Perspective

Aspiring changes; inspiring futures

noreply@blogger.com (Niti Bhan) — Fri, 18 May 2012 06:04:00 +0000

I've been in New Delhi this past week for some work and its been interesting to see the shift in thinking and aspirations. The first few visits in the early 2000s showed the dramatic surface changes of a noisy market opening up to the rest of the world. Today it struck me that many of those obvious things were simply cosmetic - more billboards, more shops and more traffic, a larger variety of consumer goods - all the things that had never been seen before in pre-liberalization India where swadeshi was all important.

If asked to describe what I've sensed this week as my overall impression I would say its the subtler, deeper indicators of the increase and importance of aspirational decision making. A humble example from the home would be all the complaints of there is no more household help to be had, not even migrant workers from the impoverished parts of the nation like previously. They don't want to move to the city anymore now that there are schemes which offer them monthly grants from the government and employment opportunities are increasing right near their homes.

Unpacking that last shift, the seeming and perceived reluctance of rural residents to move to urban metros seeking employment, is a project in its own right, but even so, its implications are significant, imho, even if still in the form of weak signals.

I went out deep into the greater National Capital Region for a meeting yesterday at an office complex and while I couldn't pinpoint each and everything I observed without stopping for a deep analysis, my first impressions left me with a sense that the benefits of employment, education, communication... heck, call it modernization... were now available much much further down the socio-economic strata than ever before.

Has India magically become Singapore? No, and I don't think that is even something that is viable given the scope and scale and magnitude of the change. But in a very Indian way, even with all the problems, my country has managed to make a toehold on the first world rung of the ladder in the past two decades and emerged from its cocooned pigeonholes.

I look forward with anticipation to any opportunity to take pulse of the rural market towns and regional centers to see what the India under the radar thinks. I think the key word will still be aspiration but more critical will be how its interpreted and understood in context.

Fool's gold and cornflakes

noreply@blogger.com (Niti Bhan) — Thu, 10 May 2012 08:57:00 +0000

@syamant pointed me to an interesting article on HBR yesterday "Are you targeting a phantom market?" which was at once amusing and yet quite sad in the spectacle that Kellogg's Cornflakes has made of itself in India.

How is it possible that Kellogg could envision building a $3 billion business in India, invest $65 million in the first year alone, and end up, 16 years later, with only $70 million in annual revenues?

From early 1994 to 1996, I had the good fortune to be directly exposed to the first gold rush of multinationals entering India's emerging market opportunity after liberalization. When the second round of global notice began in the mid noughties, I reminisced on this rush and on Kellogg's continued errors. In the comments, Chris Gee said back then (January 2006):

To some degree I think we can see the arrogance of these multi-nationals. Almost a mindset that “everyone wants to be like the West anyway. If we offer them the same things WE like, they’ll learn to like it too”.

I remember in college I had a classmate from Portugal. He told us of McDonald’s rapid expansion into Europe during the 80′s and mentioned that the expansion had stalled in Portugal. While this was shocking to McDonald’s executives, it was not shocking to him.

“Chris” he said to me, “McDonald’s is a fast food restaurant. But in Portugal, we like to eat SLOWLY. We sit for hours, enjoy our meal, have coffee and wine and THEN we go back to work! McDonald’s will not be a huge success.” I don’t know if McDonald’s has re-worked the way they approach dining in Portugal in order to position themselves to be more attractive to Portuguese youth but I thought the sentiment expressed was interesting.

Different countries and different cultures have different needs.
.chris{}

Six years later, they're still quoting Homi Bhabha's finding on cold milk and cereal in the Indian breakfast job and Kellogg's is still flailing around. Why is it so hard to acknowledge the need to observe morning habits in Indian households?

Cookstoves matter less than the ladies who must use them

noreply@blogger.com (Niti Bhan) — Wed, 09 May 2012 10:40:00 +0000

Photo credit: Goverdhan Meena, village Rawal, India Jan 2009

The Wonkblog covers findings from a randomized control trial on the impact of cookstoves in a blogpost titled "What cookstoves tell us about the limits of technology" where they share such insights as:

So what went wrong? Basically, none of the earlier evaluations of the clean cookstoves had taken into account how households in places like India would actually use the things. In early tests, there were trained technicians on hand at all times to inspect and repair the stoves. Not surprisingly, households used the stoves frequently. But when the technicians departed and the owners had to clean the chimneys themselves, they lost interest over time. People were spending too many hours conducting repairs and eventually just preferred to switch back to indoor cooking fires.

I just need to stop being surprised at how little the people involved in these grand schemes and plans matter. The article goes on to add,

What’s more, laboratory tests had found that the more modern stoves could boil water more quickly using less fuel. This led to the idea that they could help households burn less coal and biomass overall — and so cut greenhouse-gas emissions. But Hanna and her colleagues found that the cleaner stoves did not appear to affect how long the households in Orissa actually spent cooking. “[T]here is no evidence,” they write, “of a reduction in greenhouse gas emissions.”

It’s a dismal finding. But it suggests that for aid projects — as well as for any effort to reduce greenhouse-gas emissions and tackle climate change — having the right technology won’t always be enough. “As engineers and scientists, it is easy to fixate on the technology,” concludes S.C. over at the Economist’s Free Exchange blog. “It is a lot harder, however, to predict human behaviour and how that interacts with technology.”

So I dug deeper to go find this Economist blogpost by the mysterious S.C who, in addition to articulating the above challenges far better, goes on to conclude, far more insightfully, that:

But the belief that countries can leapfrog on economic and social issues solely on the basis of technology seems optimistic. The poor can be frustratingly stubborn to an economist for failing to conform to a rational-agent model. Instead of expecting the poor to "do the right thing", a better approach may be to design devices that fit into their lives with minimal effort. Else, despite good intentions, these programmes won’t affect meaningful change other than the addition of a shiny new toy.

Not to mention that nobody bothered to train people on maintenance, unless that was the point of the randomized control trial - to see if the old "chuck the technology at them and they'll manage" approach still works. I think that only ever worked for the bicycle. But the comments in the Economist blog are fascinating to read, and one stood out:

Improving productivity with more advanced technologies requires change in work routines (habits and customs to process food or learn).

The advice in the final lines doesn't work. Adapting technologies to the existing work routines ("a better approach may be to design devices that fit into their lives with minimal effort") instead of altering them also produces marginal results.

It is the combination of the two: new technologies and changes in work routines, that bring results at a higher level.

The "may be" in the advice can be scrapped. One has not only to learn people how to use them, but how to adapt their daily habits.

Asking Mrs Meena (in the photograph above) to change her entire day's behaviour (cooking in these contexts takes a lot more time than you imagined) that too, using a cookstove that she made herself, as part of a harvest festival along with the other village women, is asking a bit much from her if there is little or no value or understanding about these barriers to adoption.

Scientific methods and metrics are all well and good to tell you that X does not mark this spot, but its only through a willingness to actually imagine that Mrs Meena might have something to teach you, that one will be able to come up with a solution that she might actually aspire towards wanting to own and use.

