As a young banker in Lagos, I wrote a report that one of the reasons responsible for collapse of many small businesses in eastern Nigeria was communal mutual poverty. I have observed that many of the entrepreneurs started well, but as soon as they become fairly successful, family and extended family system would cripple them. As more people depend on their supports, they would eat into their working capitals and will eventually collapse.

It happens very often as most of the men, presently unemployed in many villages, have managed growth companies at one time in their lives. They were sent by their parents for apprenticeships in the cities and after serving their masters, they were assisted to start their own companies. As soon as they begin, the communal power of African family system will come upon them.

More family members will move into their houses and unintentional activities that will destroy their businesses and eventually bring them back to poverty accelerated. It seems that you cannot have these rich men in a system where many are poor. They are dragged down until the day the businesses collapse and they return poor to the village.

I concluded that report by noting that entrepreneurs from stable and supporting families succeed on average over those whose families would depend on them disproportionately. My motivation was to help banks understand the risk profiles of business loan applicants. It was not a technical report; it was just one on a free time which no one actually used.

The African Insurance and Managing Communal Mutual Poverty

What I have described above may seen extremely challenging for a non-African. But it turns out that we insure ourselves in Africa through helping families including extended families.The little boy you help pay his school fees becomes an insurance policy for one’s old age, since few save for retirement. That is the same reason why parents put all they have to make sure their children get the best, so that at older age, they will take care of them.

For entrepreneurs, the first wisdom is knowing the balance. While you must support others, it is always a good idea to pay yourself a defined salary. That salary becomes the only source you can tap to assist family members. This provides guidance making sure you never dip into working capital for the business.

For example, depending on the size of your business, you can pay yourself N300,000 per month. No matter the level of support required from you, have the discipline as if you are to be working in a bank or a company, you cannot just walk into the accountant and ask for money to help people. Push yourself to stay within that spending limit. (Sure, there could be moments you may need to take small loan from your company to deal with personal issues, but do that with wisdom as though you are an employee, and not an owner of that firm). If you have that level of discipline, you will be successful in your business.

The Risk of Herding in Business Strategy

The same analogy above applies in many modern industries. Companies increasingly congregate in their competitive strategies. They tend to do similar things in order to self preserve themselves. In the era of Yahoo and AOL, they provided similar services. Cell phone companies provide services and pricing models that are largely the same. Everyone wants to eat from the same pot and let the help offer assured preservation or total destruction whichever flips.

Even the network televisions are not spared this effect. From casinos to airline industry, we can see an ordered communality across industries. They mutually agreed, though never admitting it, to move in features, services and prices alike. The airline industry was notorious for it about fifteen years ago. In most developing markets where Internet has not penetrated deep enough, the media empires move in tandem on their stories, prices and distribution networks.

I call this communal competitive strategy because it simply means that these firms in their respective industries form communal ties and agree to provide services that will preserve them with lesser disruption to their industries. They may not band together because that could be illegal but the outcome shows they watch one another. Many have called this win-win strategy. It has also been seen as co-opetition where, especially in banks, they cooperate though competing against one other in other to keep the industry healthy.

Unfortunately, just as communal mutual poverty ends up badly; communal competitive strategy (CCS) is doomed in this age. The 21st century is not the one where industries can drive the consumers. Technology disrupts our needs a lot faster and makes it possible that trends arrive and fade quicker. This is in line with my argument that focusing on customer needs is a recipe for disaster; rather, firms must focus on meeting the perception of customers. That means going to offer services and products you envision they need and not asking at the moment. The idea is that very soon, the trends will make them to need them. It is like developing iPod or iPhone when few thought they were unnecessary, but when they arrived, we all liked them.

As social media, technology and globalization make consumers more informed, firms must resist the urge to follow competitors into CCS. I understand how difficult it would be to be unique or possibly a loner when something is working for everyone in the industry, and someone is asking you to follow a different plan. Banks destroyed their industry when most of the big ones got into subprime mortgage loans. In most cases, the defense from these banks was making those loans was an industry norm.

The old Ford Motors, Chrysler and GM followed a pattern- making big gas-hungry vehicles. They were all herding one another and the competition was defined on pushing more SUVs in the market. The 360-degree understanding of your market and the need of seeing the perception of consumers based on the environments which included climate movement, oil price projections and other factors played minor roles in their strategies. They were happy to communally compete, it was working, and none was ready to become a loner, even when data proved the necessity.

Breaking Industry Herding

So what must firms do to avoid the trap of CCS? They must move away from the competitive mutuality, where necessary. Google disrupted the search industry when it emerged because Yahoo, MSN and AOL were basically doing the same. I recalled that the highest email storage one could get those days was 8MG; Google provided 1GB. In airline industry, we have seen Raynair and other budget carriers in Europe disrupted the industry by offering competitive prices and taking market shares from the national carriers. We all know what happened to the US big auto companies when the Asia companies built models that appealed to customers.

