Business Idea #2 – Location Agnostic Pan-African Remittance /Money Transfer

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April 23, 2018

This daily series focuses on business ideas for those looking to launch new ventures in Nigeria (and Africa in general). The short ideas are archived here.

Problem

Over the years, sending money from Europe/US into Africa has advanced. The transaction cost continues to drop as innovations and more players enter the sector. However, remittance/money transfer within Africa (i.e. from one African country to another) continues to be expensive and non-optimal.

In this videocast, I discuss the need to build a truly pan-African digital remittance/transfer banking product which is agnostic of location or currency in Africa. None of the products we have today meets that standard. Largely, I envisage a situation where all you need to buy and sell across Africa is one bank account in just one African Union country. With that, you do not have to even think about the specific currency of that account as technology will seamlessly make it possible to access other African markets for payments, transfer etc. The banks or fintech companies must still comply with all regulations related to inter-national transfers, forex etc. The only difference is that customers will not see them as they will be hidden with technology

Opportunity

African intra-trade is low partly because sending and receiving money within Africa is hard. Just as many airlines will need to take you to Europe [for a trip originating within Africa] before taking you to another African capital, most money going from one African capital to another does require passing through London or New York. There is a huge market opportunity to fix that business friction by improving efficiency, speed and cost.

Action Roadmap

Build a payment system and settlement networks using modern technologies like blockchain, mobile money, etc with capabilities to serve broad spectrum of customers across Africa.

That Business Needs Partnership to Grow

By

Ndubuisi Ekekwe

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April 22, 2018

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Partnership: We do not do it very well in Nigeria – everyone wants to go it alone. Many years ago, many banks went down despite a fair timeframe from the Central Bank of Nigeria for them to beef up their capital requirements. For most of the owners, “this bank belongs to me. I will always be the owner”. Yes, they ended up owning 100% of 0 as the central bank withdrew their bank licenses the next day.

You may ask: why didn’t the man accept 10% in a bigger bank for his dying bank? In Nigeria, he would look small, owning 10% when 100% is on the table!

Typically, Nigeria is not good with mergers & acquisitions. We like to be 100% in charge. That is bad. From Aba to Kano, Osogbo to Uyo, you would see guys killing visions purely because they do not want to TEAM up and build something greater.

Sure – I get it. We do not trust one another that much. So, if that is the case, there is no clear basis for partnership. Unfortunately, that is a lame excuse. Nigerian legal system is emerging and if you follow it properly, the risks are as what you have in most parts of the world. The problem is that the partnership was done in a beer parlor with no clear responsibilities, rules and defined modalities. Simply, it was created on chaos because it was not done professionally.

Do not be like them – partner with others. But do it brilliantly. To save cost especially in markets where the path to profitability takes long, one of the best ways of managing risk is to share risk, smartly.

The gestation period to profitability in a typical Nigerian startup is long. That long gestation is also the reason why many startups or small businesses collapse few years of founding. Typically, one way to deal with this is to raise capital, ramp up market entry to grow fast enough to attain profitability. But in our extreme volatile economy, if the timing is off by months, the company can collapse. You just run out of cash.

Think about it –if those shoemakers in Aba could tear down those small stores [their design centers and sales offices] and have a big one where they could use division of labour to deepen capabilities and drive process efficiencies, they would make more shoes, improve quality through specializations and possibly make more money per partner. Also, they would buy in bulk and that would improve their unit economics.

Aba shoes sector would grow with partnerships [source: techeconomy]

Sure – men cannot talk at beer joints that they hold the titles of CEOs and Managing Directors post-partnerships in some cases. We like titles – a lot. But we need to understand that they are ephemeral. It is far better for three shoemakers to make progress when one is indeed a CEO, another is focusing on production while the other is driving sales/marketing. While the egos may be muted, the bank accounts will grow. And as the banks see the growing scale, those loans will begin to come in because they are seeing better digits hitting the bank accounts.

People, look for a smart partner, and combine capabilities and resources in what you do in Nigeria. It does not have to be in your city: having someone represent you in Yola, Uyo, Aba while you are in Lagos could save you massive logistical issues.

