Posts Tagged ‘understanding’

Not Disaggregating the Informal Economy Properly Hinders Development Efforts

Michael Kimani (@pesa_africa) brought this prize winning essay on the importance of understanding the informal economy to my attention, together with a snippet of text from our last inception report highlighting a major oversight that we believe is of critical importance.

Mike took issue on Twitter with the author’s very first sentence introducing his work as a PhD candidate in The Department of International Development, LSE, viz.,

I research smuggling, or ‘informal cross-border trade’.

and I offered to flesh out our concerns in a blogpost. Here’s the snippet Mike extracted from the tralac website:

C8oeVQ8XgAAnc-fNow, I won’t go into the full scale literature review on the challenge posed by the conflation of illicit activities such as smuggling with the licit yet unrecorded daily commerce in border markets as it’s clearly framed here on page 5 through 7 since the author is already in academia.

However, what I will do is just pull out Kanbur and Keen‘s specifically worded framing of the challenge of not unpacking the various elements of the informal economy as the first step towards understanding it better.

We think this is the wrong way to look at things. The key to policymaking towards informality is twofold. First, to specify more basic objectives, such as efficiency and equity, which transcend informality – informality and its persistence in itself is neither good nor bad. Second, to disaggregate informality into policy-relevant categories, rather than take it as an undifferentiated lump and then gauge policies by their impact on its magnitude.

Let’s take the problem of conflating smuggling with cross border trade in the context of Kanbur and Keen on Rethinking Informality:

In so far as any precise meaning is given to the term in discussions of taxation, informality is usually taken simply to mean non-remittance of tax due – failure to pay. But there are all kinds of reasons why a firm or individual might pay no tax. Maybe they are simply below the threshold above which they are legally obliged to; or maybe they are evading. Might not why no tax is paid matter for policy making at least as much as the fact of it not being paid? And how should tax systems be structured when it is recognised that their design may affect not only how much tax is paid, but the different ways in which it is not paid?

These questions lead, in our view, to a more useful strand of analysis than generalities about reducing informality.

or, in the case of this essay, to generalities about the need to understand the informal without distinguishing within it the various categories of trade that occurs across borders, both biashara and magendo.

Design research as a method for discovering & understanding the world around us

Variously known as User Centered Design (UCD) or Human Centered Design (HCD), the fundamental philosophy underlying the designer’s approach to problem solving is that of discovery – “figuring out how to make something that will work in this context”.

Innovation, invention and novelty rarely have pre-scripted processes due to the as yet unknown, and often, uncertain nature of the outcome. The design process acknowledges this by embedding various techniques for discovery of the problem space as well as the possible solutions.

These include:

  1. Exploration –  1. the action of exploring an unfamiliar area. 2. the thorough examination of a subject.;
  2. Prototyping –  an early sample, model, or release built to test a concept or process or to act as a thing to be replicated or learned from;
  3. Iteration –  the act of repeating a process with the aim of approaching a desired goal, target or result (2);
  4. Experimentation – a procedure carried out to verify, refute, or establish the validity of a hypothesis. May vary greatly in goal and scale, but always rely on repeatable procedure and logical analysis of the results.

This post was inspired by a twitter conversation with Dr Dan Lockton. It is the first of a series of explorations on our adaptation and evolution of the methods available for design research as tools for discovery and understanding where data may be inadequate or non-existent such as the informal economy in emerging African economies.

Please use the category UCSD to discover more on this subject.

Designing with Understanding

Wroblewski 2007, Designing with Vision

The last 6 years have been nothing more than constant proving of this philosophy and approach, as embodied in the design pyramid as captured by LukeW back in the day. As an ardent proponent of exploratory user research (Chipchase and Jung, 2007) this conceptual image just burst into a million twinkling stars of potential and understanding inside my whole brain. Take the thought of designing with vision one more step further and begin with understanding the landscape on which this vision will lie. For example, if you are going to build your castle of dreams on Cloud 9 then I wanted to begin by describing what Cloud 9 looked like first.

What was the operating environment like – or, rather, in the case of the way it turned out for the rural economy in the developing world or lower income segments in urban sprawls of South Asia and East Africa – how was it different from mainstream consumer culture in which most of the worlds tech innovation and product development seemed to be taking place?

In the case of the rural economy it seemed like the natural seasons and their rhythmic impact on farmer’s purchasing power were the key differentiators for successful consumer product launches and market entry strategies including payment plans and business models.  These characteristics emerged initially in the form of design constraints and criteria for filtering concepts for further development after the initial brainstorming, that is, they emerged as “actionable insights” from the “analysis and synthesis” phase after reams of data had been collected by primary user research methods as well as secondary desk research aka “Immersion”. A very crude and simplified blocking out of the basic user centric process (for more or less anything really, product, service, payment plan or business model, value chain et al)

All the nuance and strategic visioning has been stripped out, as have the iterative arrows in every which way, the point is to be nimble and poised to pivot, based on the data coming in from this wholly different operating environment.