Innovation provides the elements to avoid herding because innovation process means you are moving from the common way of doing things. The common way of doing things is usually what everyone does. The principle of innovation is fundamental in a firm creating differentiation and that is a key way to avoid herding.

All Together

Largely, competitive herding is totally bad. However, if an organization relies on that it will not survive for long. Most new entrants usually focus on attacking those models and when they do, you will be affected. This means you must have a strategy that is different from your competitors. You have to become like McDonald that invested in Chipotle Mexican Grill. While the model of Big Mac was under attack by policies, they covered themselves with Chipotle. Similarly, Pepsi has since evolved from purely a soda firm. If you focus on attacking the soda business, you will not get Pepsi. They got out of the soda war with Coke and reinvented.

Avoid the CCS trap and when everyone in the competition is giving customers more, you may go sole and refuse to give. And in cases where they are taking, give the customers more. Herding with your competitors is not a guarantee that you will survive. It simply means that your industry is vulnerable because your singular model can easily be attached by an outsider.

He is the man behind Africa’s Apple – the Tecno Mobile. He brought the firm to Nigeria, perfected a product vision. Tecno found success. In this piece I explain how Nnamdi Ezeigbo has mastered the game of mobile in Nigeria. I explain smiling curve and the accumulation of capability and what is driving his success. He is everywhere but yet invisible because you may not see him on Tecno launch events. But yet, do not worry because  most Tecno products go through Slot System which he controls. He has a great seat and he knows when to come as Infinix phones. He is the real mobile man in Nigeria and he is scaling brilliance with his partners.

In this piece, I explain why Nigeria should work to become a global center for regulated cryptocurrency/blockchain apps. Since the leading nations like U.S. and Germany have refused to regulate these new technologies, Nigeria has an opportunity to lead and enjoy the benefits inherent in them. Whether the world likes it or now, bitcoin or its incarnate under the architecture of blockchain is certain to be part of future commerce. The earlier we understand that and make it legal, the better.

Tecno Mobile likes football. And it is playing its favorite position – attack. Across Africa, as the football season begins, it will be wearing Camon CX Manchester City Limited Edition Smartphones jersey.  Guardian describes it elegantly thus: “Tecno Camon CX flagship is the latest in a line of photo-focused smartphones of the Tecno Camon series; best known for its premium camera upgrades and pocket friendly price tag. The Camon CX Manchester City Limited Edition features the City blue colour and includes the official crest on the reverse”.

Tecno is amazingly impressive and beloved by its fans. It has figured out how to make good smartphones that fit into most people’s budgets. It is treasured in Nigeria, welcomed in India, hailed in Pakistan, and loved in most parts of the developing world. It is very local and yet international in vision. It is scoring and winning the game of smartphone business in most parts of Africa. It offers a great lesson on how to unlock value in new markets through superior mix of quality and pricing.

The Phone Company for Fans

Tecno is one of the fastest growing mobile device brands in Africa. It started business in 2006, in Hong Kong, and today operates as a subsidiary of Transsion Holdings. It has won hearts with its balance on pricing and quality. Today, the company competes for market share against Samsung in the smartphone mobile sub-sector. And head-to-head, Tecno is doing very well, in Africa, against Samsung.

How did it do this? Tecno feels local while Samsung seems exotic and foreign. In deeds and ways, Tecno looks like the nice guy that just arrived in a party and everyone wants to shake his hands because he is sociable and accessible. It has figured out how to work with local partners like SLOT System while engaging hundreds of shops as outlets. You will not feel any elitism in the business model. Its goal remains scoring more goals and it does know how to do just that.

We estimate that Tecno commands more than 20% market in most African markets (excess of 12 of them) where it does business, today. Its products are really good and it has the local chemistry.  Its latest product, the new dual front Led flash device, Tecno Camon CX, is a great product for Africa, when you consider the price and the quality.

Playing Football

Tecno wants to move up the branding pyramid and it has started that by working with Manchester City Football Club in England. Man City, as the club is called, is very popular in most parts of the developing world. The visibility and the equity it will get from this will help it fight any brand perception challenge from Samsung. While Samsung has branded with Chelsea FC England, Tecno is taking it to the next level: unveiling a phone for the lovers of the game and the fans of Man City. As Man City scores, Tecno expects to also score. But its scores will be counted in money.