Putting some real numbers to the world changing on the mobile

noreply@blogger.com (Niti Bhan) — Mon, 07 May 2012 14:48:00 +0000

VentureBeat writes last week on How tech companies are waking up to global responsibilities, opportunities and shares this oft quoted example of world changing,

As investment in social enterprise becomes more common, major brands and venture capitalists alike are learning how to make a difference without sacrificing their profit-driven missions.
Nokia is a prime example. With 51% of the mobile market share in Africa, it’s one of the continent’s most recognizable brands. Lacking televisions, computers — and, in some cases, electricity — many people throughout Africa access information and communicate solely through their mobile phones. Nokia has not squandered this opportunity - it’s using it to extend affordable, life-changing services and tools to African farmers.

Through its Ovi application store, Nokia offers Ovi Life Tools, an SMS-based app available on extremely cost-effective handsets that provides farmers with timely weather and agricultural information to optimize preparedness and crop yields. Nokia partners with organizations like the Kenya Meteorological Department, agriculture NGOs, and more to serve up tips, techniques and market stats that could help them prevent food shortages and get the best prices for their goods. Life Tools is also being used to deliver lesson plans to teachers, learning games to kids and accounting services for small businesses.

Now that I've been taking a deeper look at what companies are actually able to do, among these population segments and exactly how successful they've been, I have a very large dinosaur bone to pick with this article (and its accuracy).

Lets go back to last month and what Nokia CEO Stephen Elop said in his Q1 2012 Interim Report so that we can be sure of getting our information straight from the burning platform.

Nokia announced an evolution of Nokia Life Tools, now known as Nokia Life, which provides life-enhancing information across the range of Nokia Series 30 and Series 40 products. Since its 2009 launch in India, the SMS-based service has expanded to China, Indonesia and Nigeria. To date, more than 50 million people have experienced its benefits.

Lets unpack this information first before we look at what poor VentureBeat had to write as a message from their sponsors. First, a quick search online brings up 2010 population data from the World Bank for India, Indonesia and Nigeria (we can double it to add China) - we're talking roughly 1.2 billion for India, 240 million for Indonesia and 160 million for Nigeria or a total of approximately 1.6 or 7 billion people.

50 million "experienced" its benefits (did they pay for the service which is/was supposed to be have a revenue generating business model or is this experience a weaselly choice of words?) - Google calculator tells me that 50 million/ 1.5 billion is 0.03333 or 3% of the population targeted with the service. In the 3 years since its launch, even with the dropping market share, that is an insignificant amount of people to reach given the percentage of the population of each of these countries who live in rural areas, are farmers and are Nokia owners. Taking a low ball market share of 30% of the rural population having Nokia phones and rural/urban divide which is approx 60% of the total still comes to 300 or 400 million people BEFORE we add China. Adding China, we now reach somewhere between 8 to 10% of the population benefiting from the experience. Is it worth the effort and the investment?

Now we go back to VentureBeat - what value does the Kenyan Meteorological Department offer populations in India, Nigeria, Indonesia or China? A little more digging reveals the February press release on Asha from which the Q1 Interim Report has lifted its paragraph directly:

Nokia Life benefits 50 million users
Nokia also announced an evolution of Nokia Life Tools, Nokia Life, which provides life-enhancing information across the range of Nokia Series 30 and Series 40 products. Now with additional relevant services, social elements and fresher look, it's available first on the Nokia Asha 202 and 203 phones. Since its 2009 launch in India, the SMS-based service has expanded to China, Indonesia and Nigeria. To date, more than 50 million people have experienced its benefits.

Nokia Life delivers content in the areas of parenting, life skills, education, health, entertainment and agriculture. For example, Nokia Life can help parents focus on children's physical, emotional and social growth needs, from birth to adolescence. People can also learn English using basic SMS communications, and enjoy ringtones, sport news and trivia.

"Nokia Life services provide an entry to the world of digital content and an internet-like experience for many people who don't yet have access to data plans" said Dieter May, Nokia's senior vice president of Mobile Phone Services.

Really? Come now VentureBeat, if you really had a clue about what African farmers were doing online with their mobile phones, you'd think twice about writing this bullshit passed on to you directly from the PR department of Nokia. Since its inception, Life Tools or Life has been nothing less than a PR driven storm in the teacup, with nary a signboard or radio advert or even a mention among the actual populations where its supposed to be making this difference. Each year, I hear about it, the very same phrases with minor upgrades for modernity are used to describe it and the folks in service development in Espoo and Otaniemi parrot their own press releases as proven fact. In fact, I'd reviewed it in September 2009 from India, on a now defunct blog/URL where the response from those claiming to be on the development team left a lot to be desired. However, here's a snapshot from that experience (here's the entire folder of photographs):

With all due respect to all the best intentions in the world, until these services are assessed and evaluated as any other profit generating business model, they will end up in the list of "BoP" examples trotted out in each conference, presentation and article on blind faith alone.

Someone prove me wrong about this example please. Show me the download numbers, the SMS quantity sent or an answer to this question languishing on the webz.

Cracking the code for sustainable "BoP" business models

noreply@blogger.com (Niti Bhan) — Mon, 07 May 2012 13:08:00 +0000

Unlearn the past to create the future ~ C K Prahalad

In the half decade or more since I increasingly began to focus on the challenge of the emerging consumer opportunities among the lower income demographic of the developing world, I've yet to hear of an unconditionally successful business model specifically designed for this segment of the world's population.

We've seen the unprecedented success of mobile phone adoption with double digit growth rates in Sub Sahara and rural India or China, but was the prepaid business model designed with the needs of the informal economy in mind or an accidental superstar? The same goes for the oft quoted MPesa mobile money transfer system in Kenya or the virtuous qualities of the Nokia 1100.

The concept of the Bottom of the Pyramid, now called the BoP, has overshadowed the rest of CK Prahalad's contributions to management and strategy - the core competence of organizations is one great example. Today, I'd like to remind us of a speech he made in Hyderabad's International School of Business way back in early 2009.

Overthrow the tyranny of dominant logic, he said, if you want to be successful in today's global economy.

Dominant logic is the result of a pattern of socialisation. All of us are susceptible to it. Often, the dominant logic is implicit. For over fifty years, developed country managers, consultants and academic researchers have been socialised to believe that developing markets cannot be a source of innovation. The academic community has, by and large, accepted this notion as well. The dominant logic provides the theoretical lens with which we see the world. I think it's time to challenge this received wisdom.

And so, I've been thinking of overturning the dominant logic of current day interpretation of Dr Prahalad's Bottom of the Pyramid concept. Lets start with the basic assumption:

This is the best known visual of the pyramid that we have all seen. And its fundamental premise is based entirely on annual income - that is, the so called Bottom or Base of the Pyramid is the vast swathe of this planet's population defined solely by their cash flow. The Next Billion or 4 Billion or the "Other 90%" have neither been segmented with the consideration that global marketers give to the rest of their customer segmentation in 'ToP' markets nor their unique characteristics explored or explained in any further detail. I have been working on the latter aspect and will be sharing those thoughts soon but in this post I want to overturn the dominant logic of measurable income as a quality that could conceivably be applied to people who for the most part earn their living in the informal economy (Neuwirth's Systeme D) and their cash flows are irregular or unpredictable. How can one estimate one's income (if asked) when there is seasonality in cash flow over the course of the natural year?

