April 23, 2014

Assessing the Impact of the Mobile Phone on African Consumer Markets

68% of @Twitter users in #Africa rely on this platform as a primary source of information on national news ~ The Mo Ibrahim Foundation
Lets start with everyone's favourite topic, the mobile phone of Africa. It used to be a secondhand candybar Nokia but today it could be anything from an iPhone to Samsung's latest or some lesser known Chinese make full of bells and whistles. This isn't meant to be the definitive article so much as an exploratory one attempting to capture the various aspects of the mobile platform* influence that will have impact on marketing and market entry strategies for the African consumer market.

The Mobile Platform as a Financial Tool

The phone is your credit card in Africa. Its your identity, your bank account, your bus ticket and your barbershop bill. I don't need to write a laundry list of initiatives and innovations that are changing the financial services landscape of Africa due to the prevalence and ubiquity of the mobile phone. If you're reading this with any interest whatsoever, you are probably already aware of this fact.

A tidbit, that serves as an example, is yesterday's news that Kenya's Equity Bank will distribute 300,000 Near Field Communication enabled smartphones to merchants in lieu of far more expensive Point of Sale devices for contactless swiping of their newest ATM cards in bid to capture the nascent yet emergent payments processing business currently monopolized by the telco Safaricom and its MPesa platform of products.

Prepaid Mobile Plans for Voice and Data

Africans prefer to pay as they go for their use of mobile phone voice, text and data services. "Prefer" is an understatement as a quick search turns up stats like less than 1% of Kenyan mobile phone users were on a post-paid contract or that the GSMA's 2013 data shows that across the whole continent, 96% of all mobile phone users were using prepaid services.

This is not a meaningless statistic or one relevant only for telcom or phone related stuff but the visible demonstration of an entire continent's purchasing patterns and buyer behaviour observed in a variety of different contexts. This will have impact on business models, payment plans, pricing and even marketing communications, for both goods and services, especially in the online world. I'll stop this paragraph here as this is a topic I'll come back to in more detail.

Innovation and Development on the Mobile Platform

The hottest thing across the continent is the emergence of the tech startup as a viable career choice for youth. Incubators, accelerators, hubs, demo camps, developer schools, training programs, venture capital, conferences and competitions have all but taken over as teh topic du jour for anyone wondering what young, educated Africans are upto these days. Silicon as a prefix has been applied to a wide variety of geographical features, from the lagoon in Lagos to teh savannah outside of Nairobi.

The point is that the tech savvy are beginning to grab and take ownership of their information and communication future. The impact of their work and their voice on the web, served up through their favourite phones and pads, is as yet unpredictable but will be undeniable, on everything from new product introductions to customer service for any brand wishing to enter these markets. Overlooking home grown solutions to age old marketing challenges would be a grievous mistake.
"Social media may well end up having an outsize impact on Africa, because of the huge penetration of the mobile phone," says Allan Kamau, head of Portland Nairobi. "Africans have got used to doing everything on their mobiles: sending money, chatting, campaigning, complaining." ~ #Africa Trending
The Mobile Phone as an Information and Communication Tool

Interestingly, this personal device might end up being the most complicated medium for mass communication in Africa. Again, there is much to be found online on everything from advertising and marketing on mobile to doing market research. What I do want to point out here, however, is what the phone is actually doing is scaling the scope and reach of an existing behaviour, one that can be seen at the most hyper local level in the most rural regions. And that is the sense of connection and community through the ongoing conversation at the corner store, in the market place or the homestead, where information is exchanged, opinions gathered and word of mouth and trusted referrals play a far more critical role than is currently prevalent in the developed world's markets.

This is the core of the informal market economy, the local ecosystem in which the community thrives and survives, in part, an element of the resilience and survival instinct of the human being. Community as insurance against times of need has been observed as part and parcel of the African mobile experience, one of the critical reasons that sales and adoption of the mobile phone grew so rapidly across the whole continent, regardless of the individual's economic standing. GSMA's Mobile Economy report shows the phone's contribution to African GDPs is as much as 6%.

The phone is the ultimate communication and information tool - both directly from your own social network, as well as indirectly by the way of going online. Its teh portal to every other communication service and social media that marketers are beginning to use everywhere else. But how to use it and when and where will be teh challenge for marketing  because the patterns emerging from the local markets may not be the same as those in the domestic markets of new brands seeking the African consumer opportunity. Metrics and mass production have no place where personal response and trusted communication is the norm. I'll end this with a screen cap of a tweet I saw today.


