The Semacraft Blog

Next week's office

We start the immersion phase of our project tomorrow and leave for our first location in rural Kenya today. Our focus is to better understand household consumer behaviour and our methodology is inspired by the early stage of the human centered design process.

Ukambani has been the traditional homeland of the Kamba people for at least the last four or five centuries. Although oral history acknowledges that the Kamba came from the south, in the region of Mount Kilimanjaro, the creation myth which is most popularly cited places their origins in the heart of Ukambani: Mulungu (God), who created the universe, also created the first Kamba man and woman, and placed them on top of Mount Nzaui in the fertile Mbooni Hills (roughly 20km north of Emali).

We’ll be based in the market town of Wote, capital of Makueni district.

Consumer electronics stall in informal market, Nairobi Kenya 23 January 2012

Increasingly I have been getting the sense that there are some fundamental issues with the way BoP focused organizations are developing, creating and implementing their market entry strategies.  Here are four of the most obvious errors that I’m seeing:

Assuming there’s no competition

Most of these firms, particularly those coming in from the outside and seeking to serve the ‘poor’ in the developing world seem to be operating in a vacuum. Observing their market entry actions point to an underlying assumption that they are entering a virgin market where  no competing solutions for their product or service exist.  If this fundamental premise is mistaken then every element of their marketing, communication, distribution and pricing strategy will naturally suffer.

A caveat here is that it might indeed be a virgin market for branded international solutions in the formal market but this is where overlooking the informal markets and existing practices in user behaviour can be far more dangerous since this is where the competition will come from in the form of substitutes or alternate solutions.

Because of the above assumption, little effort is made to uncover information about the customer, the market or competition or the operating environment. Whether this is due to a vacuum of information on BoP markets or the developing world, or this subject simply not being taken into consideration, the fact remains that this oversight then gives rise to a series of errors (like the domino effect) – those in marketing strategy viz., marketing communications, value propositions and positioning not to mention pricing.

Conflating company mission with marketing strategy

While this is most commonly found among well meaning social enterprises entering these markets for the first time with their life saving products for the poor, large multinationals with previous experience in the developing world are not immune the minute they choose to focus particularly on the BoP (or poor) market.

Tata Nano is the most obvious example of this although here one wonders how much of this had to do with their actual marketing communications and advertising for the Nano and how much to do with all the media hype around the car being specially for the ‘common man’? All the positioning and branding in the world through formal advertising and communication channels could not overcome the public perception of the ‘poor man’s car’ created by every other article – from engineering news to international styling – on the Nano.

Similarly, if all the marketing communications, press reports and online information is geared towards the ‘poverty alleviating” mission of the company then this lack of clear focus or understanding of who the target audience is will come through in the positioning and branding of the product in the marketplace.  And no one will aspire to buy the ‘poor man’s product’ if it means a clear signal of having failed to succeed or admitting defeat among their friends and neighbours.

Confusing value proposition with need

This lack of clarity and understanding about the target audience for a product or service and thus, its marketing communications and messaging then snowballs into incorrect positioning of the product or incorrectly identifying the value proposition for the end user.

The end result might be the same – the customer choosing to buy your product – but the pain points may differ tremendously across geographies and regions, not to mention socioeconomic strata. An example is water saving flush toilet mechanisms being sold in Nairobi as a sustainable, greener alternative – that is, the same positioning and value proposition as that used in the eco-conscious parts of the Northern European continent. Sales are sluggish. But when you take into consideration that there is a water shortage or that many communities need to purchase water in tankers to fill their household storage tanks, a simple shift in positioning to “Spend less money flushing down the toilet” or some such clever quip could in fact make a more sensible approach in this situation for the very same product.

This gets more obvious the lower down the income stream you go – Mama Mboga with her vegetable stand may not have the same priorities nor relate to the same value propositions that social impact investors do.

Overestimating the ability of a faceless brand to communicate value

There is probably a snappier sentence to capture this aspect but at this stage of understanding the BoP markets and their challenges its perhaps better to be clear than pithy.  Some have called this issue one of Trust and in the past, I’ve referred to it as Commitment but the fact remains that this aspect is the most challenging and difficult to overcome as a barrier to acceptance.

Even megabrands accustomed to instant global recognition such as Google may find that not only is their brand unknown and unheard of in these new and emerging markets but others may have gotten there before them.  Which, in a way, brings us back to the first point in the assumptions made at the very beginning of considering market entry strategies in the rising global middle class.

One of the most surprising things that struck me over the past couple days of running around doing recce visits for our upcoming rural research was just how rapidly and how well the concept of the user centered design (UCD) process and thus, the human centered approach to research and development was not only understood by our rural hosts but how much it was appreciated. As others in the field know, it can often be a challenge to explain to clients why user research is critical and what kind of difference it can make, more so in the former rich world.