Make it happen.

Business Idea #1 – Managing Dangote Group Truck Fleet

By

Ndubuisi Ekekwe

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April 22, 2018

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This daily series focuses on business ideas for those looking to launch new ventures in Nigeria (and Africa in general). The short ideas are archived here.

The Problem

The Dangote Group operates more than 12,000 trucks. Largely, for all the success achieved by the Dangote Group, it has not managed its fleet optimally. The accidents are common, blocking roads and causing mayhem.

“[The Dangote Group] has a fleet size of 12,000 trucks … and are large users. One of the biggest challenges in the market today is logistics because we do not have a proper transport network,” he said.

The Opportunity

Because the Group has not managed its truck very well, there is an opportunity there. The Group needs to have a better way to maintain, track and route its trucks more optimally. The implication is that possibly someone else can do it better, deploying new technologies and capabilities. Nigeria would be served better if Dangote Group fleet are better managed.

Action Roadmap

An entrepreneur can propose to Dangote Group to use digital freight matching, telemetry, IoT, blockchain, etc to improve the truck/fleet management. Simply, the company can outsource the logistics and management once it acquires the trucks.

Launch of Today’s Business Idea Series

By

Ndubuisi Ekekwe

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April 22, 2018

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We are launching a new series on Tekedia. It is titled Today’s Business Idea. Daily, we will share some relevant business ideas.

Starting today, I am posting daily business (or startup) idea with specific focus on Nigeria (and Africa in general). You have already seen today’s idea which focuses on truck management. Though I have noted Dangote Group there, the thesis is applicable to other companies like BUA and IBETO.

The piece format contains The Problem, The Opportunity and Action Roadmap. And it is very short as I am not trying to write a business plan, rather to provide direction.

All the daily entries will be archived here.

The End of Scale, Building The Capability of the Future

By

Ndubuisi Ekekwe

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April 21, 2018

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MIT Sloan Management Review has a very fascinating piece which looks at the (approaching) end of the economies of scale and how technology is reducing its impact on market competitiveness. Many decades ago, companies needed massive scale to drive cost efficiencies. Sure, scale still matters but now we are looking at the scale that comes through Inversibility Construct – a construct that looks at using digital platforms and network effects to inverse physical-level customer experiences.

With mobile, cloud computing and AI, we are seeing how small and agile companies are challenging incumbents, using knowledge as a key factor of production. Interestingly, being big with traditional assets could weaken a firm’s capacities to thrive in this era. The unconstrained and unbounded internet has made it possible to reduce marginal cost without massive capital investments on distribution and transaction systems.

Economies of unscale are enabled by two complementary market forces: the emergence of platforms and technologies that can be rented as needed. These developments have eroded the powerful inverse relationship between fixed costs and output that defined economies of scale. Now, small, unscaled companies can pursue niche markets and successfully challenge large companies that are weighed down by decades of investment in scale — in mass production, distribution, and marketing.

Investments in scale used to make a lot of sense. Around the beginning of the 20th century, the world was treated to a technological surge unlike any in history. That was when inventors and entrepreneurs developed cars, airplanes, radio, and television, and built out the electric grid and telephone system.

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Today, we’re experiencing a new tech surge. This one started around 2007, when mobile, social, and cloud computing took off with the introduction of the iPhone, Facebook, and Amazon Web Services (AWS), respectively. Now, we’re adding AI to the mix. AI is this century’s electricity — the technology that will power everything.

AI has a particular property that supplants mass production and mass marketing as a basis of competitive advantage. It can learn about individuals and automatically tailor products for them at scale.

Diagram of economies of scale [source: economics help]Indeed, Netflix without prior distribution infrastructures is positioned to challenge Disney because the distribution internet network is unbounded. Amazon has since become the most pre-eminent retailer without following the outdated paths of opening physical stores.

Economies of scale is not going anywhere as a business concept. But the absolute impact based on the traditional factors of production will erode. The scale that matters is Capability of the Future which is largely knowledge. This knowledge will anchor new business models which will emerge as new technologies like blockchain reshape the structure of global economies.