The German Government just wrote that it will fund a new business practice in my company. The Wellbeing Economy, pioneered by Prof Lorenzo Fioramonti of the University of Pretoria, offers new roadmaps on how to build businesses of the future. The seed funding was communicated via an email from the Global Leadership Academy of the German Government.
From GLAC-side, we would be able to support you financially with a … seed funding
In my Advisory subsidiary, we invented the Wellbeing Economy Leadership Practice (WELP) which supported by our WELP Center of Excellence.
A WELP Center of Excellence (CoE) is a vehicle for delivering projects and program excellence so that besides fiduciary responsibilities, business processes deliver wellbeing to the operating ecosystems. WELP CoE provides the standardized approach, strategy and templates to manage businesses with absolute commitment to the wellbeing of the states. To help firms, we provide a WELP Charter to guide top business leadership on this critical organizational transformation in the early part of the 21st century.
In building a WELP CoE, organizations can start small, use existing resources, and achieve tangible benefits almost immediately. We will assess, define scope, design, implement and validate the elemental pillars that will help the organization drive productivity even while saving, not just in the short-term, but also in the long-term.
You can read about Wellbeing Economy here
The current economy can be described as a vertical structure in which wealth created by growth at the top of the pyramid is ‘expected’ to trickle down to the lower layers. The separation of production and consumption roles leaves ‘consumers’ on the receiving end of the growth process. The model is reinforced by the predominant economic growth measurement, which is the gross domestic product (GDP).
By contrast, an economy designed to promote wellbeing needs to be adaptable, integrative, and empowering. Adaptable, because the new economy must operate like a network, abandoning the conventional vertical structure to expand horizontally, and to build resilience against external shocks through a system of nodes; integrative, because it locates systems of production and consumption within the broader biosphere; and empowering, because its users will take control, rather than performing the passive role of mere ‘consumers.
Finally, we will be moving Tekedia to AWS (Amazon Web Services) for better user experience. The process will be completed in the next few hours and programming will resume. The last backup will be taken once this piece is posted. Please check back later as the transfer will not take long.
Tekedia will be available all through the process.
Bloomberg Businessweek reports that a Chinese company will be opening a T-shirt factory in U.S. Yes, you read it right – United States. The company will be making T-shirts that cost it 33¢ per unit. It has used automation to take out the labor cost which has made it very challenging to make apparels in U.S.
“By early 2018, Tianyuan Garments Co., based in the Suzhou Industrial Park in eastern China, will unveil a $20 million factory staffed by about 330 robots from Atlanta-based Softwear Automation Inc. The botmaker and garment company estimate the factory will stitch about 23 million T-shirts a year. The cost per shirt, according to Pete Santora, Softwear’s chief commercial officer: 33¢.”
Softwear Automation was founded in 2007 by a group of engineers from Georgia Tech, and its sewbots will produce one T-shirt about every 26 seconds, Santora says.
Millions in economic incentives persuaded China’s Tianyuan to set up shop in Little Rock, where it will create 400 jobs, mostly for machine operators. Given America’s supply chain, infrastructure, consumer market, and skilled workforce, “the U.S. is undeniably an attractive production base if labor cost is taken out of the equation,” one researcher says.
This looks very scary when you consider that Africa has been banking on bringing industrial era jobs to jump-start its job creation. But when robots can be deployed in this way, it does mean that we have to go back to the drawing board. Simply, the jobs may not be coming.
As noted in the article, when automation takes over, jobs can actually move from the low-labor cost countries like Indonesia to the advanced ones like U.S. where the highly skilled manpower needed to operate the equipment could be found. There is no human element that can beat 33¢ for producing a T-shirt. Add to the advantage that the advanced countries are where the markets are located, a huge dislocation evolves. Once you automate out labor, the few ones needed to operate the equipment can be easily paid. Factory Jobs could end up being localized in countries like U.S. and UK in the near future. So, Africa needs to update its job strategy as machines are coming.