* The mobile as a post industrial platform for innovation in emerging markets has been a personal obsession since 2006 so I have be careful not to get carried away in my blather and to remember to stick to the point ;p

April 21, 2014

Why the African consumer market opportunity will force marketing to reinvent itself



Mass markets were a shorthand forced on marketers who had too little time or information or leverage to treat different people differently. They are the result of the mass merchant, the mass media and mass production. But humans aren't a homogeneous mass, we are individuals, as individual as we dare to be. ~ Seth Godin
To continue my series on the challenge and the opportunity waiting for the enterprising in the emerging economies of the African continent, I'm going to explore another element of the unease I've picked up in current day coverage by mainstream business media and management consultancies. Based on my experience consulting with startups and companies targeting the African consumer market, I believe that marketing, as a discipline and as an industry, will be forced to reinvent itself, from the ground up, starting with the fundamental assumptions on which the entire framework rests.

Diversity

The sad fact that Africa has always been misperceived as one homogenous mass (see Africa is not a country) is another underlying reason why her emerging markets are being treated in the same manner as the those of India and China. Unlike the two Asian countries, the African continent consists of 54 diverse and disparate nations, comprising very different cultures, societies, languages and histories. Even though India has as much diversity and disparity, it is still one nation with a single set of laws and regulations for trade and commerce. This is not true of Africa.

This diversity has been noted as a challenge for marketing and advertising but I think its going to become a bigger issue than simply regional localization and more market research. Its not just a matter of different cultures and languages, but also social and economic diversity leading a wholly different mindset and worldview, and thus, buyer behaviour. As the linked FT article quotes:
It is early days, but foreign executives from consumer companies privately acknowledge that they will have to adapt, and quickly. “It’s only just now that people are beginning to see Africans as consumers,” says a European corporate executive.
“The time is coming when we and everybody else are going to have to tailor and adapt brands – advertising and marketing, both – to the different Africa markets,” the executive says.
There's still an implicit assumption however, that though the concept of Africans as consumers is new, once they're seen as such, developing a consumer market strategy can follow the same old approach as for any other consumer market. The real challenge, imho, for marketers and brand managers of all stripes and sizes, will be their struggle to grasp the complexity of the opportunity within the frame of reference of traditional marketing and sales.

Disparity

Without questioning the underlying premise behind their methods, what CK Prahalad had referred to once as the 'tyranny of dominant logic', there is the danger of attempting to apply frameworks and tools from one operating environment in order to make sense of a wholly different one.

For example, for a "European corporate executive", a small solar charger retailing at 30 euros could be said to be an off the shelf purchase in a department store. He wouldn't be surprised to find it in a blister pack, hanging from a hook. This would not be considered a major household consumer durable purchase like a dishwasher or air conditioner, requiring face time with customer service or decision making with his spouse. One can walk in, choose one's preferred charger and take it to the payment aisle.

The very same product at the same price point is in fact a major household purchase for a subsistence farmer living off the electric grid, for whom this may be his first installation of a modern energy supply. Three thousand shillings could be half his monthly cash flow, thus requiring the joint efforts of the entire household. That small solar charger can provide lighting, mobile phone charging and even power a radio for news and entertainment.

That singular decision to categorize a product as a Consumer Durable or as a Fast Moving Consumer Good (FMCG) can make or break a brand's entire distribution, marketing and sales strategy. Worse, it may not even be a considered decision but instead the result of an entire series of implicit assumptions left unquestioned. The product ends up being sold without any manual or brochures, with little or no customer service or training in its use, while being distributed in supermarkets. The end user for whom it was meant to serve, the hardworking chap living in some remote rural African farm without electricity, rarely ends up benefiting from it.

Formulaic assumptions

Yet it is these sort of fundamental assumptions in marketing that are not being questioned, even as brands and market research seeks to identify and segment the African consumer opportunity. In fact, market segmentation itself will be a whole different ballgame when it comes to the prevalence and impact of the cash based informal economy and its own particular characteristics. These are not your grandmother's consumers and they are going to be some of the most demanding customers you have ever served. Standard concepts just won't fly and only lead to millions of euros lost and companies folding up shop.
Traditionally, research has been lacking in Africa, with much being ad hoc or proprietary studies done by fast moving consumer goods companies, which lack the objectivity to make them entirely reliable. While Namibia, Ghana and Kenya have surveys analogous to those of the South African Audience Research Foundation (Saarf), research is still too scarce and fragmented, say sources. [...]
As a developing market with an ever-younger population, Africa is seen as the last frontier for global brands. Media in Africa is exploding, with channels like mobile presenting new and unexpected opportunities for marketers. In a fragmented and inconsistent media research landscape, the key to the future is developing homogenised data that is comparable across markets. ~ Africa, the final media frontier
Will homogenised data be the key to the future when exactly the reverse is beginning to happen in more developed markets due to the impact of social media and smartphones? Fragmentation as a fact of life for mass marketing is a global challenge for marketers everywhere, not just in Africa. The very same legacy infrastructure that Africa leapfrogged on its way to embracing the mobile platform is what still provides the somewhat shaky foundations for mass communication and marketing in the established markets of the developed world. And here, I include South Africa, as its only now that it has begun to consider itself part of this continent and not a breakaway faction of the first world.

