We are fixated on the Over-the-Top (OTT) solution providers like WhatsApp, Skype and WeChat which allow people to consume audio, video and other media services directly, via the Internet, as standalone products bypassing telecommunications service providers that typically function as the gatekeepers of such contents. The implication is that OTT deprives companies like MTN, Glo, Airtel and 9Mobile extra revenues besides what customers have paid them to have access to the Internet.

In most strategy conversations, people are focusing on these OTT companies. Interestingly, there is a huge disruption that is coming which may even deprive the telcos the mere opportunity to even earn at least the fees customers pay them to have access to the web to do the WhatsApp and Skype in Africa. KonnectAfrica is leading that charge and it is ferocious. From a newsletter:

Konnect Africa, the Eutelsat-owned satellite broadband service provider, has unveiled SmartWIFI, a new hotspot service, as part of its ongoing commitment to bring digital opportunities to Africans.

This new service leverages Konnect Africa’s powerful, reliable satellite broadband network to enable sales outlets (retailers, hospitalities, gas stations, etc.) as well as healthcare centres or schools to become a connectivity point and digital gateway to opportunity for the surrounding population. Users will be able to access the internet from a distance of several hundred metres around the hotspot. Access can be extended to several kilometres through off-the-shelf Wi-Fi repeaters.

Users can access the SmartWIFI service through vouchers or mobile payment schemes. In addition, SmartWIFI comes with a unique local data storage system, enabling users in remote areas to access smart digital content free of data charges, including online courses and education programmes, sports and entertainment. Mobile and computer applications will also be available to help support daily business activities.

If this company succeeds, we will see a new basis of competition in the telecommunication sector. While many may argue that satellite broadband may not be as fast as terrestrial broadband, the fact remains that the satellite technology has improved over the years for broadband services. What KonnectAfrica is offering is a threat to the present telcos business models. Satellite broadband cost model is better since it is using satellites, meaning that its products will be cheaper.

Elon Musk is coming with satellite broadband in 2019 and Africa is one of the main focus areas. Who wants to compete with Musk? He is the most brilliant innovator in our time, and I do think he wants to do good in Africa with these satellites. That means, the price will be low. Innovators offer better services at usually lower costs.

Elon Musk’s SpaceX plans to start launching satellites into orbit in 2019 to provide high-speed internet to Earth. In November, the company outlined plans to put 4,425 satellites into space in a Federal Communications Commission (FCC) filing. But the document gave little detail on the timeline

The SpaceX is expected to cut the cost of broadband in Africa by least a factor of 2. It is going to be a brutal moment in the industry because other players will join the competition. Just as KonnectAfrica is doing, most of these players will bypass the telcos working with schools, churches, mosques, and health centers as business partners to reach their customers. Just like that, terrestrial telcos will be cut-off. The threat is many orders of magnitude to what OTT is giving them today. OTT gives them options to earn internet connectivity revenue; satellite broadband provides a new basis that does not follow their paths.

Meanwhile, many global players have seen that Africa is the growth market for telecommunication services. Nokia and Vodacom have signed partnership to trial “Nokia 5G technology to accelerate the launch of the new technology and enable Vodacom to drive digitalization for the benefit of businesses and individuals in South Africa”. As Vodacom is working with Nokia, MTN and Ericsson have also sealed a deal on 5G trial.

Ericsson and MTN have announced the first 5G trial in South Africa to start in the first quarter of 2018. The two companies signed a memorandum of understanding (MoU) at AfricaCom 2017 to collaborate on the rollout of 5G technologies in South Africa, one of the first in Africa. 

All these developments are expected. In my projection, I expect 2022 to be the year Africa will have immersive connectivity. That is turning out to be so, in the making. My models are coming out fine.

In today’s videocast, I make a case that Africa will enter the era of affordable broadband internet in 2022. That will be the year we will begin a new dawn of immersive connectivity where you can eat and surf all you can. Industry players will take off the Internet meter and then focus on service, experience and quality. From satellite broadband vendors to the MNCs with balloons and drones, the sector will become very competitive and service will drive growth. This has happened in the past – every decade, Africa experiences a major industrial transformation. We saw that in banking and voice telephony. 2020s, starting at 2022, will be the decade of immersive connectivity.