Many western companies design their business models based on high profit margins. It pays very well to be differentiated and pursue vertical markets. Most horizontal markets are commoditized and a strategy to dominate within it is not always seen as a smart move by analysts. Increasingly firms try to innovate and differentiate in order to carve a niche where they can make hefty margins.
That is very good if your business is domiciled in the saturated Western Europe and U.S markets. There is growth inertia in these two markets with their ultra-competitions and intense regulations. Especially in the pharmaceutical industry, there seems to be no way to expect huge growth in these mature economies.
So what do you do? You have to expand out of Europe and U.S. to Africa, Latin America and Asia. They are the future. They have the population with enormous growth potentials. Despite the downturn in the global economy, they remain promising, especially Asia and Latin America.
Having worked in Lagos (Nigeria) as a banker and traveled to many Africa nations, the high margin structure will not always work in Africa, especially in the pharmaceutical industry. Many are still very poor; yet, they have the same needs as those in the developed world. From entertainment to drugs, they want to enjoy the western products. They want the new cars for their bad roads; they want the best drugs to manage diabetes; the new video games to relax; and so on. Any sense of high cost, people will abandon the product. It is very common to see people die slowly because they cannot afford drugs for treatable diseases.
Arguably, these drugs and cars are available in many parts of Africa. But the problem is that only few can afford them. With no insurance scheme to finance healthcare delivery, patients must pay themselves. What worked in Boston will not work in Botswana because the patient in Boston is being helped by the insurance firm while the one in southern Africa must pay cash. That is the major difference in marketing drugs between U.S and Africa.
Another example is in the telecommunication industry. Cellular handsets are very expensive in Africa when compared to the U.S. Understandably, a simple reason is lack of competition since not many firms have gotten into the markets. Another is the obvious fact that none of those gadgets are made in Africa. So, there are associated transportation and handling costs in selling them in Africa.
Nonetheless, the truth is that by not using value based model, many MNCs are undermining their potentials in developing, emerging or transitional economies like Africa and Asia. You have to offer what the customers can afford and do away with the cost based strategy. In the U.S, you can ask for any price; in Africa, you need sales volume, and lower price makes it happen.
For pharma industry, they have to rethink their strategies. It is time they cut down the prices of their drugs. Drug prices are patient problems, unlike in U.S where it is the insurance firms’ (for those that have, anyway). Many more people can give you sales volume and you will make more profits than sticking to your present pricing model and serving only less than 5% of the African market.
If you focus on pushing volume at good prices, more customers will come in. That alone will help you stay profitable. And they will be better off themselves by using your great products. Drugs, video games, etc must not be overly expensive in Asia and Africa compared to U.S and Western Europe.
For Entrepreneurs
Africans are extremely price sensitive because people do not have a lot of disposable income. This means that a very expensive product is not really a product. Simply, it will not work. The continent is a place where people complain of poor education, comparing their schools with the likes of Stanford University and Harvard University, even when they know they cannot pay the more than $50,000 per year required to attend the schools. So, they know the best possible value in the market. And they expect you to deliver value, even when they are not open to pay for the full value.
That puts entrepreneurs in challenging positions. My recommendation is always to follow the P&G model. Deliver the best possible value per smallest possible unit of measure. In that I mean, instead of selling a bag of Ariel detergent of poor quality, sell a high quality Ariel in sachets. The quality remains the same even though the size drops, making it affordable for families. That model can work in many industries including electronics where you unbundle product designs so that products come with optional accessories, making sure that the core product is affordable. (Many on LinkedIn had noted that Cowbell was also efficient in using sachet packaging in its competition in the diary sector, especially against Peak Milk.)
You cannot design without thinking how your customers can afford to pay for the products. Indomie Noodle is another good case study: they offer many entry choices in the market, making it easier for anyone to engage at the level of its purchasing capacity. You need to learn from Indomie as you design your pricing strategy.