There is no "mass" market and now its too late to create one

For the rest of Africa, the combination of the "youth bulge", the lack of legacy infrastructure in consumer insights, and the mobile phone are on their way to creating a perfect storm for the future of marketing right now, and its going manifest itself in this very same emerging consumer market opportunity. To go back to Seth Godin's words I quoted at the start of this article, mass markets were the result of mass media, mass production and the mass merchant. All of these are part of the legacy that Africa has already leapfrogged or may never establish.

Already, Facebook is seen as business promotion platform in Ethiopia, something I'd heard an entrepreneurial young Kenyan woman in Mombasa also tell me back in late 2011. A snippet,
A similar technique has attracted a sizable number of customers to Yonas Gulelat, 24, who makes and designs traditional dresses to sell at his shop in the Shiro Meda area in Gulele District, on Algeria Street. Facebook, he says, has provided him with a more viable and cheaper alternative to advertising, than electronic or print media.
“Facebook promotes business more swiftly and has helped me to sell anywhere between 15 and 25 traditional dresses every week,” said Yonas.
The only thing that social media and communication technology have done is scale the reach and scope of the way the existing local and fragmented informal markets were already communicating; through word of mouth, trusted references and proof of performance through the experiences of others. Where the informal meets the formal will be the operating environment of the African consumer markets, and the arena where market entry will either fail or succeed.

April 19, 2014

Its complicated: Pondering the implications of the Emerging Markets hyperbole for Africa

Middle class or something uniquely African? Businessman's home in Mombasa, Kenya Photo Credit: Niti Bhan
As I mentioned in my previous post, the hyperbole and handwringing characterising current day news coverage of the frontier market opportunity in the African continent has been reminding me of the way India and China were covered back in the heady days of their emergence. I've been looking over, comparing the coverage and what I'm picking up, however, is an underlying sense of unease. One that I am not able to pin down in black and white terms. Its not quite as simple as saying "Oh, you can't compare these apples to those oranges because Africa is a continent of 54 countries while India and China are countries in their own right". That's undeniably true but I suspect there's more going on here and I want to use this post to tease this tangle out further.

Heritage, history and the burden of mainstream media perceptions

India and China rose to global prominence during the last decade of the previous century and the early years of this one, primarily through the resurgence of their economies. As cultures and countries, they have thousands of years of recorded history, and are ancient civilizations with vast bodies of accumulated scientific knowledge, philosophy, religions and civil society structures. Each, in their time, were wealthy centers of trade and learning, attracting travelers and traders and ultimately, the western powers who dominated and overtook them. Until recently, they were perceived as developing countries struggling to cope with the challenge of their teeming, hungry billions. At least as far as global mainstream media perceptions went.

When the first 'gold rush' of globalization began and companies rushed into these emerging markets of millions of middle class households with their billions of dollars of consuming power, they were taken by surprise at the pushback from entrenched local brands and far more complicated domestic market infrastructure than they had been given to expect. The market entry strategies drew heavily on Theodore Levitt's 1983 classic "The Globalization of Markets", which presumed the natural evolution of a homogenous global middle consumer class. That assumption cost some of the largest consumer brands millions of dollars and many lost years to realize and recover. Some never did and even today, the Indian and Chinese markets are still domestic strongholds proving a challenge to newcomers.

Africa, on the other hand, carries the heavy burden of a heritage of negative media narratives. The perception of risk and danger is far greater and the implicit assumptions around corruption, chaos and systemic mistrust far more embedded than we realize. Even as press releases tout the opportunity of the African emerging consuming classes and their dollar value, one picks up the sense of unease inherent in the reports' disclaimers. And though it has only been 3 years since The Economist changed their tune on the African opportunity, venerable publications like The Financial Times have already begun issuing cautionary notes on the breadth of diversity and disparity across Africa.

The shift in perspective has been jarring

There's almost a sense that even while the reports and the releases and the articles play up the frontier market opportunity of the sub Saharan consumer, they are unable to take it as seriously as they did when they wrote earnestly about the Indian and Chinese middle classes. I touched upon this briefly last year, in The Tale of Two Africas, where I saw the early signals of a future clash that will become increasingly obvious within the next 5 years if not sooner.

Imagine the magnitude of the shift in perspective being asked of the business press and the management consultancies and the market research firms as well as the middle managers and business strategists, all of whom may have grown up seeing the hungry Ethiopian faces or the reading about Rwandan genocides, Ugandan child soldiers and constant conflict in CAR and Congo. Suddenly, they're expected to consider the same people as middle class consumers demanding international retail experiences when shopping for the trendiest brands.

