Understanding Agglomeration Strategy And Lagos Traffic

I am privileged to work remotely – what that means is that I have less firsthand knowledge of how horrible Lagos traffic is – I have however heard a lot from people; like my brother leaving Victoria Island at almost 8pm and getting home at around 10pm and calling it a miracle, to some guy – no joke – who spent 6 hours on an Istanbul to Lagos flight, then spent another 8 hours from Murtala Muhammed to Lekki Ajah, to people where I live hopping out at 4am in the morning to get to work at God knows when.

The most important trait of any entrepreneur is the ability to see opportunities where others see problems – Gokada was a miracle product that would have saved a majority of Lagosians from mental breakdowns and unnecessary stress (I wonder what the average lifespan of a working class, Lagos traffic marauding Lagosian is?), it apparently didn’t fall into the State Governments plan for a Mega Lagos – so that got scrapped.

A new class of people see opportunities in Lagos traffic and due to the unofficial nature of their business, scrapping them has turned out to be harder than thought.

Last week I worked on a case study of the economic opportunities in Lagos traffic – these are my notes from that case study.

The Power of Agglomeration

One of my parents is apparently old school and of the opinion that anything you put on the ‘internet’, everyone sees it – we all know this is not how things work (would have been good if it was, but apparently it isn’t), and the amount of people who see what you put on the internet is really a function of how many people are; interested in you (or that topic), and how many people you can get it in their face.

The idea that there is someone out there who needs your product – but doesn’t know it exists has created a need for advertising – trying to get a product in the face of as many people as possible – and with the advent of technology and data, trying to get the same product in the face of as many relevant people as possible. The need to consistently get the right people to see your product – and apparently see it so many times that they get tired of the annoying Facebook ad and just click buy has created a new asset class; Agglomeration.

I have observed three things in business; one is that everybody sells – two is that the more valuable what you sell is, the more you earn, and three is anything is a product, as long as it has value, and you can market it and sell it well – the third point is key.

In the past, trading was all about commodities (gold and wheat), then we started trading equities (which is really just imaginary ownership of a business or enterprise), then debt. Today – anything that has any relative value can be sold, and can be sold at a premium too. Tesla sells ZEV credits (an almost fictional product) to General Motors, Fiat Chrysler Automobiles, and other manufacturers, earning them US$594 million in 2019 alone, people are spending a minimum of US$4 billion daily to buy an imaginary digital currency called Bitcoin, McDonald made US$11.01 billion in 2018 annual revenues selling a big red banner with a yellow M on it to a minimum of 36,000 businesses for a US$45,000 franchising fee, 4% of all gross profits and in some cases rent, Apple reportedly sells the “rights to be its default search engine” to Google for US$12 billion, and because the other day I was watching a YouTube video from a German based business school – Advertisers pay YouTube hundreds of thousands of dollars to bombard my feed with ads that in some cases I consider to be extremely irrelevant.Agglomeration is the new market class. Motivational speakers always tell us there’s a price to pay for the fulfillment of your vision – they’re right. Facebook’s vision is to connect the world – Facebook’s vision is a lucrative one, because apparently connecting the world creates a lot of Agglomeration, and the price (or benefit) of connecting 2 billion people in 2019 was US$70.7 billion in annual revenue – I like that kind of vision.

Agglomeration is a powerful asset, it’s so powerful that through her blog (an Agglomeration platform), Linda Ikeji reportedly bought a N500 million (US$1.31 million) house at Banana Island in 2015 based primarily on the power of Agglomeration.

Except for the Experience (s/o to Pastor Paul Adefarasin and House on the Rock), no other event Agglomerates a larger number of Lagosians than Lagos traffic.

Agglomeration creates an opportunity to sell, market and advertise a plethora of products and services, and when no one pays an Agglomeration fee, the barrier to entry becomes extremely low.

Hawkers in Lagos take advantage of the free Agglomeration of commuters in Lagos traffic to sell products these commuters may need at that present point in time – or may not have the time to buy later on.

Finding ways to Agglomerate users is a key strategy that helps businesses up sell and cross sell various offerings to users. Always have an Agglomeration strategy.

