When the Sun Rises, you better be running – It’s a Silicon Savannah

When the Sun Rises, you better be running – It’s a Silicon Savannah

It’s May 1^st, Week 18 of 2020, Labor Day 2020. Another holiday gone, Covid19 has brought with it a sobering paradigm shift and perspective re-focus. Jalang’o on radio wittingly reckons the Govt owes us a holiday. Not long ago in his comical fashion he delivered Thomas Friedman’s ‘Every morning in Africa, a gazelle wakes up. It knows it must run faster than the fastest lion or it will be killed. Every morning a lion wakes up. It knows it must outrun the slowest gazelle or it will starve to death. It doesn’t matter whether you are a lion or a gazelle: when the sun comes up, you’d better be running’.

Kenya is one of Africa’s Innovation quadrangle together with Nigeria, South Africa and Egypt. Nairobi is no doubt the nerve-center of East Africa’s technology ecosystem. In this bustling city, one thing is evident, with the first ray of sunlight, everybody is running

Image: GSMA Ecosystem Accelerator Tech Hubs Landscape Report 2019

The World Economic Forum launched the Africa Growth Platform, an initiative aimed at helping startup enterprises grow and compete internationally. With early-stage entrepreneurial activity 13% higher than the global average, Africa is well placed to get startups off the ground, but it also has a higher-than-average failure rate due to product-market misfit, insufficient support and infrastructure.

Product-market misfit is a core foundational issue. For any new product or service to be taken up, it must be solving a need, a validated a market gap. The question is therefore, how do we come up with a framework to validate the need? Alex Liu of AT Kearney, one of the Platform founding partners, believes Africa's future is innovation rather than industrialization. To find a working framework, let’s revisit the last innovation buzzword “Disruptive Innovations”

The case for Market Creating Innovations

Silicon Valley christened the term ‘disruptive innovations’ with the birth of unicorns like Apple, Google, UBER, Netflix, Coursera and Amazon. The theory of ‘disruptive innovation’, was first introduced by Harvard Business School professor Clayton Christensen in his 1997 book ‘The Innovator's Dilemma’. The book’s thesis influenced the entire direction of thinking in Silicon Valley and for powerhouses like Netflix and its co-founder Reed Hastings, and Apple co-founder Steve Jobs

Christensen’s other book, The Prosperity Paradox: How Innovation Can Lift Nations out of Poverty, focuses on Market Creating Innovations as a solution for emerging economies. This will be our main reference in trying to solve the core start-ups challenge in Africa

One of the solutions to the Product-Market fit conundrum is Market creating innovations. As the name implies, these innovations create new markets. But not just any new markets, new markets that serve people for whom either no products existed or existing products were neither affordable nor accessible for a variety of reasons (non-consumers). These innovations transform complicated and expensive products into ones that are so much more affordable and accessible that many more people are able to buy and use them, M-PESA is a great example.

Who are non-consumers?

Non-consumers are people who are struggling to make progress in some way, but have been unable to do so because historically a good solution has been beyond reach. This does not mean there isn’t a solution on the market, but often non-consumers are unable to afford existing solutions or lack the time or expertise required to successfully use the product.

Identifying Non Consumption, the barriers to consumption

It is evident that non-consumption offers a powerful clue that there is enormous potential for, how then do we unearth non-consumption? There are primarily four barriers or constraints; Skill, Wealth, Access, and Time

• Skill: Lack of skills necessary to consume existing solutions on the market, even though they would benefit from doing so. The resultant innovation will be one that provide the skill or an uptake interface. Wix.Com and GoDaddy offer websites creation out of the box on pre-built platforms requiring zero coding expertise.
• Wealth: Easily identifiable constraint. This is when non-consumers cannot economically afford existing solutions on the market, if they exist. A number of companies like MKOPA are coming up with installment plans to address this barrier. Reducing overall product cost by improving the value network costs is another solution to this barrier, Indomie Noodles is a classic example
• Access: Accessibility to existing solutions is a barrier in their particular location or context. Access to internet is a huge challenge in Africa and BRCK realized this barrier, it is now connecting people and things; getting individuals and businesses online and helping them fully utilize that access. OneAcreFund is also solving accessibility barriers by supplying 1 million smallholder farmers with everything they need to grow more food and earn more money
• Time: Time-related constraints are when non-consumers would benefit from using a solution, but the time required is prohibitive. MYDAWA is an example of innovation allows patients to purchase quality medicine and wellness products through MYDAWA.com website and mobile app, saving them time

With non-consumption identified, how do you go about creating the solutions?

Once solutions has been identified they have to be evaluated through the right lens, both for entrepreneurs who see potential to build something from scratch, and for existing organizations who want to drive market- creating innovations into their innovation portfolio mix. Christensen presents a helpful frame of reference that entrepreneurs and should look for as they consider creating new markets

• The business model has to be built to target non-consumption - Majority of the models existing today are targeted at existing consumers. Most payment solutions for instance offer credit/debit card options, the non-consumers however in rural Kenya will work with a mobile payment solution.
• An Enabling Technology - An enabling technology is one that provides improving levels of performance at progressively lower cost. A technology is any process within an organization that converts inputs of lower value into outputs of greater value. It reduces costs, is scalable and create a quick feedback loop for validated learning in the start-up process
• A New Value Network – These are the set of activities a product or service goes through in its production. Each activity adds a little bit of cost to the price of the final product. Creating a new value network enables start-ups to redefine their cost structure so that their solutions can be afforded by non-consumers and profitable at the same time.
• An Emergent Strategy - When creating a new market, innovators typically use an emergent (or flexible) strategy because they are going after markets that are not yet defined, and so must learn much from their soon-to-be-customers. Eric Ries’ Lean Start-Up methodology is a good reference
• Institutional/Executive Support - Businesses that attempt to create a new market are often unpopular because not only do they target a market that technically does not yet exist, but also they often require more resources. Support can be financial, legal, tax subsidies, incubation, and networking. There are 48 Tech Hubs in Nairobi as illustrated in figure 1 and a host of Startup Incubators. Some examples of support avenues are NAILAB , IHUB, OneAcreFund, LakeHub and KIRDI. 

    Non-consumption provides what I believe to be the best opportunity to solve the product-market fit challenge and ignite new growth engines for entrepreneurs and companies. These new growth engines will help provide jobs and income, both of which ultimately help people make progress in their lives and super-charge the economy.

The sun is almost down in Nairobi, are there night hunters too? It is 9 AM in Wall Street and 6 AM in Silicon Valley in a globally connected world, it doesn’t matter where the Sun Rises, you better be running!

        Kirer P – Your village trotter