So in a way it makes sense that the media coverage is defaulting to the safe and familiar jargon of consumer behaviour, brand preferences and disposable incomes thus resembling the hyped growth opportunities from the last time around, even as the disclaimers and cautions explicate and sometimes, contradict, that very same hype. This underlying unease seems to be stemming from the change in mindset and worldview required to see customers and consumer markets where one had only perceived beneficiaries and refugee camps.

Active customers not passive beneficiaries

This change in perspective will be critical for business success in African countries. Different nations are at different stages of development and thus, self perception and ambition. For some, the inflection point has already been reached where the choice is not how much money can foreign investment bring into the country but whether they want it in the first place and from whom. At the same time, there has been little recognition of the impact of the mobile revolution that is taking place across social and economic strata where ubiquitous and affordable information technology is empowering people with aspirations and ambitions far beyond the dreams of their grandparents' generation. It is those voices that will push back in unpredictable ways that will make "frontier African markets" a very different challenge from that posed by the "emerging markets of India and China" of a decade or so ago.

Back when India and China were opening up, mobile phones were also in their early stage growth phase, and hadn't yet put the internet into every rural youth's hands. Social media such as Facebook and Twitter weren't even on the radar. Across Africa today, new and emerging communication tools are changing the landscape of the consumer market in ways we do not yet realize. Word of mouth and trusted referrals within social networks, the traditional grapevine, are being scaled by technology to reach far beyond what was within the realm of possibility. And the emerging African consumer is not only well connected but less likely to stay quiet about corporate excess or marketing failures. First impressions will matter far more than they did in the early days of Indian and Chinese markets. Perhaps this too explains the underlying unease in this edition of the emerging market 'gold rush'.

An update: I just came across this snippet that seems to capture the above transition well:
"The real challenge facing consumer product companies these days is to survive in a globally connected, consumer-driven world. In order to manage and grow profitably, companies must learn to meet consumer's demands from any part of the world, through any channel. New approaches that must be embraced include end-to-end global supply chains, virtual market entry, direct-to-consumer channels and more investment in consumer insights. A more connected consumer is a more powerful consumer and that is the frontier consumer products companies now face."

April 14, 2014

News coverage of the African "market opportunity" reminds me of "Chindia"



Africa's economic and consumer market opportunities, as covered in mainstream media as well as press releases, has begun to remind me of the way India and China used to be covered back in the early years of the past decade.

Just as was the case with India, where any news of economic growth or scientific advancement like sending a satellite into space was greeted with handwringing over the teeming millions living in poverty, one reads the same about Nigeria's recent rise to economic prominence or the nascent African Space Research Program in Uganda.

At the same time, one sees the same hyperbole being bandied about the millions of emerging middle class consumers hungry for multinational brands and the shiniest retail opportunities in the form of mega malls and online shopping.

Even the research reports being churned out by management consultancies vying for lucrative contracts sound similar to those for the Indian and Chinese market opportunities when they first pinged the radar of the global economic powerhouses. "Chindia" as it was called, was the biggest emerging market ever, billions of customers, gazillions of dollars.

Look at where India and China are at now. An excellent summary of India's performance over the two decades since the "Golden Summer of 1991" is available here by Swaminathan Anklesaria Aiyar and for China, this seems to provide at least a synopsis of major strides in development.

But what does this echo of hyperbole and handwringing imply for the frontier African markets of tomorrow?

I'll be taking an indepth look on this in forthcoming posts



March 9, 2014

Service design for the prepaid economy: Continuing the case of Google's Bebapay in Nairobi

The previous post on the sluggish adoption of Google's BebaPay, a cashless prepaid card introduced in Nairobi as a payment mechanism for public transportation, had me pondering the challenge of designing services for the informal sector.

There are two main challenges that I see here, which don't seem to have been taken into consideration during the development and implementation process:

1. The impact of introducing this service on the end-users

and the second

2. The characteristics of the cash based informal sector.

That is, if one were to say that the design of a new service should take the people and their operating environment into account as much as the actual technology and platform, then this is yet another example of technocentric design failing to meet its promise once introduced in the market.

Why are these elements so critical in this context?

The wananchi and their kadogo economy

Ensuring at the design stage that all possible effort have been made to lower the barriers to user adoption of your new product or service is one of the key ways to  maximize its chances of success in the operating environment.

Here, the people who are going to be using this service on a daily basis are not necessarily the stakeholders involved in the design, implementation and launch of this new cashless payment system. Matatus are operated by drivers and conductors, not the owners themselves. They, together with the commuters, are the end-users. Call them the wananchi, as they do in Kenya.

From the technology point of view, the implementation of the cashless payment service using Near Field Communications on an Android smartphone and a plastic prepaid card, was a very simple matter. All you need is an app downloaded on a mobile in the hands of the conducter who can then swipe passenger's cards when accepting fares. Passengers can pick up these cards for free at any Equity Bank agent - ubiquitous in Nairobi - and top them up either directly at the agent or through the MPesa system.

