So, I spent this week writing a case study on Transsion Holdings, how they became a billion dollar business, and how they’ve been able to extract monetary value from a region that is extremely price sensitive, cares more about essential products (60% of household income is spent on food), and has taken more businesses under than the Titanic.
This note is a short snippet of what I learned from that project.
Innovate around your Market
There are two big fallacies about investing, or doing business in the Nigerian and by extension the African market:
One is that Africa is the next one billion. This is partly true, and partly false. Partly true in the sense that yes there is a market opportunity here (not for every product though), and partly false in the sense that if you do not understand and innovate around this market, it could quickly turn from the next 1billion, to the next 1billion lost.
If you’re trying to invest or build a business in Nigeria, and you come in here with the “this model worked in San Francisco, Berlin, Beijing, and even Johannesburg” gait, the results you will command will so surprise you, you’ll think the guys that did your market research were deliberately trying to sabotage you.
If you want to succeed in this market, you need to design a new playbook that’s built around understanding and innovating around this market. What you did in Silicon Valley will not work here. I repeat what you did in Silicon Valley will not work here.
Transsion’s glocalization strategy built around creating products that are meaningful to local markets has paid off extremely well, US$11 billion well as at the time of writing this article.
The second fallacy about doing business in Nigeria is that there are 200 million people in Nigeria, and that’s a huge market opportunity.
I’ll be frank with you, regardless of what you sell, your total addressable market is nowhere near 200million, and depending on what you sell, your total addressable market may not even be up to 100,000 users. There are a good number of trendy startups in Lagos whose total addressable market is nowhere close to 100,000 users, because although they have a meaningful solution, the number of people who both find value in their product, and can afford it are not as many as you think.
Get in at the right time, and ride the waves
Africa is behind. This isn’t supposed to be an insult, it’s a strategy. What is already normal and common place in the West is still likely nascent here. What too many people try to do is try and copy what worked there and try to blindly replicate it here.
As much as copying and pasting (with some modifications) can work, pasting at the right time is extremely key.
Interswitch got into the market at the right time, has built a solid moat (Nigeria practically runs on Interswitch), and started the push for a cash less society.
Transsion got into the market at the right time, has built a solid moat (that 40.6% market share in the African smartphone space isn’t child’s play), and has instigated the smartphone push in Nigeria.
There are opportunities in this market, but you need to know the right time to get in, and explore the market. A time will come when electric cars will be mainstream in Nigeria, but if you try to start that now (a market where even buying brand-new cars is an extremely niche market), you will sell your trouser. Literally.
Guard your Brand with all Diligence
When Transsion started in Nigeria with Tecno feature phones, we called them “Chinko” phones. If you’re into brand strategy, Transsion is a very good example of how a business can transform its brand from being known as a “Chinko” phone, and every other negative thing associated with being a Chinese brand to become the go-to mobile phone purchase for more than 40% of the people in an extremely price sensitive market.
Focus on the Essentials
Focus on what’s important. Leave your Silicon Valley playbook at the door. I repeat leave your Silicon Valley playbook at the door. From the onset, Transsion’s design challenge has been simple; how do we create products that are valuable to our users at the cheapest price as possible.
This is why Transsion products always carry specs they know are important to their users, and leave the remaining buzzword specs at the door. Don’t expect wireless charging, a 120Hz refresh rate screen, and any other advanced and really unnecessary smartphone spec in any of their products anytime soon. Those kinds of specs are nice to haves, expensive to execute, and buzzy. Definitely not Transsion’s style.
That’s what innovation really is. Making things simple. In this market, innovation isn’t about high tech buzzwords like AI, VR, and IoT, it’s about creating products that are meaningful to a good number of people, and that are either affordable to your users, or designed in such a way they pay for them without even knowing. Any other thing is wasting your time.
If you live in Lagos, Abuja, or Port Harcourt, and you haven’t seen a Tecno, Infinix or Itel banner or advert, I can guess your house address.
You probably live in a remote cave in some faraway place where there is no internet connectivity, no banking system, and maybe even the Gospel of Jesus Christ hasn’t gotten to. Unless you operate primarily in the B2B vertical, if you want to scale a business in Nigeria, people need to see you.
Nigeria has an audio money culture; what we don’t see doesn’t exist.
In my 23 years of being a Nigerian, I have never seen an Innoson Motors advert. A good number of Nigerians do not know that someone somewhere in the east is manufacturing made in Nigerian cars. I don’t blame them, Innoson Motors operates primarily in the B2B sector, and based on the present spending power of the majority of Nigerians, I do not see that changing anytime soon.
If you operate in the B2C sector, the more people see you, the better it is for your business, and the better it is for your brand. And you should definitely not play with your brand.
Transsion Holdings is the perfect model for foreign businesses trying to invest and do business in the Nigerian and by extension African market.
Transsion’s strategy is built and designed around understanding their market, and building products that are valuable and affordable enough for the majority of people in their market segment.
That strategy of taking what you used in the West and trying to paste it here without any serious modifications will not work. I repeat it will not work.
The Nigerian market is a price sensitive market, innovation isn’t AI, VR or IoT here, it has a totally different meaning. You’ve got to learn to think outside the box and create products that a majority of users can both find meaning in, and that they consider to be affordable. Any other thing is not advisable.