All Together

As you build web products and services, have in mind that by 2022, most African cities will be at parity on broadband with most areas of EU and United States. My model and capacity to track technology penetration have given me confidence that our business model can shift to an era of affordable Internet, starting 2022. It will change many things including more global competitors and access to new markets. Even the products we make today which are designed for metered Internet may evolve because Internet will be more affordable: from Facebook to Microsoft, from KonnectAfrica to the telcos, we will see huge price collapse. That will be the beginning of the new era of web business in the continent.

Last week in Lagos, I ran a Board Meeting strategy for a major client. The business had many products and was looking at how to coordinate capital investment to ensure optimal asset allocation and utilization. Our job was to drive the visioning process to make sure investments are synergistic across the product lines. During my work, I introduced my clients to One Oasis Strategy (my phrase) which I have used with major clients in U.S.  You will read an extended piece if you subscribe to Harvard Business Review print.

Before explaining the One Oasis, let us refresh what oasis means:

In geography, an oasis is an isolated area in a desert, typically surrounding a spring or similar water source, such as a pond or small lake. Oases also provide habitat for animals and even humans if the area is big enough. The location of oases has been of critical importance for trade and transportation routes in desert areas; caravans must travel via oases so that supplies of water and food can be replenished. Thus, political or military control of an oasis has in many cases meant control of trade on a particular route.

Indeed, oasis is very critical and every company has oasis. Your best product is the oasis in your business. Every other product feeds on that best product. If you build your investment around that main product, you will find success, because those investments will have a clear “customer”, and that reduces market risks. In other words, if your new business investments are geared to support the best product, and the best product is doing well, it means the risks on the new investments will be easily managed. Provided the best product continues to do well, demand on the new investment is assured. That is the One Oasis Strategy.

Every product is like the animal that returns to the oasis for water. Every product is like the humans that depend on the oasis for habitat. Provided that the oasis is there, and doing well, their survivals are guaranteed. Yet, as those new products do well, they could find new customers, beyond the first customer (that best product). That means, you can introduce them to the markets for other customers to buy, even when they are supporting the best product, which is the most important reason the original investments were made.

For my client, we spent time and agreed upon the best product in the business, using many indicators including brand, financials and market positioning like market share, etc. We then worked on how investments could support that best product while also having the capacity to serve the broad market in future. We want the best product to be the category-king and purely peerless in the industry. The massive accumulation of capabilities in the company to deepen its position was designed to make that happen. We structured some business lines and reshaped how some products were made. Simply, we engineered a One Oasis Strategy. I have so much confidence that my client has paid for elite insights.

Cases of One Oasis Strategy

In this section, I will explain two companies which have used the One Oasis Strategy.

Amazon: Amazon is an ecommerce company with massive user base. It supports billions of transactions in a year and needs computing resources to keep its portal functioning well. Amazon could have called IBM to rent a cloud infrastructure for its ecommerce. Rather, Amazon decided to build one in-house knowing that the future of its ecommerce will be driven by the capacity to offer great experiences to clients. The cloud infrastructure investment is necessary as growth in the ecommerce keeps going up. It does not make sense to be sending that money away. So, Amazon went and invested in cloud. The ecommerce is the oasis and the cloud is like the animal that finds habitation from the oasis. Provided the ecommerce is doing well, the investment in cloud has minimal risk. The first customer to the cloud business was ecommerce and that means Amazon does not have to worry if there is any external customer for the cloud services. Amazon does not need to check market dynamics to invest in cloud provided its ecommerce business is doing well.

But interestingly, after time, Amazon did find opportunities in the external market to sell its cloud services. Those services are now called Amazon Web Services (AWS). Tekedia is hosted on AWS, just as many websites which include brands like Dropbox and Instagram, present or in the past. The oasis (the ecommerce) has been served by the new product (cloud) and now that new product is making profit for Amazon.

Samsung: In the global semiconductor business, Samsung is one of the most prominent companies. Others are Chartered, Intel, TSMC and GlobalFoundries (old IBM). While Intel makes chips it sells to customers to be bundled in products, it does not have any direct customer-end products of itself. Others are largely pure foundries. But Samsung is different: it makes all these chips, fabricates them, and it has products in the markets that use them. The Samsung Galaxy series is the best Samsung product, an oasis, which the semiconductor is serving.