Twitter influencers have one job – have fun and tweet all you like to gather followers, then help us market our products to your followers (base of Agglomeration).

eCommerce is essentially an Agglomeration strategy. I was in a conversation with someone the other day, and I jokingly said that if music doesn’t work out for the P-square duo since they split, they can both legit become Instagram Influencers.

Always have an Agglomeration strategy.

Interaction Layers

All products have three interaction layers – interaction layers influence how people come in contact with your product and eventually commit to it (purchase). The first interaction layer is desired; when a user desires a specific solution or experience – the job of the entrepreneur is to make sure that solution or experience exists. The next layer is search – knowing a product exists, but not knowing where (or how) to get it is a market friction in itself. Businesses have a mission to make sure the availability and the location of that product is known. And the final layer is request – this is where a user eventually makes the step or takes actions to get that product.

The first layer can be gamed – and Apple does just that. Every human being has a desire to stand out and feel unique – it’s why getting the first position in class is a priority for kids (or at least most kids), it’s why people respect celebrities, and it’s why people do crazy things on Instagram just to go viral and draw everyone’s attention to themselves.

Apple creates products that feed that innate desire. Below a certain market class, an iPhone isn’t just a smartphone, it’s one of the simplest and non-obtrusive ways to signal to people that you’re a higher specie (earn more than the average person). Not everyone will walk outside to see the car you drove in with – and you can’t carry your Lekki Phase 1 property on your head and come to church – you can however get the iPhone 12 Pro (even though both me and you know you don’t need that phone for any reason, and your iPhone XS was and is still doing a fine job), and flaunt it every time need be – like when the pastor says open your Bible, and you legit came to church with a physical Bible, but you prefer to open the one on your phone, But I digress.

Hawkers employ a DTC (Direct to Consumer) marketing approach that breaks through the first three interaction layers to create a solution that is extremely phenomenal.

When your stomach growls after two hours in traffic (which is normal), you don’t have to fantasize about a roll of gala, look for where to buy one and make an attempt to purchase (you’re stuck in your car, so you literally can’t do that), the guy in front of you wearing a worn out Arsenal jersey is already dangling the thing in your face, all you have to do is pick up N200 from your wallet and whistle – that roll of gala will be in your hand in seconds – without any receipts, thank you for your patronage(s), or come next time(s).

Now in practice – it isn’t really possible to remove all interaction layers and employ a DTC approach for all products – the key selling point of the DTC marketing approach is that the quality of the product in question doesn’t necessarily need to be gauged or verified a lot (the major verification for consumables is expiry date, and you can really do that with one glance). FMCG brands don’t necessarily see their DTC strategies as being a negative representative of their brand, and therefore they can apply it as much as they need to.

I may not always be correct, but in my opinion, no sensible person will (and should) buy any kind of smartphone that’s hawked in traffic, you might as well buy the new Oppo A93, and see a nice wrap of hot fufu neatly packaged inside the box when you get home – how they performed the switch is a question I’m not sure I can answer.

Ideally most businesses will be able to remove the first two layers – the third layer is a tricky interface all together. The key point to realize is that the lesser the layers – the quicker the sale.

A technology service and consulting business may operate with the first layer on – the client (a big firm) observes they have a need and informs you of the problem. Since you don’t already have a solution to that problem, the first interaction layer is still firmly in play. Your goal will be to build this solution (usually from scratch), and deliver it to the client. You obviously get paid well – but you make lesser sales per volume when compared to other businesses that already have an existing product on the market that people just have to buy into.

Conclusion

Agglomeration is a key strategy that all businesses must design and make provisions for. The lesser you depend on external sources for Agglomeration, the better.

Agglomeration is also very similar to businesses focusing on building platforms (and communities) rather than just products.

As much as possible, businesses should focus on reducing and removing the interaction layers their users go through before interacting with their solutions.

As I said earlier, this is not always possible due to the intricacies of every business.

However, every business can design innovative ways to make interactions with their products and solutions as easy as possible.

 P.S: if you want to talk more about Agglomeration strategies, Interaction Layers and all things strategy or for Consultation services, contact me with email below.