Photo via @rnagila on 5th March 2014 of matatu strike in Nairobi
 But from the people's point of view, and this is where the distinguishing elements of the operating environment come in to play when looking at the informal economy prevalent amongst the mass majority, often called Kenya's kadogo economy, this payment method comes with some drawbacks. Here are some that come top of mind:

From the operators' perspective

The shift from daily cash flow and living in the ebb and flow of the kadogo economy is a shock to the people whose livelihood has been directly affected by this system. Where the operators of the matatus were accustomed to managing with a fluctuating yet constant flow of daily cash in hand, with all the habits of household expense management and purchasing patterns consistent with that volatility, they are now expected to accustom themselves overnight to a monthly budget. Was any financial education offered to them to ease this sudden change? Do we know if they have received sufficient salaries to cope with their expenses? The recent Nairobi matatu strike seems to imply not.

From the commuter's perspective

Cash in your pocket is the most flexible payment mechanism when managing daily expenses. A prepaid card locks in your cash, particularly if its only usable for one type of purchase. For example, you might need to purchase milk and bread on the way and make a decision trading off your matatu fare for food, choosing to walk home instead.  At the moment, prepaid payment cards have not yet scaled beyond the transport sector, so if you have 200 shillings in your Bebapay card, it becomes an inflexible tool without options for alternatives. How likely are you to lock in extra cash when you're accustomed to the flexibility required to manage expenses, especially if you too are employed in the informal economy? And how convenient is it to top up your card at the nearest Equity Agent as opposed to jumping on the nearest bus with cash in hand?

From thinking about today to planning for tomorrow, without the accompanying infrastructure.

The system imposes planning for the future out of context of the entire 'prepaid' or kadogo economy's rhythms. This is a huge change in behaviour required from all the end users of the system. To go from the daily rhythms of irregular income streams where coping mechanisms are habituated to minimize the volatility between expenses and cash flow to suddenly budgeting transport costs, planning in advance to top up your matatu card, changing the way you think about money is far more complicated and challenging than simply adopting a new transport payment service.

via @denniskioko on 7th March 2014
So, what about Lipa na MPesa?
Why then, as Dennis Kioko noted on Twitter yesterday, are Google's BebaPay posters being torn down in City Hoppa buses and replaced by Safaricom's Lipa na MPesa?

Looking at the Mpesa system only from the point of view of the barriers to adoption raised in the preceding paragraphs, the first and foremost advantage it offers the wananchi is Flexibility.

Your money is not locked into your MPesa account to be only used for your matatu fare. If you did need to send some to your teenager in school or make a purchase, you could access it. From the operator's perspective, accepting an Mpesa payment ensures that they will follow the regulations banning cash fares for matatu travel yet the unspoken options on which MPesa account receives payment remains flexible.

From flexible and negotiable to rigid and non-negotiable

Until the system design finds a way to cover the operator's loss of income it will not be an acceptable option. We don't know if owners raised the salaries of the bus drivers and conductors or offered them any incentive at all to change not only their own financial management behaviour but also to adopt this new streamlined (and rigid) payment system. 

Design of services for the flexible, negotiable, cash based informal economy

Can service design for the informal economy afford to overlook this fundamental aspect of the end user's behaviour and mindset, arising as it does from the very volatility of their operating environment and income sources?

Can service design afford to assume that any new payment plan or revenue model that is meant to operate for the mass majority in the developing world will operate in the same way as it would in the first world?

Can service design as practiced in the sophisticated and structured formal economy afford to overlook the very human challenges faced by prospective customers halfway around the world?

Stakeholder interviews and technology testing is not the same as fundamental understanding of the people, their problems and their purchasing patterns. Focusing on the platform alone without wholly visualizing the impact of introducing such new services on people will only raise the barriers to adoption, not lower them. This case is not a simple of of a new product introduction but one that not only impacts incomes and livelihoods but also requires massive behavioural change from the end users.

I'll be following up on writing further on formalizing the informal after a literature review.

March 6, 2014

The curious case of Google's Beba Pay: a mobile payment app that users refuse to adopt

This week, news from Nairobi, that hotbed of mobile money innovation, opened up a Pandora's box of reflections on payment plans, service design issues and the challenge of technology adoption in the mass markets of the African informal economy. None of these are 'bad' things in their own right, but taken together, they have resulted in a perfect storm for innovation planning.

Standard Digital published an article on the 23rd of February, titled "Matatu operators opposed BebaPay", viz.,
Matatu operators are opposed to the BebaPay — a cashless payment system for commuters. The platform, launched last April by Equity Bank in conjunction with Google, is facing challenges.
 A single sentence. Yet when parsed further, it contains many implications for what exactly has been happening in the informal transport sector in Kenya and the potential opportunities as well as possible repercussions for players in the mobile payments space.