The concurrent and as damaging assumption that goes hand in hand with this framing is that of 'survival markets' and thus the aspect that these are the poor (all 4 billion of them), a label that is loaded with so many assumptions regarding behaviour and needs. It is this poverty that needs alleviation that has resulted in attempts to focus on people's "needs" rather than the very human and aspirational "wants" of the audience. I've been pondering whether its due to this framing that the majority of business models are still failing to succeed at any discernible level beyond the initial pilot?

What if we turned this whole dominant logic on its head? What if we stopped focusing on people's needs and instead looked at their wants... I don't mean to stop offering them a cleaner cookstove or better solar light and sell them alcohol and tobacco instead ... I mean what if, even though the need might be that of modern energy but the human want is entertainment? That is, what people are seeking is a way to listen to the radio or watch TV rather than a solar powered lantern that doesn't smell or smoke like kerosene?

You'd still be selling them the same thing, just approaching the whole marketing strategy from an entirely different way from what is being done right now for BoP audiences. Like customers (like human beings) everywhere, they are no different in seeking aspirational goals or status yet we focus on talking about toilets and firewood and kerosene... Is it any wonder nobody wants to listen?

By first questioning, then validating through field testing, the original assumption/s on which "the BoP" market concept rests, perhaps we can start designing business models from scratch that are resonant with the target audience and their particularities with respect to their cash flow, spending habits and environment, than simply focusing on a random number as "income" alone.

Out of touch, out of sync: The future of American Design

noreply@blogger.com (Niti Bhan) — Tue, 01 May 2012 12:10:00 +0000

Since I'm still in the mood to look back at the progress of the design industry in this past decade, let me bring up another article I'd spotted in FastCo as well. This one is from September 2011, titled "American Firms Now Embrace Design, But They’re Aging Fast. What’s Next?" written by FrogDesign's Robert Fabricant. Going by titles alone, I hope this isn't the renaissance of the design industry's intense navel gazing of the 2005-2007 era, although, I've heard it said that design writing tends to consist of little else. Lets look at what he has to say:

This wave of "agile innovation" poses a new set of challenges for designers, as many of the tools of design are already in the hands of entrepreneurs and engineers. Designers can’t wait to be "hired" to enhance or improve these offerings. We must be active participants at their inception. If designers are truly skilled at identifying unmet human needs and creating the breakthrough products to address those needs, then, increasingly we will need to prove our value as entrepreneurs. American designers can and should lead the way in showing how you adapt the design process to rapid, real-time product development. And lead the way in demonstrating what can be achieved by designers as entrepreneurs in our own right. Ten years from now I hope to see designers able to attract VC capital at the same rate as MBAs and software engineers. That is the next big mission for American Design.

Amazingly, just a few months later, we have this Reuter's piece In Silicon Valley, designers emerge as rock stars (though its publish date is Friday the 13th of April, not the 1st).

Five years ago, Justin Edmund arrived at Carnegie Mellon University, a floppy-haired freshman, with artistic talent and dreams of joining a venerable design firm like IDEO or Frog. But during his sophomore year, a recruiting pitch from a Facebook employee turned his head, and prompted a detour of his ambitions.

"It didn't even occur to me that working at a tech company was something I could do," Edmund said. "I switched my trajectory completely."
[...]
Edmund isn't alone. Inspired by the legacy of Steve Jobs and lured by the promise of the current tech boom, young designers are flocking to Silicon Valley, where they're shaking up a scene long dominated by engineers and programmers.
[...]
Last year, McClure put down money to create the Designer Fund, a program that identifies entrepreneurs with strong design backgrounds and offers seed money and mentoring from experienced founders like Putorti and Chad Hurley, of Youtube. The fund, headed by Enrique Allen, a 25-year old graduate of Stanford's design school, has partnered with more established venture investment firms like Khosla Ventures, Andreessen Horowitz and Kleiner Perkins.

"We're reshaping a lot of how you build a company," McClure said. But, he added, "there's still a resource and talent shortage" for interaction designers.

Young American designers seem to be already leading the way, as the rest of the article clearly demonstrates, attracting VC interest and a fund developed specifically for them. Can this shift have suddenly happened in the 6 short months since that article was published at Fastco? Apparently not. Dave McClure writes in BusinessWeek back in February 2010 on "The Value of Design to Startups" where he says:

It certainly doesn't hurt to have code jedis at the helm of your starship, but engineering for consumer Internet startups need only be competent. The real challenge is finding designers and product managers who can build an awesome product experience, and marketers who can figure out effective, scalable, integrated distribution strategies (whether organic or paid, whether technical or creative).

So are these two clusters of highly intelligent people simply talking past each other, or has the design industry indeed aged and faded to the extent that they're unaware of what's happening in the cloud around them?

From the perspective of someone who was once actively thinking and writing about design, from a desk on a hill in San Francisco, just five years ago (when Justin Edmond arrived at CMU in fact) it seems that American design has a bigger problem they face today - that of still living in an echo chamber whilst gazing at their navels. Man, even I've archived those posts on a dusty Wordpressed shelf and moved on to the next frontier. Once upon a time, Fast Company was as edgy as Wired in the heydays of "make it look like Wired" but today, it seems to have become the "business strategy" thinking designer's bulletin board.

Going nowhere fast: Looking back at a decade of design thinking

noreply@blogger.com (Niti Bhan) — Tue, 01 May 2012 10:30:00 +0000

"He who doesn’t know where he came from doesn’t know where he is going” ~ African proverb

Today, I came across an article in FastCo written by one of Monitor/Doblin's people, Melissa Quinn, whose bio seems to imply she is responsible for selecting the right mix of professionals from both business and design. Reading What Both MBAs And MFAs Get Wrong About Solving Business Problems took me back in time to a wholly different era, just about 7 years ago to the Spring of 2005, when "Business" and "Design" first began to intersect on a graph that had until then been asymptotic. That I feel grandfathered is a side effect, but that the conversation has gone nowhere in these intervening years is a much worse feeling for one who has been immersed in this conversation for a decade. And, I was a latecomer as those articles reveal.

Why did Quinn's article wake up the ghost so suddenly? She wrote:

And I was less than impressed with the business-thinking skills of designers the following Monday morning, when I interviewed 10 of them at the Institute of Design in Chicago for jobs at Doblin. To most candidates, I asked of the ideas they presented in their portfolios, “But how does it make money? Who will pay for that? How much would you need to sell to be profitable?” and was met with far too many blank expressions when I did so. Design schools have a long way to go to integrate good business thinking into their programs. In order to make their value known to the world, designers need to speak the language of business--that’s where great ideas get funded and developed. Design education needs as much of an overhaul as business education if we are to benefit from the talents of design thinkers in the business world.

I hope that we see meaningful reinvention of both design and business education so that the business world can realize the true value of design thinking. Until that happens, Rotman’s Business Design Club would be wise to require challenge teams to comprise both designers and MBAs. At least it would level the playing field, and it may improve the educational experience for both--assuming each can decipher what the other is saying.

"Ahh, my poor students" was my first thought, forgetting that I'd not been Director of Graduate Admissions and head of the department for all things students since the summer of 2005. Ironically, most of Doblin's current team are either former classmates or former admits, can you blame them for raising the bar too high for new recruits? Still, pride in the past aside, one must now ask what the problem is with the curriculum and the teaching at the Institute of Design if after 7 years they still haven't learnt to think about the bottomline?

