My bachelor’s degree is in chemical engineering – what that means is that I’m among the people who studied one thing in school, and went on to do something else in life, and I have some above average grasp of product recycling and waste re-utilization.
This article is the first part in a series on designing for data double plays that I will be sharing.
Today, a good number of businesses are seriously considering expanding their operations into Africa. Africa is touted as the next 1 billion, and with a youth population of almost 60% – a ripe market for product and business innovation.
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Although the logic seems reasonable, the data on ground speaks otherwise. Africa has high startup failure rates; Nigeria alone (Africa’s biggest economy) has a startup failure rate of around 61%. A number of high profile business failures on the continent have also propelled business leaders reconsider their actions.
Although a number of global tech companies are already active on the continent, a good number of them are still dragging their feet – Facebook is now considering and planning a H2 2021 office opening in Lagos this year, Apple has no reported Apple stores on the continent, Microsoft has been present on the continent for decades, and recently launched its ADC (African Development Centre) in Lagos and Nairobi in 2019, and while Amazon presently delivers to Africa, I am not sure they have any serious delivery infrastructure on ground.
Amazon, the global leader in eCommerce although ships to Africa, doesn’t necessarily have a serious on ground presence here. I don’t blame them, when the company touted as “The Amazon of Africa” that innovates in 11 countries, has a total addressable market size of 600 million people, has only captured 1% of that market (after 8 years of operations), and has a GMV (Gross Merchandising Volume) of US$1 billion, is still deeply unprofitable – you definitely have to seriously consider an entry into that market.
Amazon, through its AWS (Amazon Web Services) division has chosen to take the path that a good number of foreign businesses expanding into Africa consider – starting from South Africa.
Is South Africa African?
South Africa has a total population of 57.78 million people, its total population represents about 0.046% of the African market – which is not necessarily a bad thing, considering the fact that a relatively large number of Africa’s 1.3 billion people live below the poverty line, and most businesses may find it challenging to profitably innovate for them.
South Africa is not completely African primarily because South Africans have different behavioral and spending patterns when compared with the majority of the continent.
Takealot for instance, South Africa’s leading eCommerce businesses innovates primarily for the South African market, has around 1.9 million users, a yearly GMV of US$425.8 million, and has a clear two year profitability timeline. Compared to Jumia that operates in 11 core African markets and has a yearly GMV of US$1 billion, Takealot looks like a smarter business to invest in.
South African market performance may not necessarily be the right benchmark to use to judge and measure your African expansion endeavors.
South Africa is pre-Africa. Referring to South Africa as Africa is like landing in Victoria Island in Lagos, seeing the scenery as you drive through Ozumba Mbadiwe and Oniru, and concluding that Lagos is a very organized and decent city – by the time you cross the bridge (third mainland) to the other side of town, and you enter places like Bariga, Shomolu and Mushin, that’s when you’ll know how far (vernacular for you will understand what is going on), But I Digress.
Market Dynamics
Market sizes usually get larger as you go down the market scale. There are usually more poor people than rich people, and so the wealthier the class you innovate for, the lesser they are, consequently, the poorer the class you innovate for, the more they are.
This is why businesses innovating on the African continent will usually try and target a market segment that creates a delicate balance between spending power and numbers.
A new report by DFS Labs concludes that the best market and income brackets for startups in the B2C space to target on the African continent are those earning between $4 – $8. Whether I agree 100% with their analysis is another argument entirely.
The fact still remains that for technology businesses – profitably innovating for the African market may be less about targeting specific market segments, and more about creating novel and redesigned business models.
Data
In the university, I was taught that all products have some degree of intrinsic value and so in the crude oil refining process, anything that comes out of the refining process as a waste product can usually be cleaned and reutilized to create another product.
Almost all (if not all) technology businesses have one by-product – data. Data isn’t just about who logged in, and who didn’t – but about who used the product?, when did they use it?, how did they use?, how much did they use it? etc.
Any business that runs without data is a blind business.
Data doesn’t just help you see what’s happening in your business, it helps you adjust what may not be working best.
This is why product manager’s use A/B testing to find out what product features create the most value for users, and which do not.
As much as data can help you improve a product, it can also help you create a new one.
Double Plays
Most successful African businesses usually have some kind of double play.
Flutterwave started from processing payments to launching Barter by Flutterwave (the only Nigerian fintech app I use) to today having an eCommerce store.
In its bid to become profitable, Jumia has recently embraced the idea of a double play with Jumia Pay, Jumia Logistics, and the gaming division being its key operations. Succeeding in Africa may be less about building a single product, and more about building profitable double plays.
Data Double Plays
Some weeks ago, I was opportune to pitch a kind of data double play to the CEO of a Lagos based startup in the mobility space.
A data double play is simply a product built primarily on the valuable data a business is generating in a specific space.
On the surface, Facebook looks like a B2C business. It’s not. Facebook uses a data double play (selling data targeted ads), and is primarily a B2B business because most of its core customers are businesses buying advertising ads (tautology, I know).
Not every business can build a data double play, primarily because these double plays usually depend on the context of the data being generated, but businesses that can do so will usually have some kind of competitive advantage over those that can’t.
Having meaningful data, and not being able to effectively process it to build a product is almost like being a crude oil producing nation that still has to import gasoline
The average African doesn’t value his data, finding ways to extract that data (usually for free), process that data, and create a product off that data can help you create a new product lineup that bolsters your business’ bottom line.
We need to learn to think outside the box, the only real monetary value of data cannot primarily be for advertising alone.
Imitating God
The Bible tells us that God is both omniscient and omnipresent.
The closest we have to the omniscience of God on the earth today is Google. Google probably has more information and data on people and things in general than any other business on this planet. Google probably knows more about you than you know about you. The way YouTube can accurately fill my feed with videos they know I will find value in is phenomenal.
Human beings usually have a desire to replicate God. We want to know more than our own human senses can allow us to tap into.
This is probably why a relative of mine told me the other day that if I started a church tomorrow, and I started seeing visions (and telling people the name of the village people that were worrying them), in no time that church would be filled up. But I digress.
The capacity to replicate God, and create some kind of omnipresence and omniscience is primarily where the value proposition of news broadcasting and the media is – from the comfort of your sitting room, you get to know what is happening anywhere in the world without physically having to be there.
A data double play that gives your users (businesses or customers) a better perception of the world around them, and helps them tap into some degree of omnipresence and omniscience is not an option a business with the capabilities to do so should ignore.
When you find it challenging to scale a product to profitably make money off conventional sales due to the price sensitivity of the African continent, a data double play may just be the key to creating value on the continent.
Conclusion
Africa is a price sensitive market that has over the years proven to be a hard nut to profitably crack.
The key to profitably innovating in the African market may not necessarily be about focusing on profitable market segments alone, but redesigning business models that allow you profit off the data your business is generating.
Inspired by the Holy Spirit
P.S: in the second part of this series, I’ll switch and share a practical example of an African business and how it can design its own data double play.
P.S2: to talk more about data double plays, or for consultation services, you can send a message to the email below.