Notes From My GTBank Case Study

Notes From My GTBank Case Study

My personal philosophy in regards to entrepreneurship is really very simple: create value for as many people as you can sufficiently extract value from. Creating value for few people and not being able to extract enough value from them to keep your business afloat and growing is not true entrepreneurship.

Creating value for customers and being able to extract value is the true definition of entrepreneurship. Anything else is really just philanthropy or marketing.

So, I’ve spent the last couple of weeks writing case studies on some of the most successful businesses operating out of Africa, and I’ve observed two things; one is that most of these businesses tend to ride a wave – they either create a solution in a market filled with ineffective solutions (GTBank, Transsion Holdings), create a solution after observing a need no one has bothered to solve (SystemSpecs), or outright build their own solution/platform to a problem people have, but don’t necessarily see a solution to (Interswitch). In my opinion, the worst approach to innovation and building a business is Jumia – Jumia entered a market to solve a problem no one thought they had, a price sensitive market that had no existing eCommerce infrastructure, and tried to copy a paste a model that has worked elsewhere in eCommerce ripe markets. eCommerce is legit as a niche product, but as a mass market product as Jumia has proposed, it isn’t ready yet. Jumia is really only alive because of venture capital. Jumia is the perfect example of what you shouldn’t do when starting a business.

The second thing I’ve observed is that all the businesses I’ve studied were either profitable from the get go, or very early on. I seriously doubt if the Western model of burning capital for years chasing growth before finally becoming profitable works here. Jumia is well poised to capture extreme amounts of value, become the undisputed market leader and eventually end up becoming profitable when eCommerce eventually picks up as a mass market solution in Africa, if they’re still around.that is.

Jumia’s focus on burning capital to nowhere is a Western model that apparently doesn’t work here. Learn from their example.

Last week I worked on a case study on GTBank, one of the leading Tier 1 banks in Nigeria, and apparently a model that every entrepreneur should pay serious attention to.

These are my notes from that case study.

P.S: this is not the case study.

The Magic of Numbers

The Bible says one shall chase a thousand and two ten thousand, can you guess how many 40 will chase? Let me give you a hint – 96 poorly managed old generation banks.

The ideal co-founding team is usually 2 (the guy with the vision, and the tech guy), if you want to push the strings a little further, it could be 3 (the guy with the vision, the product and tech guy, and the marketing guru), GTBank on the other hand figured that taking on the dysfunctional Nigerian banking system at that time with 2 or 3 co-founders was just not enough, so they opted for 40, like 40 – four and zero. I wonder how early co-founder meetings were like: 40 men in their mid to late 30s in late Mr Tayo Aderinokun’s First Marina Trust office strategizing on how to take the banking industry by storm. They’re very lucky that SARS hadn’t started misbehaving then (1990), SARS would have probably busted into their office one day, accused them all of internet fraud (with no tangible evidence), called Mr Fola a liar when he tries to tell them they’re trying to establish a technologically advanced and customer centric bank, maybe even slap him for using the word tech, and probably cart them all to some police station (or bush) to extort money from them. We obviously wouldn’t have GTBank today, and we’d all be stuck with mentions a Nigerian bank whose customer experience is so bad, it should be illegal. But I digress.

Always build a team of like-minded people that compliment your weaknesses, and augment your strengths. The purpose of having 40 co-founders was to raise the minimum capital requirement (N2 billion (US$16 million) then) to start a bank.

Note: Don’t go starting a business with 40 co-founders; I’m still wondering how they were able to successfully share equity without any serious misunderstandings.

Personality of A Business

Every business has a personality, it’s the image a business automatically brings up in your head when you remember it, and yes, personalities are very similar to brands, but they’re still personalities anyway.

So I like to personify businesses – InterSwitch is that sharp guy that knows how to make money from places people don’t even know exist, Jumia schooled abroad and is high on drugs (venture capital), Transsion Holdings is that Asian guy that has lived in Lagos so long he can now speak Yoruba, SystemSpecs is that quiet rich low-key man that wears a brown suit and has an extremely aggressive money making Boerboel dog as a pet called Remita, Gtbank on the other hand is that almost perfect guy in class; tall good looking guy, always came to class early, always got good grades, all the teachers (CBN) liked him, and apparently when he was done with high school, he went straight to London for his undergraduate degree (US$750 million Global Depositary Receipt listing on the London Stock Exchange).