The Background

Back in September 2013, the Kenyan government announced a ban on all cash payments for bus fares and this will go into effect on July 1st, 2014.  By January of this year, there were debates by reputed  bloggers on whether this move was even one that could conceivably be implemented realistically speaking, given that top down imposition of a technology has rarely prospered. Kachwanya said,
Yes cashless payment is much better and I personally have campaigned for it  for years. But you can’t say you outlaw cash payment. There things which are good and need to be done but the society needs to evolve before going out right into some of those things. At this point in time cashless payment will be great for some in Kenya, but unfortunately majority of Kenyans are still not ready for such drastic shift. To start with, this should be left for market forces to determine the time and speed of adopting cashless mode of payment and not some sort of directive from the Government.
This is a move to formalize a sector of the informal economy, and conceptually a worthy one where benefits to multiple stakeholders - transport business owners, banks, payment service providers, the tax authorities and the government - are immediate and obvious.  The real world challenges of attempting to bridge the formal and informal economies I will cover in a subsequent blogpost.

The Business Case 

This has the potential to become an extremely lucrative opportunity for service providers and application platform owners, not to mention the intermediary banks. The formalization of an entire industry, public transport, has meant a new scramble for this legislated pie. Safaricom, the service provider behind MPesa, didn't need investment in developing new services and simply started signing up bus operators and here are the numbers on the potential ROI,
The Economic Survey 2013 values Kenya’s road passenger transport business, which is dominated by matatus, buses, motorcycles (boda bodas) and three-wheelers popularly known as tuk tuks, at Sh205 billion. This means that providers of electronic payment systems as demanded by the Safaricom and Equity Bank stand to potentially earn upwards of Sh2 billion annually assuming a transaction processing fee of one per cent for payments. 
And for Google and Equity Bank, who launched their product 6 months earlier, the opportunity is manifold:
Equity Bank said it is targeting the more than 1.5 million Nairobi residents who use public transport daily.

“This system will help eliminate the cost and risk of handling cash. It will also help formalisation of the transport sector because as banks, we can now fund this sector without fear since we will have the financial status statements of the industry players at hand,” said Equity Bank CEO James Mwangi.

The public transport sector is a key economic driver whose growth could power the economy, but has been held back by the disorderly nature of the industry.
Furthermore, stakeholders such as the matatu owners, are said to be pleased with the aspect of the payment system directly depositing passenger fares into their bank accounts, bypassing the crew of the matatu, eliminating opportunity for fraud, theft, corruption and loss of income.

The Technology and Process

From the same article linked above, here are the relevant snippets about BebaPay:
Equity Bank has partnered with global IT giant Google to introduce a cashless commuter fare payment system that involves the use of pre-paid plastic cards to settle public transport bills. The partnership marks Google’s first introduction in Kenya of its Near Field Communication (NFC) technology, which it has been promoting in some developed economies.

The card-based system dubbed BebaPay is based on Google’s NFC technology, which runs on the Android mobile phone operating system. Users will swipe pre-paid cards against android-based smart phones [with a special app] that will be given to public transport customer attendants.

The cards, Mr Mwangi said, will be available free of charge at Equity Bank service agents, where they can also be loaded with money. The cards can also be reloaded with cash through the bank’s mobile banking platform, without incurring additional cost, or through M-Pesa Paybill.

Matatu owners will be able to access the money paid by commuters immediately, and can access records of their bank accounts in real time through a system interface, allowing them to track the inflows from their vehicles.

The public service vehicle operators will be required to have the BebaPay application on smart phones in order to accept payment from commuters. Commuters on their part will receive free SMS receipts once they make payments.
On the look of its, given the context of the regulatory changes in the operating environment, the lucrative opportunity for a successful service and the ease of use and accessibility of the technology, the solution seems like a no brainer. In fact, both MasterCard and Family Bank have announced the impending launches of their own solutions during this past month as well. A scramble in a teacup, one could say.

The Discussion

So why does the news that matatu operators are unhappy with the system continue to make me hesitate to state that its just a matter of time and people are always unhappy with change and everybody will settle down and stop complaining and get used to it by the time the deadline in July rolls around?

The original article quotes some matatu operators as saying that the system leaves them with no cash in hand at the end of the day, or that they end up in the lockup due to some unhappy cop. Additionally, some are 'losing' their android smartphones as a way to revert back to cash transactions.

These are all 'bad' things - I use the air quotes deliberately as I am not in the habit of making value judgements on observed and existing user behaviour, merely documenting them as elements of the operating environment in which this system must succeed - and from the matatu owner's perspective, per the article, the new payment systems will eliminate them.
Matatu Owners Association chairman Simon Kimutai, speaking during the launch of the card in April 2013, said the cashless system would help investors in the industry to control their cash flows and reduce losses that they incur from theft by matatu crews.
Yet, in an aside to a tweet by Emrys Schoemaker requesting a comparison of news articles against reality, one does note how everyone seems to be saying the same key talking points. Whether its the public relations person quoted in the very first article, or other major stakeholders in the subsequent ones, the benefits stated are not only all sounding alike but none of them benefit either of the end users - the operators of the transport vehicles and the commuters.

