towards multiplayer. The key difference, imho, is beneficial for actual gameplay, that is, they’ve cut down the amount of micromanagement of your civilization that you have to do while you plot world domination strategies.  On the other hand, if gaming is argued to be the training ground for the next generation of management, then Civ III is nothing less than an “MBA” training ground for leaders.

For those who have never encountered Civilization, it’s about playing God on a world somewhat modeled on Earth’s history, but with lots of variations in maps and how you go about building your civilization. It’s all about “interesting choices,” as Sid Meier once put it. Do you build up a big army and pursue aggressive campaigns of conquest? Do you try to live in peace, keeping your people happy and growing culturally? However, I believe that it is the very micro management that CivIII requires that teaches us how to be corporate leaders, and specifically, I’d say, it applies to managing a creative shop like a design studio.

 Why?

As your civilization grows in the game, you deal with issues on two fronts – the competing end, where you play an aggressive game based on war and conquest or the cultural approach where you build Wonders and culture to win – and the back end that needs to be managed throughout however deals with resource management. Issues such as pollution, paying for extra workers, unhappy citizens in over crowded cities, building requirements for growth, all of these “micro” issues need to be dealt with simultaneously as you create your winning strategy. Those who play at the expert level, successfully, in Civilization III, develop a unique skill set that can be translated to management terms. Here are some of them:

  • Multi tasking, multi threading – tracking all events creates the ability to have a multiplistic perspective of the world
  • Resource management – Identifying, sourcing, choosing to trade or buy resources such as money, labor, machinery, raw materials to ensure an uninterrupted supply to meet your objectives.
  • Ability to see the “BIG” picture – you can’t get any bigger a picture than the growth and evolution of a complete civilization competing against 7 others for the same resources.
  • Cooperation, collaboration and team play – how to coordinate and deploy your armies, your workers, scientists, artists and engineers for maximum support.
  • Decision making, diplomacy and leadership – jockeying your way to a United Nations winning vote requires the ability to manage and negotiate trade, sales and peace treaties.

There are probably many more such skills, but these are those that come immediately to mind. If the US Army can use simulation software to develop war games to teach strategy and diplomats can use a game to figure out how to over throw a government without war, who says CEO’s cannot be trained by a little civilization?

Why are they shaming Simon Berry for making an important and valuable strategic change? #colalife

In my 2009 article “The 5Ds of BoP Marketing: Touchpoints for a holistic, human centered strategy” I used Simon Berry’s initial work, with Cola Life, as an example of innovative distribution models,  so:

Such “piggybacking” has been attempted on an existing tried and tested global distribution network as a way to distribute medicines to the neediest. Simon Berry has launched a scheme called colalife.org, an award-winning social media campaign launched this year to demonstrable success that sought cooperation from The Coca Cola Company in order to leverage their extensive and highly visible supply chain in the remotest parts of the developing world to distribute critical life-saving medicines such as ‘oral rehydration therapy’ for common waterborne diseases.

A status report from their Flickr group discussion board:
Before the Facebook group I was getting nowhere at all. The group has changed everything and is the reason we’ve made such rapid progress… Continuing support for the idea is vital if we are to turn this idea into a reality and actually save some lives.

Research and development of the campaign continues to evolve. The next objective is to get an international NGO to engage with the campaign. Meanwhile research is underway in East African into Coca-Cola’s distribution system and the feasibility of the idea is being investigated and reported in Simon’s blog.

Simon is to be commended for his brave, courageous act in acknowledging that the highly acclaimed and design award winning concept of packaging made to fit the Coke crate -the “Kit Yamoyo”, which has been recognized with The Design Museum’s inclusion in 2013 for product design – was not successful as a means to achieve his goals. Thus, regardless of the cool concept and the design innovation manifest in the packaging, he has stayed true to his real mission – how to distribute life saving medicine rapidly and cost effectively as Coca Cola does into every remote village shop on the African continent. And in order to do so, he has adapted his methods to suit the distribution channel.

Simon’s real achievement has been gaining access to Coca Cola’s trusted vendor and distribution network. Listen to what he says,

Berry replied: “We are piggybacking on Coca-Cola in the sense that we’re using their ideas, we’re using all their wholesalers, who are very well respected and know how to look after stuff, but putting the kits in the crates has turned out not to be the key innovation.”Berry also conceded that the concept of delivering the kits in Coca-Cola crates hadn’t worked in an interview with New Scientist magazine last month.“Instead, what has worked is copying Coca-Cola’s business techniques: create a desirable product, market it like mad, and put the product in a distribution system at a price so that everyone can make a profit. If there is demand and retailers can make a profit, then they will do anything to meet that demand.”
He’s learning how to scale, massively, from the master. If you have ever been anywhere remotely remote and then wondered how did that familiar red show up here, then there’s the start of your trail of clues.

Then why does that article sound like its trying to shame him for not using the shiny award winning design? And is that why other clunkers like LifeStraw or something solar clank along limpingly rather than attempt to deconstruct and start over from lessons learnt? What a sad waste of time and money…

 “I have to say Simon though, this is a bit of a con,” Day said on discovering the innovative strategy had been dropped. “You got this award for the design product of the year, very ingenious, very clever, because it fitted into a crate of bottles. You’ve abandoned the crate of bottles distribution now, so it comes in very conventional, ordinary packs. You’re nothing to do with cola now. In other words, the design is almost incidental.”

Way to go, Simon!

This post was written by niti bhan and rss originates from www.nitibhan.com