Mass Markets Offer Business Opportunities
One subject that people keep asking me about is doing business with, and investing in, the ‘bottom billion’. As everyone and their pet fish know, I strongly dislike that term: It’s rude and patronising to call people the bottom of anything, especially if you plan to extend services, possibly paid services, to them. But that notwithstanding: It’s a mass market, and it’s entirely possible to do very good business with a low-income demographic – scale will see to that.
I just read through a blog post by Ethan Zuckerman (thankfully devoid of bottoms). Zuckerman, a former researcher at the Berkman Center for Internet and Society at Harvard University, now works as director of the Center for Civic Media at MIT, and also sits on the board of several non-profits, including Kenya’s Ushahidi. Recently, he wrote a blog post about a visit to Kenya where he and two students from the Media Lab did some market research for a product they were working on: ‘piece of prototype hardware that plugs into a diesel generator or other power source, distributes the power to multiple outlets, monitors how much power is used and charges the customer for the power they consume.’ This will enable people in locations with limited power infrastructure to sell power to neighbours. Kenya struck them as a good point to start as M-PESA would make it very easy to combine this facility with a payment mechanism.
Using a trip already planned for a conference, he and his two students went to Nairobi’s Baba Dogo Road, an industrial area with a slum –although, as they also commented, not quite as high-profile a slum as Kibera (the mythical mother of all African slums) and Mathare. And here, Zuckerman found several of his earlier assumptions proven wrong: For one, in contrast to what he expected, Baba Dogo actually had fairly good access to electricity, even if not always entirely legal and safe. Often, an apartment building will have power, and from there, improvised power connections will be created for other electricity users in the neighbourhood. This is easier than paying the still rather substantial sum for a power connection, but otherwise a wobbly affair: the power vendor has the hassle of collecting small sums from everyone around them, the end users don’t really know if they are being charged according to consumption, and also have to worry that power (often crucial to their own businesses) will be cut off if the middleman doesn’t pay the bill.
Secondly, other than what he expected, people were willing to pay for power. His third assumption was that it would be difficult to convince people to think of themselves as becoming micro-scale power companies. Not so – everyone they spoke to saw the point immediately, especially because most people in Baba Dogo already had some entrepreneurial activity or other (everyone around here has at least two or three gigs going, I often think). But they wanted to know how flexible the pricing would be. This, Zuckerman argues, was because doing business wasn’t always based on cash transactions: ‘But we had to understand that not all commerce in the neighborhood was about the exchange of money for goods or services – often businesses provide favors to one another in complex webs of obligation.’ Fourth, his assumption that neighbourhoods like Baba Dogo would be the right market for their product: Perhaps not, because people are already too wired up, relatively speaking – maybe an off-grid environment with only generators would be more promising?
I was intrigued by this blog post because of its approach to market research and business with a low-income demographic. It can only be a good thing if superbright kids at outstanding universities devote their energy to thinking up smart products that solve problems – but there’s also the fact that you’ll only achieve scale if your product can be sold profitably. For that, you need to consider many other (business) issues beyond just the technology itself – something that many such initiatives pay little attention to.
I did like the approach of developing a product for what is effectively a grey area: It seems a pragmatic approach to electricity provision in a market that is dominated by illegal and semi-legal, often dangerous connections, and where many people simply can’t afford connection costs. If I were them, I’d have included a visit or phone call to KPLC to find out whether they would object to this (surely a crucial piece of information) – or whether they might actually support it because such formalisation could cut down on dangerous jua kali wiring and might also improve bill payment. They could have even suggested a co-operation and reduced their own marketing costs?
Still: ‘While it’s frustrating to discover that many of my assumptions were wrong in pursuing this project, it would be vastly more frustrating to learn this six months from now, having developed an inappropriate prototype for the wrong market.’ No kidding!