This is what makes Samsung competition with Apple very interesting. It can afford to invest in new memory chips and OLED display irrespective of what the market trajectories are. Why? The first customer to Samsung semiconductor business is Samsung mobile devices unit. That means Samsung semiconductor has an incentive to innovate because it wants to make the best mobile devices in the world. No other company in the world has those capabilities, at scale, as Samsung.

Between Apple and Samsung, Samsung is a better business in terms of re-positioning, but Apple is a fashionista brand which makes customers great fans. Samsung has better engineering, but Apple builds better customer perceptions on products. But when you look deeper, you will notice that without Samsung, there will not be any Apple iPhone in this world, at least at its quality level. Samsung will make about $110 from each iPhone X sold.

Simply, with this capacity to feed the oasis, knowing that Samsung semiconductor has no risk in the business, it makes it harder for competitors who are in OLED display and memory chips. Those competitors have to find customers, and then get their assurances they will stay with them for long. But Samsung semiconductor has the customer in-house and can wager without any risk since its best customer is a unit in the group business. That explains why Apple has been unable to find an alternative to Samsung in supplying these critical components used in iPhone: no one can take the risk required for innovation unless Apple can lock in for years. But Apple will not do that. So, at the end, only Samsung has the best product. That is the reason why Apple has to use Samsung, its arch-rival.

Apple along with some investors bought Toshiba memory business. Sure, this new business can see Apple as its first customer, based on the One Oasis Strategy, to invest. But with private equity (PE) firms involved, they will not be in a hurry to invest billions required to match Samsung scale. Apple will not just have to guarantee taking those supplies; Apple has to be ready to pay at the rates that PE will like to see. It is not likely that is possible because Apple is a minority investor which will likely look for the best deal in the market. Samsung has the best price along with the best product. Toshiba has to win on both ends.

All Together

The One Oasis Strategy is about finding how to create solutions which can find their first customers within the business. Amazon Cloud has the ecommerce operation as its first customer thereby removing any market risk. Samsung Semiconductors has the Samsung mobile devices business as the first customer. With those assured internal customers, these firms deploy resources, irrespective of the market dynamics, because they have found the first customers already, in-house. But over time, the products are now made available to the general public. You need to identify your best product (the oasis) and get others to find how to build habitations around it.

Apple has a clear arch-rival in the smartphone business: that is Samsung. Though Google Pixel is emerging along with Huawei, the company that keeps Apple awake in the night in the smartphone business is Samsung. Samsung delivers the best Android devices, at scale, which challenge Apple products across many indicators.

Between Apple and Samsung, Samsung is a better business in terms of re-positioning, but Apple is a fashionista brand which makes customers great fans. Samsung has better engineering, but Apple builds better customer perceptions on products. But when you look deeper, you will notice that without Samsung, there will not be any Apple iPhone in this world, at least at its quality level. Samsung will make about $110 from each iPhone X sold.

Samsung actually has a vested interest in the iPhone X being a huge success. According to The Wall Street Journal, the company stands to make around $110 from each phone sold, which all told could result in billions more than the company even made on its own most-recent flagship, the Galaxy S8.

To be clear, all that money will go to Samsung Group, the conglomerate, as opposed to specifically the mobile division of the company. Why the windfall? Samsung made the OLED display, NAND flash, and DRAM chips in the iPhone. It’s currently the only company capable of manufacturing these items at the volume that Apple needs, which means Apple has to buy the parts from Samsung.

If the iPhone X sells the way analysts think it will, that means Samsung stands to make billions of dollars off its competition. In fact, the Journal reports that one analyst thinks Samsung will likely earn $4 billion more from selling parts to Apple than it did from sales of its own phone.

Technically, Apple is equipping its main competitor. For Samsung, that iPhone X is selling very well is not really a bad thing, since that means Apple will need more display and memory chips from it. And should Apple struggle, Samsung can easily fill-up the gap since it has its own big smartphone business.

Personally, I do think that Apple will be having quarterly nightmares whenever it sees Samsung break sales records just as Apple is breaking sales records, especially when Samsung has shot itself in the leg. Apple was the primary reason why Samsung recovered easily from its burning phone scandal: the revenue coming from Apple to Samsung’s chip business was enough to make a huge scandal to fizzle.