After all, hadn't I taken Design Planning with Doblin's Keeley himself? His curriculum began (in the Fall 2003) with an introduction to most of Porter's classic frameworks of strategy and competitive analysis interspersed with the usual suspects from Bschool textbooks. If anything, that should be the program (Human Centered Design Planning) that should have incorporated the need to think about business models from the revenue generation point of view. The joint MBA/MDes came much later - in fact, Brad Nemer was the very first student to attempt both these degrees together in 2002 and that too, both were extremely intensive fulltime programs. It had taken a lot of kicking and screaming internally, if I recall those faculty meetings correctly, to finally create the merger of the two degrees into something a human student could conceivably achieve within the 2 year span.

I know that even back then, many students were planning on taking the basics of finance and accounting but today, in the Spring of 2012, I am surprised to read that business model design with the attendant consideration of revenue models and payment plans are still giving the design students a "blank expression". The irony of Melissa Quinn's complaint in FastCo is not lost on me when you consider that the original Institute of Design - Moholy-Nagy's new Bauhaus - was reinvented by Jay Doblin himself. (Read that linked PDF, its Doblin's "A short, grandiose theory of design" that first puts forth the need for design to think about business and its goals) and that Keeley is on the Board of Trustees.

I'd like to end this pondering path down memory lane with Brad's quote in the 2004 Core77 article:

"I chose the dual-degree path for two reasons. After working in several high-tech startups, where the product essentially is the company, it became clear that no matter how grand the vision, design is managed in the context of business." He said as he explained his choice of degrees, "So it is critical to understand the basic forces of accounting, marketing, and organizational management, because otherwise even the best designs in the world will go nowhere. The much-celebrated divide between "designers" and "suits" is not only counter-productive to success all around, it's inaccurate. Once you demystify business fundamentals, they become just like any other design constraint, and are no more insurmountable."

and leave it to the powers that be at ID-IIT, Chicago to ask themselves what progress they've made in this century.

An update: Victor Lombardi tweets (In) Sum: Have we thrown out collaboration? Until we learn to make unicorns, it's the *team* that needs all those skills

For some context, I'd interviewed him for that very first article as well, back in December of 2004 where he'd said:

"My partners and I view design as a way of thinking which is applicable far beyond the design of products" he explained. "Our clients want to explore innovative business strategies, ways of collaborating, and ultimately to develop their own innovation capabilities." So while Lombardi's firm thinks like designers, they work with executives to help them explore the options a more creative approach can offer. "It's not easy for people to stretch their thinking to encompass both business- and customer-centric points of view, but ultimately this is what we need to do to create innovative, human-centered organizations."

Nielson puts the African opportunity in perspective

noreply@blogger.com (Niti Bhan) — Mon, 30 Apr 2012 07:00:00 +0000

Nielson have released a new report called The Diverse Peoples of Africa covering 7 countries. While they focus on urban and peri-urban consumers, mostly earning USD200 a month and above, there is some fascinating information available in there nonetheless. This is one of them - the visual puts the facts in context, the emerging consumer market opportunity in Africa is larger than that of India and China, albeit harder to crack. They say:

As the tactics and strategies needed to reach consumers across Africa require different approaches due to varied beliefs and behaviors, each country also requires a unique strategy. To succeed in Africa, it is important to not only ensure distribution in an unorganized market, but it is just as critical to confront the challenge of delivering an affordable product that gains consumer trust through offering quality and value.

Fresh look at India's consumer market

noreply@blogger.com (Niti Bhan) — Sun, 29 Apr 2012 22:49:00 +0000

This report (PDF) by Yoshihiko Iwadare of Nomura Research Institute is only 15 pages long but manages to overturn conventional business strategy on its head in its framing and approach to new market entry for India's emerging consumer markets.

The hidden digital divide: Energy consumption and infrastructure

noreply@blogger.com (Niti Bhan) — Sun, 29 Apr 2012 10:32:00 +0000

Photocredit: Niti Bhan, Maua, Kenya Feb 2012

This is an ironbox. It is heated by placing glowing embers of charcoal inside and securing the lid. When hot, it is used to iron clothes. Variations of this design can be seen in use across India's urban centers where the isteriwallah plies his trade, ironing clothes for a few paise a piece or available for sale in shops in Iloilo City, The Phillipines. The concept remains the same.

This ironbox caught my eye in the North Meru town of Maua in Kenya. It was available for sale at an electrical and electronics store which otherwise displayed colour television sets, home stereo systems and more. Why would a charcoal powered primitive device like this be sold in a modern store like that?

For one, the most common source of electricity to power the home are solar systems and the energy source is far too weak to run a regular iron. And if there's electricity, then power consuming appliances like irons and immersion water heaters are avoided to save money on the bill.

I've covered this aspect of gaps in the infrastructure before but as a driver for innovation. Today, this scarcity acts as a barrier to growth for high tech innovation, an aspect better captured by this interview with a Ghanaian startup founder:

What are some of the challenges you face running a startup in Africa?
Inadequate infrastructural base. For software startups, internet connectivity is inadequate compared to the U.S. This means entrepreneurs have to spend more time doing research and software programming. Even where there is internet, it’s expensive and comes with low bandwidth.
Shortage in energy supply. Startups that can’t afford standby energy generators lose productive hours anytime there is power outage (which is consistent in most countries in Africa).
Low capital investment. Bootstrapping in Africa is not easy and angel investor funding is non-existent. There are a few venture funds but they aren’t adequate enough to meet the demand of startups. In addition, the terms are not favorable for most startups who want to access these funds. Worst of all, financial institutions like the banks charge high interest rates for loans making it difficult for startups to have financial stability.

When something so basic as to be taken for granted by startup founders most everywhere else in the world is considered a challenging barrier for African entreprenuers, it may as well be a digital chasm.

More or Less: the flexibility of the informal

noreply@blogger.com (Niti Bhan) — Sat, 28 Apr 2012 10:17:00 +0000

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

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

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

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

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

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

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

Your thoughts?

Lessons from working with Social Enterprises

noreply@blogger.com (Niti Bhan) — Thu, 26 Apr 2012 08:30:00 +0000

Aisle Manager at Nakumatt

By the end of my most recent project, I was convinced that the label "Bottom of the Pyramid" (or Base of the Pyramid) also known as "the BoP" was one of the biggest barriers for organizations seeking to serve these emerging consumer markets in the informal economies of the developing world.

The alternative long and descriptive sentence is not as snappy as the BoP and I struggle with this everyday as I try to capture the characteristics and qualities of this market. But the problem with the label is that it has come to be closely associated with poverty alleviation rather than an emerging market opportunity, and thus gets loaded with the detritus of the aid and development industry. If you are to be a sustainable business, you need to generate revenue if not make a little profit and for that you need to consider your target audience as your customer, not your beneficiary.

The peculiarities of social enterprises seeking to serve the poor include the existential struggle between doing good and good business. But the emphasis on the BoP as the poor, the underserved and overlooked (by myself included) diverts us from taking them seriously as financially shrewd even if economically challenged customers in their own right. We barely know where they shop and why, how they make their decisions to purchase and how they plan to pay for them, in fact there's little or no serious consumer research on these segments of the population. No wonder if they are not considered serious consumers to be wooed and won over like any other.

