It’s common for (aspiring) tech entrepreneurs around the world to look at and try to learn from leading & emerging tech companies in the West: Apple, Amazon, Facebook, Google, Airbnb, Slack, etc. But the reality is that, unlike counterparts in the West, African founders across many countries have to deal with scarcity in several forms: lack of capital, inadequate infrastructure, lower levels of literacy/educational attainment among both the workforce and customer base and more. This isn’t to say that there’s any scarcity of ingenuity, determination to succeed, or hustle, however.
While Western ventures often receive attention and emulation from entrepreneurs in Africa, tinkering with (established) business models to align with realities on the ground is perhaps more important to successful tech entrepreneurship in African markets than merely importing the latest technologies.
Comparing African countries like Nigeria with more developed markets, there are a number of reasons why innovative and unconventional business models may be necessary (and natural) including:
- Different values, expectations, and preferences of African consumers (as compared to Western counterparts),
- Immature distribution channels,
- Underdeveloped infrastructure, and
- The arbitrage challenge/opportunity of leveraging what is comparatively abundant and cheap locally (e.g., labor)
Exploring some of these challenges and their analogues in Western markets highlights why founders in Nigeria and in similar markets across Africa may want to look elsewhere for inspiration.
- Electricity and other public utility systems tend to either be unreliable or works in progress.
- Systems are usually reliable and an afterthought—it’s often taken for granted that they are functional (& rightfully so).
- Road networks can be poorly maintained. Highways and more robust rail lines are generally works-in-progress. Motorcycles may be more prevalent than tractor trailers.
- Again, the assumption (a correct one more often than not) is that infrastructure is in place and adequate.
- For physical goods: Prevalence of smaller retailers, the relative rarity of larger retailers, and multiple layers of wholesalers create inefficiencies (and delays).
- For digital goods & services: Smartphone penetration levels, while rapidly growing, tend to be low and the cost of data/internet access as compared to wage levels can be discouraging to consumers.
- Both physical & digital distribution channels tend to be well developed and efficient.
- Speaking very generally, low cost is often more important than value.
- Value (or ‘bang for the buck’) is often a key consideration & can be more important than cost.
Cost of labour
- Lower hourly costs provide opportunities on the labor supply side (e.g., manufacturing), but challenges on the consumer demand side (e.g., reduced consumer spending power)
- Higher hourly costs provide some challenges on the labor supply side, but opportunities on the demand side (e.g., proximate customer base includes some of the highest income tiers globally)
For these and other reasons, it’s not surprising that some pioneers of tech entrepreneurship in Nigeria look to the East (India/Asia) for inspiration and not to the West, and recommend that others do so as well:
“Emerging markets are only at the beginning…I love to seek inspiration [in India].”— Jason Njoku, Founder & CEO, Iroko
“While building a business in Africa and looking for role models to imitate, look at businesses in Asia and borrow a leaf from them.” — Marek Zmyslowski, Founder & CEO, HotelOga (& Former MD, Jovago/Jumia Travel)
“Interested participants in the Nigerian tech ecosystem, should read ‘The Golden Tap’ by Kashyap Deorah. We have the same challenges as India.” — Chijioke Dozie, CEO, OneFi
The truth is, regardless of whether you’re in the startup world in Lagos or the corporate world in Los Angeles, it’s probably wise to pay attention to new business models being developed in fast-growing emerging and frontier markets in the East.
A good place to start is ‘The Next Wave of Business Models in Asia’ which gives a contextual overview of “two distinct, yet overlapping, waves of innovation” across China and India. (Note: registration required to read the full article.)
The article is from the MIT Sloan Management Review’s recently released Winter 2017 Collection, Keeping Up With Emerging Markets, whose tagline makes it clear why this is relevant to entrepreneurial and corporate leaders across the world: “If your company isn’t staying abreast of new business models and strategies being developed in emerging markets, you’re falling behind.”
Emeka Ajene writes on behalf of the team at Africreate, an advisory organization focused on innovation, insight, and impact in the African tech & SME ecosystem. This article first appeared on the Africreate blog.