Gtbank has etched out a name for itself by its consistent investment’s in its brand image. To be frank I really don’t know how they do it (I actually do), but the name GTBank always rings a positive bell, and that’s good for any business. Think about The Nigerian Police, PHCN, and even the Federal Government. Do these ring good bells in your mind? Probably not. If The Nigerian Police was a private business, they would have closed down by now. The horrible brand image/personality is enough to kill any business. Personally I don’t bank with GTBank, but every time I remember their name, or see their logo, I see youthfulness, agility and ease, even though none of that is really written anywhere in plain sight.

Market Segments

The market segment you innovate for, especially in Africa will determine how profitable you and your business will be in the long run. Nigerians are extremely price sensitive, and I would therefore not recommend building a mass market consumer product in a nonessential sector. Look at Uber for example; they solve the transportation friction (bless Kalanick I don’t have to stand by the road to wave a cab anymore), they’re a supposedly mass market service serving the Nigerian market (200 million+ people), but they’ve only got 9,000 drivers in Nigeria. Compare this with the U.S market (350 million+ people) where there are approximately 900,000 drivers, a hundred times what we have in Nigeria. Africa as a whole, where Uber operates in 15 countries (including Egypt and South Africa), really only has about 60,000 drivers. Don’t get carried away by what you saw on HBO’s Silicon Valley, or what you see in the US, this is Africa; the market segment you innovate for will either make or break you.

GTBank started by innovating for the middle market segment, the SME’s, the small businesses.

I personally believe that some of the biggest business opportunities to create and extract value in Africa are in the middle market segments, the SME’s, the small businesses, I’m not talking about tech powered startups, but the real small businesses. From Janet, CEO of Janet wears whose corporate office is her bedroom, and whose WhatsApp always replies with an automatic message that says something along the lines of “we will get to you”, it makes you wonder who “we” is, because to the best of your knowledge, Janet runs a one man (in this case, one woman) show. “We” must mean Janet’s spirit, Janet’s soul, and Janet’s body, to the Chijioke from Mighty God Electrical Enterprises whose head office is probably not bigger than my bathroom, and who is a general contractor that can supply anything.

Unemployment has made almost every Nigerian a self-proclaimed entrepreneur. The market opportunity here is huge. My sister was telling me the other day that there are now more people selling clothes on WhatsApp than those buying them. She’s right. The quicker your startup/business can find a meaningful friction in this market, innovate around it, and design an effective business model that allows you to extract value from them, the better.

SystemSpecs has already started this with PayLink.

I’ll say this again; one of the biggest business opportunities to create and extract value in the Nigerian (and by extension African) space is the middle market SME segments.

International Networks

It’s always smart to have an international affiliation; either a shell company based somewhere in Europe, or some kind of foreign affiliation. It usually pays off in the long run, especially if you consider raising capital.

No African startup has raised (and burnt) as much money as Jumia has (US$823 million+), and I doubt if any African startup has as much of a foreign affiliation as Jumia has – Jumia is essentially a white guy wearing a black mask.

Foreign affiliations are important.

Some of the biggest opportunities to create and extract value are in markets where horrible customer experiences and flat out ignoring customer needs have become the norm. Find them, innovate for them.

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2 thoughts on “Notes From My GTBank Case Study

  1. Jumia is actually a triple-platform business: the marketplace goods, the new market place for logistics, and the payment platform. E-coms suffer everywhere for a while. Profitability can only come with scale and this explains their organic “virtuous cycle” approach which after a while with being asset-light, will punch above its weight class. Not every size will fit all in term of profitability models, but I agree, early profits helps. It is arguable if indeed GTBank and other Nigerian banks that could have dominated the payment space early enough simply did not grow big because they hid inefficiencies behind all kinds of overpricing (sanctioned by CBN) and sometimes unwholesome practices, especially in the FX space.


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