"Should we be profiting from the poor?" ask a plethora of well intentioned articles when those who do business with each other in the informal, cash based economies have no such compunction when doubling the price of kerosene as a premium for the convenience of transporting it 10km closer to their customers.

If we took away this well meaning yet now increasingly problematic label (with all the associations of poverty and helplessness), we'd perceive a diverse group of people with varying needs, aspirations, cash flows and consumption habits. We'd be segmenting them with the same rigour of a Unilever or attempting to reach them wherever they shop like Coca Cola. We would not be sitting around measuring impact of the soda or wondering how to scale. I'm going to wrestle with this wicked problem further but in the meantime, here are some collected thoughts from my observations in field recently:

Questioning the value of the term Base or Bottom of the Pyramid aka the BoP
But why aren’t they buying my fantastic life saving product?
Assessing social impact vs financial sustainability for BoP business models
Why so much “BoP” marketing fails in the developing world

Social enterprises and the target audience for their value propositions
What does it mean when Chinese manufacturers enter the social enterprise space?
Systems thinking and the mobile for economic impact and wealth creation
Raising some concerns about urban user research insights being applied to design for rural markets

Navigating the African market opportunity
Caution: The emerging African market PDF stampede
Cracking the informal markets in Sub Saharan Africa: the need for strategic improvisation
Insights from the South African low income market (BoP) opportunity
The ingenuity economy: grassroots social enterprises abound

Forced changes: Gmail and Google

noreply@blogger.com (Niti Bhan) — Mon, 23 Apr 2012 07:15:00 +0000

I came here to write. Instead, I've been sitting here watching the screen, stopped in my tracks by the completely unfamiliar interface. The same thing happened yesterday in Gmail, as I found myself stockstill as my brain and fingers froze while racing to find the delete button.

Don't snatch away the familiar and comfortable without any options.

I used to feel a certain sci-fi "sense of wonder" about design; design doesn’t lack for flashy theatrical histrionics — but what I’ve really come to treasure about it is that sense of *engagement.* Design isn’t science and it isn’t fiction, but it’s is a way of knowledge and a method of action; [...] it’s a path into the poetry of things. ~ Bruce Sterling, 2007

[On preview] I'm sitting here wondering where the publish button is...

Putting people first: the difference between "what" and "why"

noreply@blogger.com (Niti Bhan) — Thu, 19 Apr 2012 08:18:00 +0000

Pondering the topic of contracts and creativity in yesterday's post 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 gave the company a means to identify a problem but are not able to provide any explanation for the discrepancy. It was these very same metrics that originally identified the first region as one which would be a good location to launch a product – average income was higher, unmet need was felt by almost 90% of the population, retail outlets were numerous etc.

This is where the need for exploratory user observations in the field, in order to understand the customer base and their behaviour made sense, as the company's sales data (contradictory to initial performance estimates) needed explanation that only the people generating those same 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.

The problem with contracts: rigid agreements trying to predict a creative process

noreply@blogger.com (Niti Bhan) — Wed, 18 Apr 2012 03:48:00 +0000

The title of this post has been lifted from an email conversation with Dirk Knemeyer, where I was sharing my frustrations with a recent challenge I faced during the course of my work. I want to explore this further in writing, particularly since tweeting about it for the past couple of days helped me feel better but there's never enough characters to wholly articulate the problem. I think its one that comes up for many in the creative fields, particularly those tending to push the envelope of the 'fuzzy front end'.

The issue clearly is related to working against a ToR that is fixed in terms of methodology and deliverables, which is easy to do upfront, whereas the real value is to deliver ultimate value (which cannot be foreseen upfront – otherwise why hire you!).Your proposal needs to refer to a methodology that mentions the empathy, fuzziness, ambiguity and chaos situation, and the resulting need for flexibility. There also needs to be an explicit reference to providing ‘answers’ rather than the following of a methodology which in itself is just doing something, whereas the point is finding (substantiated) answers.

This is a quote from another email conversation which I think better captures the situation than anything I could have written. The challenge ahead is now to work out the articulation and framing of either a new or hybrid methodology or a way to capture the contingencies in the original proposals themselves.

The question I'd tweeted was posed so:

Can you successfully solve the problem and yet fail contractually or meet the specs of the contract yet fail to solve the problem?

because the situation I'd faced was an interesting, if complicated one. My client had a problem in the field. They suspected it might be something to do with one area and proceeded to create terms of reference for a research project based on their hypothesis. My proposal was a response to that hypothesis and framing of the problem area but as it was a 'Bottom of the pyramid' or BoP focused project, I expanded the scope to include a broader, more exploratory study. Prior experience has shown me that since the BoP markets are still very 'new' and thus have never been studied as deeply as the mainstream consumer markets of the developed world, one was better off exploring a broader context in order to ensure the problem had been framed correctly in the original hypothesis than simply assuming it was so.

And I was right. The solution space turned out to be vastly more complicated than the original hypothesis or terms of reference for the project, requiring flexibility of vision in order to synthesize the whole in terms of insights that the client could act upon in order to improve their chances of success (i.e. "solve" their original problem).

This meant that while my final recommendations certainly fit within the original objectives, the path and process followed meandered, in some cases quite significantly, from that originally proposed in the contract.

Thus the conundrum of having "solved the client's problem" but falling short of meeting the metrics of success.

Thus, I'm now in the situation where I need to find new ways to frame my methodology and approach - my 'offering' if you will - in a manner that allows for flexibility and ambiguity while assuring confidence that the outcome will provide value.

I'll wrestle this out here on the blog since I find that much of it draws upon the original pondering I'd done when I first began looking at the ways the tools from the field of design integrated with the needs of business and strategy. Since then I have gain practical experience in the field and the time seems right to reflect upon those original and early thoughts and refine them, or rather, its time to iterate the prototype based on user feedback from the field ;p

Empowering the girl child: Simple means

noreply@blogger.com (Niti Bhan) — Sun, 15 Apr 2012 15:09:00 +0000

Mobile phones, social media and the Maasai: Time to refresh the image

noreply@blogger.com (Niti Bhan) — Mon, 09 Apr 2012 09:36:00 +0000

At first, I did not know what these two young men were upto during an enforced halt on our way to Kisii at the end of February this year. The road had been blocked by the local community demonstrating about land rights just a few kilometres outside of Narok, in the heart of Maasailand and the driver pulled the car back and to the side to park out of reach of any rocks if they were going to be thrown. Soon enough the traffic was backed up and a little community sprung up during the few hours we were there, waiting for the road to open up. While waiting I noticed these two in action.

First, one took the stage, expounding at length on what was going on and emphatically giving his opinion on what needed to be done by the government and the leaders of the community, while the other captured this on video (a smartphone obviously). Then they would review the video snippet,

carefully, while laughing and making jokes - I did hear the word Facebook being mentioned a few times - before the other took his place and shared his views loudly.

But the most amusing part was when they convinced a little girl to give her opinion, which she did, to the laughter of the crowd that had gathered,

"This road belongs to all of us, it is not their grandfather's road, so why are they blocking us from using it to continue our journey".