I love agriculture. But I do not want to be a farmer. I want to provide the modern shovels and the cutlasses for farmers. I know one thing: agriculture in the next ten years will create more millionaires than any other sector in Africa.It is very obvious because from Ghana to Kenya, Nigeria to Egypt, the African agenda revolves around food sufficiency. This is massive and fascinating.
Africa is entering a golden era of agricultural production where technology will drive productivity. We expect continuous improvement in crop yield over the next few years. Everyone knows that fixing agriculture will fix Africa because more than 65% of Africa’s working population is employed in agriculture. So, it has the most catalytic impacts possible in raising millions of people out of poverty.
The path to making sure that farming communities are not hungry is a key strategic imperative of both the Gates Foundation and the African Development Bank.
The African Development Bank, AfDB, plans to invest about $24 billion over the next 10 years to accelerate the realisation of the food sufficiency agenda, its president, Akinwumi Adesina, said on Tuesday.
Mr. Adesina, who said the investment would be through the Bank’s ‘Feed Africa Strategy’ would require paying attention to the implementation of plans to achieve the green revolution in Africa.
Zenvus
Few days ago, it was reported that the Gates Foundation is committing about $30 billion to agriculture, and Nigerian farmers union are already tapping into the resources.
The Rice Farmers Association of Nigeria (RIFAN) says it is working to access the $30 billion agricultural grant contributed by Bill and Melinda Gates Foundation and other donor agencies for rice production in Africa. Alhaji Aminu Goronyo, the National President of the association told newsmen in Abuja on Wednesday, that the association had submitted a template that would qualify it for the grant.
The amount of money in the agriculture is huge. From Western Union Foundation to Ford Foundation, from federal governments to state governments, there are many sources of intervention programs designed for the sector. Agriculture is where to be.
How You Can Play in Agriculture
Here are ways entrepreneurs can play in the sector (disclosure: I own Zenvus, an agtech startup):
Precision agriculture by making sensors: this may be a little hard depending on your skill level
Agriculture insurance technology: making insurance products geared for farming
Agro lending technology: delivering capital to farmers at scale supported by technology
Direct Farming: owning farms and growing crops and/or raising farm animals
Farming ecommerce: expanding farmers’ markets by providing digital platforms for trade
Pricing aggregation: facilitating trading through provision of produce price data
Storage: African farmers struggle with storage of produce. Building solutions in this area will be catalytic
Logistics: there is a huge opportunity to facilitate the delivery of produce from rural areas to urban areas across Africa with our poor road networks
Digitization of transactions: from payment to tracing origins of produce, we have a huge need to digitize farming systems in Africa
Commodity trading: building exchanges for trading commodities
Others: there are opportunities like making digital tools farmers can use. These could include farm diary, mapping solutions, etc
All Together
There are many areas any entrepreneur can participate in the agriculture sector. The market is huge. The head of African Development Bank noted that “the AfDB was leading a campaign to unlock the continent’s food and agriculture market, projected to hit $1 trillion by 2030”. In other words, Africa will have its first trillion dollar sector through agriculture. At that scale, you can see there will be many winners.
He [Akinwumi Adesina] said the Forum would be an opportunity to push efforts to make Africa self-sufficient in food production and transform agriculture into a wealth-creating sector.
“Agriculture is booming in Africa and holds the greatest opportunity to boost African economies, build rural economies, lift millions out of poverty, and create jobs,” he said.
He said the bank must work together with its partners, governments, the private sector, and development institutions to realise its objective.
In 2010, according to McKinsey, agriculture was a $100 billion business in Africa. It has since grown to a $330 billion business, i.e. 10% of the $3.3 trillion African GDP. That means AfDB wants to move the sector from $330 billion to $1 trillion in less than 15 years. That makes sense.
Nothing will match the scale of opportunities agriculture will provide for entrepreneurs across the continent in the next decade. I am in and liking what we see.
