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.
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.
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.
I explained in a video today that Nigeria has three core investment opportunities for entrepreneurs [there are many others but I focused on the small pocket manageable areas]. I have gotten some emails with people asking me to offer more use cases. Sure, I try to keep the videos short as many in Nigeria spend money when they watch. That means you cannot really say a lot if you want people to watch.
Specifically on the financial services one, besides the race to partner with banks, I see massive opportunities with airlines in Nigeria. And that means Air Peace and Arik and soon JetWest (which will be the best airline in Nigeria when my big kinsman takes it live).
If you help these entities to improve their airline mileage royalty programs, you can mine the most lucrative customer segment in Nigeria and offer services like insurance, real estate, etc to those customers. Indeed, you can build a solid financial product using data from the airline royalty programs. It is not only banks that have customer data. The airlines have the best customers and you can deepen your business in partnership with them.
But to do that, you must have a vision on what to do with data. Fintech, insuretech, etc must not be seen from the lens of banking and insurance partnerships alone. There are many tangential sectors which are there. Working with them to clean up their data and improve data collection could unlock more value.
Our airline sector remains at infancy. While leasing aircraft would be hard, working with them to deliver services to their customers is promising for entrepreneurs. If you pay money to most airlines in Nigeria to manage their royalty programs and monetize the associated data, you could build a solid business. Think of Jason Njoku going to Nollywood to buy the rights of videos for iROKOtv. The videos for airlines are those customer data which they collect but have largely not seen any value besides moving customers from one airport to another. Under the right customer privacy policy, those customers would be happy to be served besides just buying tickets and flying.
I do not work on financial services because it is the largest sector in my practice: you cannot compete with people that put eba and amala on the table. But entrepreneurs there, discover the latent opportunities – the sector is huge. There are new frontiers with latent but promising opportunities across industrial sectors in Nigeria. Go for them.
Like Samuel Taylor Coleridge famously shouted “water, water everywhere, but not a drop to drink“, we have at the moment ‘data, data, everywhere but no one is using it”. We need to change that in Nigeria.
In this video, I present my Q2 2018 three promising sectors for investments in Nigeria. I have also noted some major competitors you would face if you decide to take action.