These few minutes, gratefully captured on camera, exemplify to me what is the current day situation in rural Kenya when it comes to everything we write and talk about the way smartphones and social media are enabling an information revolution in Sub Saharan Africa. Their response to being confronted with an unexpected political demonstration was no different from anywhere in the world today - whip out your smartphone and capture it on video.

Their intent however was one step ahead of simply uploading the action on YouTube - by adding their own commentary on the situation and capturing the 'common man's' opinion, they quickly turned this opportunity into an exemplar of citizen journalism, to be shared freely on social networks like Facebook.

Perhaps its time we refresh these images to capture the impact of the mobile phone on the young moran from Maasailand than continue using the tired and stale imagery that we all recognize.

Taking the long view - an emerging markets perspective

noreply@blogger.com (Niti Bhan) — Tue, 03 Apr 2012 14:35:00 +0000

I read somewhere recently about the difference between those driven by quarterly earnings and Wall Street valuations and those taking the long view on business returns. The latter tended to have a more cohesive strategy and patience to create a market and demand - so very applicable to the challenges of addressing the lower income customer segment in developing countries, while the former were under pressure to show returns before they had even figured out which way to turn.

Emerging markets are back on the radar again I note as increasing numbers of articles and media bits bubble up to the top. After years, concepts like 'reverse innovation', 'jugaad', even the 'tyranny of dominant logic' are being bandied about by the likes of The Economist.

But is this something to get excited about? I don't know, I've been looking at emerging markets since the beginning of 2006, when the BRICS were news and BusinessWeek was a real magazine putting India and China on the over in turns. Jugaad innovation started that year as well, soon to die an ignoble death by early 2007.

Reading all these words again suddenly makes me feel like I missed the bus, by being some few years too early. But as a client of mine recently confessed, he's ready to go back to the drawing board for ideas he may have had too early for the landscape to receive them. Since it might end up being his 4th or 5th business venture, its worth pondering his words.

Perhaps one can see what will be right around the corner but like those odd tricks of light, that corner may just be a little further away than they seemed. I suspect I'll be back to muse upon these concepts once again... or as I used to say, this conversation will continue.

Staple diet

noreply@blogger.com (Niti Bhan) — Sun, 11 Mar 2012 11:18:00 +0000

What does it mean when Chinese manufacturers enter the social enterprise space?

noreply@blogger.com (Niti Bhan) — Wed, 07 Mar 2012 10:35:00 +0000

"The market has been destroyed for solar" or so I heard today from someone who prefers to stay anonymous but I'd hazard a guess knows a fair bit about what is happening on the ground in East Africa from the point of view of social enterprises.

Interestingly, I'd brought up the question of whether "It was time to move on from the label "the BoP"", something I've been pondering over for quite some months now. And that was when the conversation had turned to the popular products for low income customers - improved cookstoves, solar lighting, agricultural equipment like water pumps and the like.

This will not be the definitive post or article on the topic - consider this an appetizer or rather, the beginning of the pondering on the weak signals seen in the market and what they might imply for social enterprises and their ilk, but also the larger "BoP" marketplace as a whole.

You see, what I've seen now in the market are branded China made products in categories that were only recently created by BoP focused social entrepreneurs and designers. The Chinese manufacturer has no other bottomline but that which makes a profit on a product for which they perceive a high volume demand. And witness the rise of the Tecnos and the Birds even as the category creator and erstwhile market leader Nokia battles for continued dominance in developing markets.

What does it mean when a Chinese brand enters what hitherto were considered "social impact" product categories? Are social entrepreneurs - many of whom are still supported through grants and funds, as they seek to improve the lives of the poor - prepared for an increasing competitive environment? Not just from other international social enterprises either but from purely commercial solutions?

What we also realized in today's conversation was that it was the BoP focused social enterprises who were doing all the heavy lifting of market creation - experimenting with value propositions and product and services that people would want, creating awareness and demand while investing their time, effort and resources in ensuring the best outcome for all stakeholders. As was pointed out to me, it was the social enterprises who tended to ensure that they offered high quality, well designed, durable and reliable products to the 'poor', something that the competition is not known to do.

And so, it brought us to the sentence that started this post - "the market has been destroyed". While its just one category at the moment, how soon before its all the others as the increasing purchasing power and aspirations of the informal economy seek the best bang for their rupee, kwacha or shilling?

The customer is the king; the beneficiary will remain a pauper

noreply@blogger.com (Niti Bhan) — Sat, 25 Feb 2012 11:45:00 +0000

We weren't beholden to our customers until we starting thinking like a business.

We didn't hold ourselves accountable until we started treating our 'beneficiaries' as customers.

No investor took us seriously until we dropped the 'social enterprise' label.

~ Ben Lyon, Founder, KopoKopo, Nairobi, Kenya

When I wrote "Why so much 'BoP' marketing fails in the developing world" recently, I had sensed that there was a more fundamental problem - either one of implicit assumptions or basic premises - than those which I'd identified through observations in the marketplace. It took these three powerful statements from Ben Lyon, founder of Kenyan startup KopoKopo, to throw light on the issue.

Were these social enterprises treating their customers like kings or were they dealing with them like the beneficiaries of development aid?

Identifying this distinction, we believe, is critical and can make the difference between success and failure. In fact, taking the thought a step further, I now wonder whether this underlying premise might not be the reason why so many social entreprenuers are unable to scale.

The lens through which you percieve your intended customer base and thus, evaluate their needs, purchasing power, wants and wishes becomes the focal point around which your product or service, its business model and distribution strategy as well marketing communications will revolve.

When we seek to serve a very demanding customer who just happens to manage within an extremely challenging environment, we raise the bar on our own performance and metrics of success. For no one will spend good money on something that offers little value or return on investment.

But as long as social enterprises continue to perceive the target audience for their goods or services as 'beneficiaries', with all the attendant baggage of assumptions and perceptions, they will never quite be able to address the challenges of creating a market for a profitable and thus sustainable, enterprise.

Maximizing profits alone may not always be the right answer, but even the triple bottom line approach embraced by European businesses can offer a more valuable orientation than simply "doing good", which may overwhelm critical considerations of "does this actually make sense and does the market actually want it". I'd written this snippet earlier, before I'd identified where the seed of the confusion seemed to lie.

Because the demand being addressed by these messages is not that of the target audience, who are ultimately the ones for whom these products are made.
Everyday, research shows that the barriers to adoption include:
Improved cookstoves rank poorly on all three dimensions: their benefits are rarely valued highly by customers at the outset, they are expensive, and they require a significant change in lifestyle to be put into use.
Lets start with benefits alone – which is where the topic of identifying the correct value propositions for the target audience comes in. If your messaging and marketing is all about the best selling drill addressing an audience of home improvement contractors but what your actual customers need is a hole in the wall, how will you manage to bridge this gap in communication when you face your customers directly?
By focusing on the value propositions – be they environmental, healthcare related or otherwise – meant for every other stakeholder but the end users aka the customers of the product themselves – organizations may never quite identify nor refine the benefits as they relate to the poor customer, in the context of their lives, and their decision to purchase and use the said products.