Even the local councilor’s political protege beamed when he heard that it was critical to understand ‘his’ people first and their daily life before coming up with any product, service or plan. In fact it makes me wonder whether his little part of the world is in for any changes?

Mind you, we were extremely blessed during our visit to Makueni district – one of the more challenged parts of Kenya, where the arid landscape can suffer from insecurity of such essentials such as food and water.  Our contact there introduced us to his old friend, who was in between contracts, and Rafael (whom I’m sure I’ll be mentioning more in future posts) turned out to be an experienced expert in poverty alleviation programs and a trained anthropologist to boot.  Our initial meeting rapidly turned into a project planning session.

But that’s a welcome side note. I started this post because as we were discussing the methodology and approach that I intended to use for our consumer insights research, I found that not only was the UCD process grasped rapidly by all the others at our table, its value was also appreciated and understood.

As our local businessman friend explained, too often products for their market were simply direct imports or secondhand and shoddy goods “sent to Africa”. The fact that their community’s lifestyle and daily challenges were considered important enough to be understood first before the development of any strategy or device was felt to be a mark of respect.

It makes me ponder whether we do the economically or infrastructurally challenged a disservice to continue to think of them as the BoP – no one, if asked, would ever consider themselves the base or bottom of anything.  And I wonder if that’s why so many of these socially beneficial products or poverty alleviation products and programs fail because to embrace them would imply to one’s peers and community members that one was ‘beyond hope’ or ‘poor’ regardless of one’s one economic challenges?

A former student of mine just mailed me this article “Extracting Key Lessons in Service Innovation” (pdf) by S.Wooder and S. Baker, recently published in the Journal of Product Innovation Management, January 2012 edition. Here is the abstract of the article:

This paper describes how Sagentia—working with Vodafone, Safaricom, and other organizations—played a significant role in the creation and delivery of a landmark mobile money transfer and payment service for emerging markets, starting in Kenya. In this profile we examine the organization aspects and approach that contributed to the success of the service: the lessons we learned as the technology provider and how the experience has informed and strengthened our service innovation processes.

Reading through, what I found most valuable among the basic principles so simply and clearly articulated, was this insightful description of service innovation, as pertaining to the ways that a human centered design innovation team can work to improve the customer experience for any company, large or small:

What Is Service Innovation?  Creating and Delivering Value

We are familiar with service innovation examples such as music download, loyalty programs, franchise chains, ticket/check-in kiosks, and online tax returns.

Service innovation can be described as a combination of technology innovation, business model innovation, social-organizational innovation, and demand innovation, with the objective of improving existing services (incremental innovation), creating new value propositions (offerings), or creating new service systems (radical or transformational innovation) (IfM and IBM, 2008). The key components of service innovation can be distilled down to “participative” value delivery; [...]

So if the service is considered to be:

• something that may or may not entail physical product delivery or consumption
• a value delivery mechanism that connects the enterprise to the customer
• the combination of a value proposition, a delivery mechanism, and a customer’s experience

Then service innovation is simply innovation applied to one or more of the following areas:

• new concepts and/or value propositions
• new delivery mechanisms and/or business models
• new experiences

[...] Successful service or product innovation encompasses progress from the creative act (the so-called fuzzy front end) to the commercialization act (execution) and beyond that to sustainability and evolution of the innovation. Our simple framework for service innovation is shown in Figure 3

 And finally, they share with us the mapping of MPESA on to this service innovation framework.

The authors conclude their informative article with the following words:

Key lessons that were highlighted by our experience with M-PESA include:

• Learning in a detailed sense the needs of users in new markets and ensuring that it is possible to implement these needs and requirements as part of a pilot process;
• “Keeping it simple”; particularly in the early stages of the service, it is important to focus on a small set of compelling, marketable functions and features;
• Ensure that flexibility and agility, the ability to react and to respond to changes in the business model, are designed into the system; and
• For a service to succeed, it requires a critical mass of users as soon as possible; identifying mechanisms to motivate users to take up the service is an important part of the service innovation process.

The results of the study cannot claim to be generally applicable; however, it has allowed the “usefulness” of the conceptual stages in the service innovation framework to be empirically tested in a real-world example, and the vulnerabilities and strengths are better understood as a result.

From the fact that mtandao is a newly minted word in Kiswahili that means network – from the verb tanda which means to spread – to the signboard’s assertion that its no longer simply a matter of getting access to the internet but instead a consideration of what’s next – our early survey of cyber cafes is pointing to a far more complex scenario than initially imagined. We’ll be refining our approach over the next day or so before plunging into fieldwork proper.