So, no matter what Apple does, Samsung will win. If it does not do well in its products, Samsung technology will come after its customers. And when it does well in its products, Samsung components will be needed in huge numbers thereby helping Samsung. So, irrespective of the circumstances, Samsung will profit from or on Apple. I call this Circular Profit.

Simply, you have circled your competitor that no matter any action it takes, you will benefit. When the competitor is doing well, you are also doing very well. And when the competitor struggles, your product fills up the space in the market. Under both circumstances, you will profit from or on the competitor.

What Samsung is doing to Apple is also close to what Intuit has done to some partners with the major difference being that the partners built as parasites within the Intuit ecosystem. Apple is not doing so, as it has a clearly differentiated product despite the fact that it uses Samsung components.

One company that has done that very well is Intuit, an American company that is known for selling tax software. A key attribute of Intuit is giving most things free. You can accuse the firm that it hates revenue. You see competitors building products and solutions on its platforms. But there is a catch: after few years, the competitors become invisible. They become folded into Intuit business in the eyes of customers.

So, for decades Intuit continues to swallow competitors without buying them. I have called its model: Fish Bait Acquisition Construct. It is a model where you give things free to competitors. As they come to enjoy the freebies, you trap them, and over time, they become weak. The end game is that over time, they beg you to take over their assets.

All Together

The finest moment for a company or a nation is when you circle around your main competitor. When that happens, all actions the competitor takes will generate money for you. Head, you win; tail, you also win. Samsung has successfully circled Apple. Largely, if not for global regulations, Samsung can decide if Apple will have iPhone X in the market tomorrow. It can simply says “Apple, we cannot supply to you”, but that of course will not happen because Samsung wants to move products out of the factories.

At national level, colonizing states like France and Britain have circled most African countries, profiting from any action they take. If Cameroon grows its economy, France will have more markets to ship consumer products for the citizens since nothing of value is made in Cameroon. And when Cameroon struggles, France also fills up with loans which ensure that the nation is tethered to France. And if crises happen, be sure that France is going to supply the ammunition. Simply, under all permutations, France will profit from the conditions in Cameroon.

The relationship between Apple and Samsung is unprecedented. And I do think that there is an inherent risk element there as we expect the $1 trillion Apple valuation very soon. But of course, Wall Street does not see it that way, and for Apple that is all that matters. But whether it hurts Apple or not, I do suggest you never allow your main competitor to circle you. You must work to accumulate capabilities to mitigate such scenarios from happening.

A Commenter on LinkedIn Explained the Manufacturing Processes here

Apple’s business model is what i call *Design, Outsource, Assemble & Market* (DOAM) Model. They design what they want and it is usually sleek, custom made and can be perceived to be better than what is already available for example their System On Chip (SOC) and then outsource the fabrication. Taiwan Semiconductor Manufacturing Company (TSMC) manufactures Apple’s chips while Apple assembles, program and markets.

Samsung on the other hand uses a model i call *Design, Manufacture & Market* (DMM) Model. Apples DOAM Model has been profitable over they years that they stopped using Samsung chips and launched the A-series SOC. Then out of nowhere, Samsung made the first and only breakthrough in OLED Screen Technology. They are the only ones that can Mass produce OLED Screens on Planet Earth at this point in time.

Apple’s Marketing Strategy is to *WOW* their customers but their isn’t much about the iPhone X that would wow anyone up to the point of spending $1,000 to purchase an iPhone X if you take away the OLED Screen which is the latest innovation in Screen Technology and that is exactly where Samsung got them.

Jumia House Nigeria has been acquired by ToLet.com.ng, a Nigeria-based online property classifieds portal. Jumia finds an exit as it continues to restructure its business after over-investing many years ago. Over the last few months, Jumia has streamlined its business, exiting from some web business categories. Gone were the days of the African Internet Holding (AIH) which Jumia parent company, Germany-based Rocket Internet, co-funded with MTN. The partners had expected to use the AIH vehicle to redesign Africa’s web business sectors, churning out companies that would become category-kings across many sectors. AIH made way for Jumia Group as Jumia consolidated all its properties into one brand: from Kaymu (a marketplace) to hellofood (a food delivery ecosystem).