And this conflation - of marketing messages meant for shareholders (in formal business terms) being sent to the end customers - will continue to create a barrier to sales and demand creation unless we start taking this demographic seriously as a paying customer. The roots of this challenge are also embedded in the way the concept of "the BoP" has evolved away from Prahalad's original vision of a vast new market and opportunity into a catchall label for the poor, the downtrodden and the precepts of poverty alleviation.

Brazil comes before India and China in BRIC

noreply@blogger.com (Niti Bhan) — Sat, 28 Jan 2012 16:10:00 +0000

Dominic Wanjihia showed us this chaff cutter made in Brazil he'd picked up for 35,000 Kenyan Shillings (around USD400 or thereabouts). He's using it to test and run his biogas generators at his workshop.

Brazil? Not Indian or Chinese? What about the jua kali makers, don't they make one far cheaper?

Brazil, he said. They've got the best quality, the best materials and the best finish for the price - far better than anything I've seen out of India or China (here in the Kenyan market). And the jua kali makers don't manage to balance it properly so the welded seams start tearing from the machine's vibrations after a while.

We've read about increasing South South trade between numerous Sub Saharan countries and the emerging economies of the BRIC nations but this is something I'd have never imagined. Dominic was our guide through the informal manufacturing sector in Kenya when I'd first come in the Autumn of 2010 to take a closer look at innovation under conditions of scarcity. At that time, if the majority of the machine tools used were not of local manufacture, they tended to be imported from China, or used ones from India.

Brazil is certainly taking this emerging market opportunity very seriously if they've managed to not only enter the market but gain such a reputation in so short a time.

Where are the appliances designed to be used with renewable energy sources?

noreply@blogger.com (Niti Bhan) — Sat, 31 Dec 2011 09:04:00 +0000

LPG powered fridge for sale in Eastern Cape, South Africa

Almost 2 years ago in early 2010 I wrote about the opportunities for disruptive innovation in the emerging markets of the then developing world. One of the 5 case studies was that of the following concept:

Re-imagined household appliances
Refrigerators have come to the forefront of the news with the launch of Godrej's Chotu Kool—a top loading unit co-created with their target audience in rural India, it does not require electricity and has one tenth the number of parts required in a conventional fridge. The refrigerator weighs only 7.8 kg, runs on a cooling chip and a fan similar to those used to cool computers. Chotukool consumes half the power consumed by regular refrigerators and uses high-end insulation to stay cool for hours without power while costing only Rs 3250 (USD 69). It is being distributed and marketed through partnerships with micro-finance institutions.

As this clay based precursor, the Rs 3000 (USD 55) Mitti Cool demonstrates, there have been a plethora of alternative solutions to the needs defined by basic household appliances. In the searing heat of the Indian summer, illnesses can be prevented by keeping milk and cooked food too cool to spoil. What Godrej has done however is taken the basic concept of low cost solutions and applied it to a mass market consumer good, to be marketed, branded and sold just like any other home appliance. Less moving parts imply ease of repair and maintenance, lower cost of ownership and possibilities for eco-innovations, a trend that could permeate the way appliances are currently designed and built for more profitable markets.

Where are these products now in the market and more importantly, where are other such home appliances?

Granted, the original concept was that of extreme affordability and these products were targetting the (still mythical) volumes in the BoP market - although in Godrej's case it was simply common sense given the proportion of the Indian population who either lives off the grid or cannot afford the paraphernalia required for back up electric power when the inadequate systems cannot keep up with the demand.

Today however I was forcibly reminded of this product development direction when I came across the results of a significant study by Prof Arne Jacobsen of Humboldt State University that looked at rural Kenyan adoption of household solar power and the demand drivers that created this unsubsidized market. While there is much that is of interest in his dissertation, particularly the focus on the 'connectivity' aspects of rural demand, it was this observation that made me think about the untapped potential demand for a range of home appliances designed to suit the constraints of the majority of renewable home energy systems :

The average solar module size for a household system in Kenya is approximately 25 W, and the most common size is 14 W. Televisions, radios, and lights are the three main electrical appliances used with solar PV systems, while cellular telephone charging is a rapidly emerging use. Many appliances that are often used around the world in grid-connected homes, such as refrigerators, electric irons, and electric cookers, are generally not used with solar PV in Kenya. This is true because these appliances consume far more energy than the small solar modules that most Kenyan users can afford are able to produce. In other words, the quantity of electrical energy supplied by the solar PV systems used in Kenya is very small compared to the quantities that are generally available to grid-connected households, and this limits the range of possible uses.~ Jacobson, Arne (2007) "Connective Power: Solar Electrification and Social Change in Kenya," World Development, v35, n1, pp. 148

While one can argue that this data is not only a decade old but focuses only on rural Kenya, I'd say that the basic insight would apply nonetheless wherever there is increasing uptake of modern energy sources among rural and/or lower income households. When one adds the potential number of households globally where utility companies are deploying prepaid electricity meters - The Philippines, many Sub Sahara African nations and of course the pioneer, South Africa - there seems to be implications for greater demand for products that would not only consume far less power than even the EU's greening laws require but also track energy consumption in units of cash or energy simultaneously.

Current day EUP requirements are still designed with ubiquitous legacy infrastructure of the electric grid, not a wholly different system for sourcing, installation and purchase. In fact, I also wonder whether the fact that most of these household solar PV systems are slowly added over time in modular chunks (reflecting purchasing patterns of those on irregular or seasonal income streams) may not also play a part in influencing future product design?

There is a market opportunity here for manufacturers of consumer durables seeking to grow entirely new markets in the frontier regions of the global economy.

Scarcity as a driver for innovation

noreply@blogger.com (Niti Bhan) — Fri, 30 Dec 2011 11:03:00 +0000

Frugality and affordability are very much in the news of late, what with the most recent essay on Change Observer and this post on Paul Polak’s new blog both highlighting similar concepts but from the point of view of very different markets. It seems to imply the trend towards frugal design or extremely affordable yet relevant and useful products is emerging to the forefront of the mainstream, regardless of whether its the sophisticated mainstream consumer culture or the challenging markets of the lower income demographic. In which case, this is a timely moment in which to give a brief introduction to the conditions of scarcity within which we looked at informal manufacture, fabrication and innovation during our recent trip to Kenya and how these conditions drive innovation. Necessity, after all, has always been the mother of invention.

Infrastructure

Infrastructure availability or systems that we take for granted such as running water, stable electricity supply without voltage fluctuation or blackouts is an ongoing challenge in this operating environment (the majority of the unevenly developed world). This need not necessarily imply “poverty” so much as scarcity or uncertainty – for example, the latest Economist has a great article that underlines this point with regard to India’s chaos having little to do with its economic growth potential and ability. The variability of infrastructure not only influences product development for these markets but as we recently noticed, drives innovation in sometimes surprising directions that we may not always perceive of as an “unmet need” immediately.

Tap (Faucet) lock, Nakuru, Kenya 30th August 2010

These are locks for your water tap, available in the jua kali market in Nakuru, Kenya. They not only prevent the unauthorized use of your water (particularly if its from a tank of finite capacity that you may have paid good money to get filled) but also protects your tap itself from theft (the metal can be sold as scrap to be melted down and reused).