Where is the user's voice in this huge shift that will impact their daily bread? And what is the benefit to commuter?

This all too common oversight in traditional approaches to product and service innovation, based as they are on opportunities created by top down regulations, is what has been bothering me all day about the news. The implications throughout have been that because commuters will have no choice but to adopt this new system of payment, all the various providers have to do is throw their services out there and make a big fanfare around the launch whilst signing up as many routes as possible.

The reality, which Kachwanya highlights,
There things which are good and need to be done but the society needs to evolve before going out right into some of those things. At this point in time cashless payment will be great for some in Kenya, but unfortunately majority of Kenyans are still not ready for such drastic shift.
 is that even while the public transport industry might be regulated into the formal economy using the technology of mobile payments, there is still the rest of the informal economy, on which the majority of the commuter's depend upon for their income, to take into consideration. And this one, which is being regulated, is one of the main arteries pumping blood into the that system, as matatus transport those informal business women and men to their markets, transport goods and materials and act as a conduit to the hubbub of the hustle.

Should a Google be thinking of phasing in the payment plan, taking behavioural change and the economic operating environment of the majority of those who must use their service into account?

Have these prepaid commuter card services given a thought to the way cash flows in the informal economy and the purchasing patterns of those who make their living within it?

If the matatu operators are refusing to adopt these services, were any alternatives offered in the system to replace the benefits that the existing cash based offered them?

You instantly remove all flexibility from an ecosystem, leaving it rigid and non-negotiable viz.,
“With the system, you cannot be left with some cash at the end of the day to even buy milk since we depend on salary,” said Peter Mwangi, a conductor on Route 33.
Despite aggressive marketing, BebaPay is still struggling with few matatus embracing it. Normally, the conductors and drivers only remit the amount collected from people who board the matatus at initial departure points.
Flexibility* in time and money is the characteristic that distinguishes the informal economy from teh formal for those who manage on irregular income streams from a variety of sources, and this is also why the prepaid business model is adopted by 96% of all mobile phone users on the African continent.*

Given the stakeholders are the government, the banks, the transport owners and the mobile payment service providers, whose responsibility is it to understand the elements of the informal economy that make it work and seek to identify the touchpoints to bridge the gap between the formal and informal successfully?

When a service fails to be adopted, such as BebaPay, is it the fault of Google's service design process or Equity Bank's? Is the problem with marketing or is it with "corruption in the system"?

Or, as I see it, are those the easy answers to this problem and  a goodly dose of contextual understanding and user research to support the desk research and boardroom strategies could have offered insights on how to introduce formalization to a hitherto informal yet extremely critical industry?

I'll explore both the issues from the point of view of the informal (or prepaid economy) and service design and innovation for these environments in subsequent posts. 

*From my 5 years of user research documented here.


February 24, 2014

Emerging Futures: Opportunities in Digital Africa

In January 2011, my friend Dirk Knemeyer, Founder of Involution Studios, an internationally reknowned app design studio, suggested I write a series of articles on the imminent opportunities in technology and design emerging across the African continent.

That first article in the series “Opportunities in Digital Africa” was published on 22nd February 2011. Below, I’ll link to each article in the order it was published along with some key snippets to give us food for thought and reflection. Three years seems like a good time to refresh our view of the emerging future we saw back then and compare against the trends and activities of today.

Africa: The Next Frontier
What kind of opportunities are there? Who are these new customers? Where are they and what do they want? Is it possible to step away long enough from the overriding concerns of chaos, poverty, alleviation and humanitarianism to consider a long term business strategy in a sustainable manner? Certainly, yes. Google, for example, has been investing in a significant African presence with offices in Ghana, Senegal, Nigeria, Kenya, Uganda and South Africa. Needless to say they see the potential of this burgeoning – and no longer dark – continent. Acumen Fund’s East African Manager Biju Mohandas was recently quoted as saying:
“This whole region is growing dramatically. The nature of conversations is changing from that of a continent in shambles, and that requires aid, to a continent that is becoming the next big growth area in terms of economic interest.”

From OLPC to VC: Africa leapfrogs the digital divide
The advent of undersea cables directly linking even small landlocked nations like Botswana to high speed fibre optics means costs are halving as nations come online at top speed. Until now, Botswana had been dependent on expensive and slow satellite internet; now they see opportunities for e-governance policies to be implemented as well as benefits to education and the economy. For African nations, e-governance allows them to deliver services via technology into places where setting up physical offices would be difficult. In fact, building physical administrative infrastructure is so difficult and expensive that e-government has become attractive enough for states such as Kenya to assign high level personnel and resources to the task.