We don’t need scientific citations to state with great confidence that daily life is very different in urban Western Europe than in rural East Africa. That every assumption we make, as we conceptualize, design or develop any solution, is across the gap in mindset and values of the erstwhile base or bottom of the pyramid. (BoP). To be honest, BoP was a good concept while it lasted, but just like Third World or Hindoo, these are labels that have done their duty in their time. Now they are obsolete. That is all.

But because the entire product_service_revenuemodel ecosystem is so very different, it makes sense for us to first understand that context in which our future solution will be utilized (or implemented, sold, used…). We would need to take a lens to this Environment, Economy and Ethnology in order proceed to beginning to see any kind of emergent ecosystem which could fill an urgent need worth micropayment or create a market much need further upstream in the sustainable agricultural value chain.

My methodology and approach are outlined here and this gives an introduction to the philosophy underlying the frames of reference I use for conceptualizing market entry strategies for emerging global middle class consumer markets.

Understanding at the bottom of the design pyramid

source

Before we can give form – and it does not have to be a tangible product but could even be a service, a business model or a strategy – to what we wish to do, its not enough to step back to just the function level, one must step even further back to envision the whole before one can even begin to pinpoint what the requirements are.

And before we can envision the potential solution space within which the requirements can be framed for the ultimate manifestation in the form of design, we must understand not only the what and how but also the why, when and where.The most powerful concept in this diagram, imho, is the fundamental importance given to ‘understanding’.

Without understanding – which in this sense could be seen as ‘grasping or grappling with the big picture’ – one cannot begin to envision or see what the possible directions or paths that ‘form’ or ‘function’ can take. Without the big picture view, the perspective into which all the disparate bits fall into – if not falling into place, then at least within understanding or at least coming to terms with – we cannot see far enough ahead in order to shape or manifest tangibly any plan of action or even, next steps.

I have said before that I believe that design is inherently a philosophy or a system of values first, and it’s implementation, in whatever form, second. Understanding the ecosystem in which your actions will take form comes first, which then leads to vision – only then can you begin to get down to the brasstacks of framing requirements and finally the design. We very often jump straight to the design – or the action – and this hierarchy of the steps required prior to any design is a useful reminder of the other 90% of the iceberg.

This approach has been the basis of my work in the little known geographies and the uncertain conditions of the emerging consumer markets of the developing world.

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.

Caution: The emerging African market PDF stampede

This  PDF report on the emerging consumer market opportunity in Sub Saharan Africa comes to us from Accenture, the most recent in the long line of consulting firm offerings that started with McKinsey’s in June 2010.  In order to differentiate themselves from the migrating herd, they offer us a single customer segmentation model for the combined population of ~ 43 countries :

Our segmentation identifies five broad consumer segments:

  • Basic Survivors are the largest consumer group in Africa and are characteristically low income consumers. They tend to make day-to-day decisions based on basic needs.
  • Working families are the second-largest consumer group. They focus their spending on their children’s needs and value stability and routine.
  • Rising Strivers value upward mobility and buy based on convenience, quality, or even more “expressive” factors.
  • Cosmopolitan Professionals are typically located in urban areas. They value pragmatic products but are also brand conscious and influenced by the media.
  • The Affluent of Africa have disproportionately high purchasing power, and are considered wealthy regardless of where they travel across the globe. This group is extremely small and very fickle.

Their segment of choice for future focus are the “Working Families” ($100 to $250 a month), described so:


Working Family Profile – The Biya family resides in a small city called Mbouda in Cameroon and has four children ages seven to 13. Francis (the father) works as a mechanic servicing local farmers’ trucks, while Calixthe (the mother) works as a housekeeping lady in a hotel. Due to both parents’ late working hours, they often make quick prepared noodle dishes for dinner and give their children small biscuit packets for snacks. They spend extra on laundry detergent for school uniforms.

I see the “consumer market opportunity too big to ignore” alright, lets see how they fare in the “African markets  in accordance with African realities”.  These insights are from their section titled Analysis, and it reminds me of Dean Roger Martin’s most recent HBR blogpost  “You Can’t Analyze Your Way to Growth” where he writes:

The fundamental reason is that analysis of data is all about the past. Data analysis crunches the past and extrapolates it into the future. And the past does not include opportunities that exist but have not yet happened. So, analysis conspicuously excludes ways to serve customers that have not been tried or imagined or ways to turn non-customers into customers.

Hence the kids being fed Maggi 2 min noodles and packets of glucose biscuits, most likely from Parle.   Martin goes on to add:

Organizationally and behaviorally, analysis and appreciation are two very different things. Analysis is distant, done in office towers far from the consumer. It requires lots of quantitative proficiency but very little experience in the business in question. It depends on data-mining: finding data sources to crunch, often from data suppliers to the industry. Appreciation is intimate, done in close proximity to the consumer. It requires qualitative proficiency and deeper experience in the business. It requires the manufacture of unique data, rather than the use of data that already exists.

I like the term appreciation but my caveat would be that appreciation of any thing, person or environment emerges from understanding.