ToLet.com.ng is the leading real estate property platform in Nigeria, focused on providing users with up-to-date information, guidance as well as the best real estate agent network, all of which are needed to make better-informed property decisions. They offer a range of services tailor made to suit the expectations of Landlords, prospective tenants, property agents and anyone involved in the real estate market. ToLet.com.ng has rapidly grown to become Nigeria’s leading online destination for property consumers to search for homes and the favoured online marketing partner for Nigeria’s landlords, estate agents, letting agents and property developers.

This is from the press announcing the acquisition:

ToLet.com.ng, Nigeria’s leading online property classifieds portal, has in conjunction with their existing investors, Frontier Digital Ventures, acquired Jumia House Nigeria, a competing property portal, for an undisclosed sum. ToLet.com.ng will now merge the two platforms over the coming months, under the new name of PropertyPro.ng, creating Nigeria’s Number 1 property listings market leader in the online Property classifieds space, with 65% share of the Nigerian online real estate market.

ToLet.com.ng currently has around 60,000 listings on its platform, whilst Jumia House Nigeria has around 22,000, the vast majority of which are property listings for sale. In 2016, the company secured Series A investment of $1.2m, led by Frontier Digital Ventures [FDV], to expand its operations. Today’s announcement also sees FDV strengthening its portfolio in Angola and Ghana.

One thing that caught my attention is the number of listings in both platforms: ToLet has 60,000 while Jumia House has 22,000. If you combine these platforms, removing duplicate listings, you may have 75,000 unique listing in Nigeria. According to the statement, that is about 65% of the market share.

Jumia House Nigeria is an online destination for the widest range of lifestyle products and services. Jumia was founded in 2012 with a strong belief that internet can improve people’s lives by helping them overcome the challenges they face every day in terms of poor infrastructures, limited choice, limited information, expensive products and services. Jumia is led by top talented leaders offering a great mix of local and international talents and is backed by global investors, namely; MTN, Millicom, Rocket Internet, Axa, Orange, Goldman Sachs & CdC.

The numbers are very consistent with any number out there: from Konga’s 200,000 (active users) to Uber less than 300,000 (active riders). If not that this information is public, I would have expected Jumia House to have more than 22,000 listed properties in its platforms, considering the investments in advertisements, agents and promotions the firm has mounted in Nigeria for years. It does seem that web business is not that easy in Nigeria.

Exiting is Good for Jumia

This is not really an “exit” for Jumia, and ideally should not be captured as one. But since the press release said “acquisition”, Jumia House has exited. Jumia is not a company that allows local companies that have raised less than $1.5 million to acquire its properties. The fact is this: Jumia has given up on this web sector, and wants to get any money it can lay hand on to cover the cost of necessary filings and disclosures, associated with the sale. My estimate is that ToLet spent $440,000 for this acquisition at premium of $20 per listing.

Now that this slow moving category has gone, Jumia can focus on areas it thinks it can find growth. It needs to find the paths to profitability.

The Property Marketplace Business

The property marketplace business looks good on paper. It has a huge scalable advantage with near-zero marginal cost. The customers generate the raw materials (the listing) and the two-sided business makes money on those materials, serving demand and supply. It is a pure platform business and one that should succeed. In the web business, nothing can be described as being better in terms of asset-light.

However, in Nigeria, there is one major challenge to most digital businesses: lack of trust. That is the main element why Jumia has seen just 22,000 listing despite all the efforts. Nigerians struggle with trusting physical space commerce. Now, take it digital and the trust issues multiply.

That distrust is destroying value across categories and will continue to make it challenging for Nigeria to have great web businesses. Only few people will be happy to close a property deal just by seeing things online. Approaching business with distrust means that most Nigerians like to feel and touch products to be sure they are for real, before committing.

All Together

The execution of this deal is what I have been preaching for startups to do in Nigeria: find a way to come together to have scale. Our markets are very challenging. So, pooling resources will provide the opportunities to survive and grow. In short, the best thing for most of the startups will be to run as monopolies as their capital bases are largely small. Coming together can help them generate more market value and attain profitability faster. Sure, Jumia Home and ToLet are not merging, but the message remains the same: better to have a unified strong front than clusters of companies which will likely fade out due to size.