An Uncertain Future

Tecno looks good but it has a faulty business model. It is a hardware company in all elements of it. That is a very bad thing. It has no platform and technically does not own any customer. Tecno is very vulnerable and the company knows that. Selling hardware is a great business but over time, the limit catches on. From Nokia to Blackberry, we have come to believe that fans are not dedicated disciples because as soon as they get the phones, they forget the hardware. The experience is abstracted out of the hardware into the solutions the hardware supports. Facebook, Instagram, and more become the fun while the phone is the pipe. No one remembers the pipe that much unless you are iPhone or Galaxy.

Great modern hardware companies own their fans. Apple has shown that through its business model with App Store and its ecosystem of music and contents. It is not very certain what Tecno will do, if Apple in the next two years decides to offer a new category of the iPhone, moving the present relatively expensive one to iPhone Star but making one that can compete with Android devices. Provided Apple makes the design so unique not to reduce the value of the expensive version, it can still deliver the value for those that use iPhone as a status symbol. The cheap iPhone will help Apple win new customers in developing world. Alternatively, Apple may even name the cheaper version of its phone Apple, while keeping the name iPhone for the current expensive brand.

Huawei, Xiaomi and others are coming. And these competitors are very experienced and battle tested. There is no inherent defense which Tecno has built since it does not operate any platform. As we learn about the challenges of Xiaomi which has China as its main market, hardware is open to so much disruptions.

According to figures released this week by research firm IDC, Xiaomi saw sales of its smartphones drop by almost 40% in China during the second quarter of 2016 when compared to the same period in 2015. The overall Chinese market grew during the same period by 4.6% and while Apple suffered a similarly large drop in sales, Xiaomi’s real competitors in the mid-to-low end of the market – Huawei, Oppo and Vivo – all saw significant growth.

In the 12 months following its record-breaking valuation, Xiaomi missed smartphone sales targets — twice — as well as revenue targets. According to analyst Richard Windsor revenues could drop a further 10-20% in 2016 to give Xiaomi a valuation of just $3.6bn.

These are the major problems ahead for Tenco as it operates in Africa:

• Africa does not really have much of phone brand loyalty. So, they can switch very fast for good deals. As people buy these phones, if they are not tethered to any ecosystem, they can be lost to the next big thing that offers more value. The way people migrated from Blackberry to other brands should be a huge concern for Tecno,
• Huawei is a beast which is waxing stronger across the globe. It is closing up with iPhone on total phone shipment; Samsung remains the leader. These firms will sooner or later begin to put interests in Africa. That will be a challenge for Tecno which is relatively small.

According to the latest statistics from analyst house Canalys, Apple shipped 41 million iPhones around the world in the second quarter of this year – 2 percent up from the same quarter in 2016. Samsung remains the leader of the pack but with flat growth, shipping 79 million units in the quarter.

However, Huawei shipped 38 million smartphones in Q2, up 20 percent year-on-year. Oppo and Xiaomi, two other Chinese brands, also showed tremendous growth, securing their fourth and fifth places with 44 percent and 52 percent growth respectively.

• Thin Margin: Part of Tecno strategy is its thin margin. The phones are really affordable and that means it is leaving money on the table. How far that strategy will carry it remains to be seen. It cannot truly afford this strategy when it does not run any major platform which can cover the cost of the small margin from hardware. It needs to fund growth and it needs to improve margin, across board.

But no one can discount Tecno which relies on its fan base to  design the excitement and the hype for its products. It is very good at that in Africa and especially in Nigeria. Being close to the fan, using word-of-mouth recommendations on social networking sites, is something we cannot take away from it. But will that be enough? I do not know, but one thing I know: Tecno has many things going positively for it, and it innovates, but until it can lock some of its fans, it will remain vulnerable. That offers a future for the brand.

Thinking of Xiaomi

The paradigm of Tecno success mirrors that of Xiaomi. What we witness in Africa was the same that Xiaomi enjoyed until the global players took notice.

Xiaomi’s meteoric rise was based on one simple fact: It was able to produce smartphones with premium hardware and features which cost a fraction of those on sale from Apple or Samsung. However that advantage rapidly ebbed away when multiple manufacturers followed suit and produced their own smartphones which offered premium specs at low prices.

Tecno understands this problem and that is why it is moving its product categories upside while making sure the price is not lost in the strategy. Affordability of the phone cannot be the only strategy. It must have many elements of other things to compete. It will need to continue to expand its product lineup and most importantly find a way to own a platform: I have recommended the acquisition of iROKOtv to merge its hardware with a platform that can help boost the low margin it present commands on the hardware.

 All Together

Tecno can be the heart of connected everything but the problem is that Africa is not matured for that type of business. Even the content business will be hard for a place where data is a premium. But this company has built a business with good mastering of how the mobile business can be done in Africa and other developing parts of the world.So, I will like to believe it has a plan when more global players take more interests in the continent. If it does, it will continue to score more goals on its  bank statements with more wins across Africa.