Fuel and energy

While much of the drivers for renewable energy solutions in the developed world are concerned with environmental and energy security issues, (valid in themselves yet still considered a luxury, imho, in the mindset of the customer due to premiums), product development and invention in the emerging markets is based more fundamentally on scarcity and need for affordable reliable power and fuel supply. Does this change the way the problem is framed for the inventors/makers and how does this shift in perspective influence the solution development? As Paul Polak points out:

If you don’t design to realistic customer-derived price points from the very beginning, any tool you design for a poor customer will never be adopted at scale.

Aluminium smelter's workshop, Nairobi, Kenya September 2010

And it doesn’t necessarily have to be a solar lantern for a poor customer per se – it can be the micro-entrepreneur who wants to lower his costs to the minimum in order to maximize his daily profits. Here is an aluminium smelter’s workshop, the can on the left contains used motor oil which he burns to melt the scrap metal down into ingots for reuse. On the other hand, he is dependent on electricity supply to power his air blower that vaporizes the heavy oil enough for it to burn and loses income if the power is out.

Transportation and distribution

If you’re in the informal economy, you don’t have access to the far flung top of the line logistics and distribution networks that other businesses do, or at least not at scope and scale available. Furthermore, due to the variance in infrastructure and operating environment, this is a challenge even for the biggest companies if you’re in a market like India’s much less the less developed nations. I’ve touched upon this further in this article but here I’m bringing this forth as one more element of scarcity that acts upon the operating environment, and so can lead to some ingenious and/or innovative solutions. Developed in context, they are often very affordable and relevant as they seek to solve locally observed problems.

Modified boda boda bicycle, Maker Faire, Nairobi Kenya 27th August 2010

Boda bodas are bicycle taxis popular in Africa, particularly East Africa, originating in Kenya. Here, these two makers from a smaller town outside of Kisumu came to display their specially modified boda boda. The back carrier has not only been elongated to increase the carrying capacity of the vehicle (which is what this is) but the gentlemen had also figured out that 250 kgs was the average load therefore they had calculated the necessary size of the modification accordingly. In addition, since their local area was both hilly and had uneven paths, they added shock absorbers to help the driver and improved the braking mechanism. Of course, they’d also added the facility to both charge your mobile front at the front of the bike while charging a car battery at the back from the dynamo. There is fodder for an entire article on the bicycle as the platform for innovation in emerging markets but that’s for another day.

Materials and Tools

Far more than in India but I can’t recall the situation in the Philippines at this moment, was the obvious scarcity of appropriate and affordable hand tools, small machine tools and raw material in Kenya.And certainly, there’s no Home Depot or some such there. And Kenya is supposed to be the most advanced in this sphere in the East African region. I would really like more information in this area so please write in or comment if you have knowledge.

Scrap from aluminium casting ready for re melting into ingots

Hammerheads made from old car axles

This earlier post compares two simple manual machines, the local variant of which uses far less energy and material to effect the same purpose and this one takes a look at the prototype of an affordable coffee grinding machine.

Working capital, cash flow and insurance (Risk and uncertainty)

A natural but challenging side effect of operating in the informal economy is access to financial tools and support systems available to small businessmen everywhere else. Bank rates are very very high (the risk of Africa!) and so access to capital for investing in new machines or growth is hobbled by the owner/entreprenuers insistence and preference on saving up and using cash instead. This takes time, slowing down economic development at the grassroots. Microfinance tends to favour consumer behaviour rather than investments or micro-enterprises and regardless, does not tend to take irregular income streams into account.Interestingly enough, mPesa is making a difference in this sphere but again, as a workaround rather than a product targeted at this need. This aspect of products designed to support micro-entreprise was the biggest challenge in the Philippines as well as my colleagues at the Philippine Business for Social Progress have informed me. These very same lacks, one could call it a systemic mistrust, drive creative solutions of a sort perhaps that may not always be preferred as much as the more positive ones mentioned above.

Backpanel of inverter, Nakuru, Kenya 30 August 2010

For example, the gentleman who makes these inverters is forced to put Japan components on his products so that customers will take the risk to purchase his product. He also offers a 1 year warranty and installs what would be an off the shelf, plug and play comp0nent anywhere else himself on the premises. The display and control shown here has inspired a lot of insight on contextual knowledge of technology – “Up for on”, issues of trust and commitment as well as the risk aversion already seen among BoP consumers.

While this has been wholly focused on Kenya, the conditions of scarcity are only variations on the themes that can be seen around the world. In the meantime, they offer much food for thought on the operating environment.

First published October 7th 2010 at Aalto Design Factory, Finland

How do you compete in a market where charity distorts pricing?

noreply@blogger.com (Niti Bhan) — Sat, 24 Dec 2011 14:23:00 +0000

Strategy guru Michael Porter's 5 forces framework is quite well known to anyone attempting to assess or analyze the landscape of an operating environment for an industry or organization. Increasingly, since I've begun working out of Sub Sahara I've been sensing the challenge of a 6th force - one that is overlooked when consumer markets are considered particularly in the mass majority demographic. It is insidious however and hinders the sustainable practice of commerce. It is the dominant logic of charity and aid which leads to free give aways by so many seeking to help a poor African out.

Lets take the example of solar power as given in this recent BBC article:

The end result is DIY solar kits that can recharge phones and batteries. They look makeshift but they have the potential to make a huge difference to people thousands of miles away in Kenya.

As the director of KnowYourPlanet, Mark Kragh's day job is to resell solar panels to small businesses and hobbyists. But in February he will travel to Kenya to distribute specially-made kits he is giving away as charity, and to show local people how to make more.

What if someone decided to give away solar panels for free to the small businesses and hobbyists who make up Mr Kragh's customer base? How do you suppose that generous act of charity would impact his business?

Similarly, whether its the jua kali inventor/maker customizing solar power installations for each of his clients or the many social enterprise ventures that dot the landscape, each in their own way are trying to earn a living even while the work that they do helps improve the quality of life for their customers.

On one hand we talk about growing sustainable businesses and nurturing entrepreneurs as a critical means of social and economic development - 'development through enterprise' we say- yet on the other, these very same fledgling ventures will be blindsided by a market force that has the power to distort pricing and disable competition.

Where will the support come from for these companies to establish and grow marketing channels, distribution networks and a win win profitable solution for all stakeholders? The majority are local establishments who employ local people and thus add value to their communities.

Well meaning enthusiasts who come in with hand outs are going to have the same effect on the market as any competitor who practices 'dumping' - it will undercut the market and cripple any sales or marketing strategy if the alternate to purchasing a local product in a shop is a free giveaway from a charitable individual or organization. Furthermore, they are not a business to provide any after sales service or maintenance or customer support, their goal is to be in and out having done 'good' during a flying visit.But the aftermath will create enough ripples in the market creation process that companies will have to deal with for a long time afterwards.

Interestingly, Mr Kragh intends to visit Kenya - one of Sub Sahara's most mature solar power markets instead of Senegal where he'd originally gotten his inspiration from. If I was part of the solar mobile charger and lantern manufacturers association in Kenya or even Nakumatt or the electrical supply shop cooperative or whichever relevant body, I'd say they should petition to put a stop to activities of this sort or send them along to a location who needs it more than they. After all, it is the season of giving rather than receiving and one must always help one's neighbours.