Challenges present opportunities: innovation in Africa
A vacuum exists in areas as diverse as transportation systems, distribution networks, basic raw materials, tools and spare parts. Lack of affordable financial devices, such as loans or overdraft facilities for small- and medium-sized businesses wishing to expand without waiting to accumulate sufficient cash or accessible consumer credit, is a constant hurdle for a population of irregular employment and often no bank account. Risk and uncertainty in this environment are considered endemic leading to high interest rates, closed business networks that operate on trusted referrals, and a healthy skepticism that a system will work as advertised. Yet, for the enterprising, these are the very environmental conditions that offer immense opportunity for creative ingenuity and innovation.

Mobile in Africa: from SMS to Android
A shift away from SMS-based solutions is expected, as user habits change and Internet-based, apps-driven services become more popular. It’s clear that an appetite for mobile content exists and continues to grow but it is not yet the mass market norm. That day, however, is not too far away.
The competition is increasingly about the customers, and what tasks they seek to complete on their devices. Simply building the right apps/content/service to meet that need won’t be enough: it will become a matter of getting the purpose, the platform and the price just right for each demographic. Market creation and customer education will drive each other in tandem.

Software in Africa: more, better, different
Today the integration of the mobile platform and conventional computer systems is a growing business. Text based interaction on the SMS and USSD platform will remain the primary need in the near term as mobile apps, while flexible and convenient, have yet to establish a foothold to the same extent as basic services.

Many software applications which take “always on” connectivity for granted as part of their evolution may not be wholly realistic in Africa for quite some time to come. The software industry reflects the uneven progress seen recently in the previous article on mobiles – pushing the envelope with new ways of transacting everyday activities like paying wages by SMS, even while dealing with challenges of piracy, localization and inadequate computing infrastructure. Still, it is this environment in which some of the most creative and innovative solutions for low cost technology deployment have been tried and tested.

Investing in Africa: challenges and constraints

To successfully enter the African consumer market on a tech platform with content and services means there is a need to reconsider three aspects:
  • Business models, which benefit from cash received upfront rather than implementing a costlier billing process and collection cycle  
  • Customers, who may not have the purchasing power for impulsive downloads (sharing and exchange are far more common) 
  • Services and applications, to leverage the differences in the environment while providing value to both the end user and the company.
Solving the puzzle of African opportunity is eminently achievable, it just requires thinking and acting in ways that are likely new and perhaps uncomfortable. The rewards, however, are well worth the effort.

February 2014, where are we now with what we saw emerging from the African digital landscape three years ago? 

February 10, 2014

Prototyping for pennies




That's Teemu Ronkka, the Electroshop leader at the design factory, explaining his moisture detector. Its a prototype he put together for just pennies of a humidity sensor using some copper 5 eurocent coins, lemonade and bit of sponge.

January 28, 2014

2014 is the year of the wooden horse

Startup Sauna, Espoo, Finland

What am I doing here?

Sitting upstairs next to that guy and typing this. Just got my keycard and I have no idea what I am going to do next but they've offered me a chair and told me I can hang out as long as like.              



FAQ on Value creation

The NDA expired 4 years ago


1.    Problem statement:

How do you build and maintain trust and commitment without face to face contact with your customers?

Value proposition:

Through a cohesive, integrated strategy of brand building across all information media sources, whether they be handhelds, mobiles, monitors, screens or even the product interfaces on medical equipment


2.    Problem statement:

How do you create and implement a consistent brand experience across multiple channels?

Value proposition:

Bringing together global talent in branding, graphic design, visual communication, user interface design, interaction, experience, information architecture and the back end software skills to bring to life your corporate vision in a compelling brand story. By being technology agnostic, we create the environment for your users to experience your brand that best suits the business challenge

3.    Problem statement:

There are too many brands competing for mindshare across the same platform, how do I differentiate?

Value proposition:

When the service provider, the manufacturer and the application developer all need to capture mindshare and contribute to the total user experience though one mobile phone interface, our responsibility is to ensure that our client's story/brand/message are consistent and compelling in that tiny space of the view screen.

4.    Problem statement:

How do you ensure that you've covered all touchpoints to build your brand and customer experience in an integrated manner?

Value proposition:

By applying the observation techniques of user research as well as secondary research, i2 can uncover all brand building opportunities and harness the future potential of your current technology.

5.    Problem statement:

How do you go forward within the rapidly changing technological landscape and proliferating information channels? Time is the only commodity and catching your customer's attention needs innovative means of communication design.

Value proposition:

i2 can assist you with working prototypes to visualize the future steps towards introducing disruptive innovation in your messaging and media to create that buzz in the market.


This problem set was written by Niti Bhan for Method, while consulting with Kevin and David for their new service Interface Innovation (i2) in November 2005.