The most fascinating book I’ve been privileged to read this year is Poor Charlie’s Almanack by Peter D. Kaufman. Poor Charlie’s Almanack is a collection of speeches and tomes ascribed to the Late Charlie Munger, former Vice Chairman of Berkshire Hathaway and (until his death) Warren Buffet’s right-hand man.
Poor Charlie’s Almanack is for all intents and purposes a highly seminal book that I cannot over-recommend and one I have added to my personal list of “Unofficial Bibles” – books that I consider to be so important, I consider it a disservice to not re-read and recommend to others – this catalog of books include Peter Thiels Zero to One, Mike Murdochs The Assignment and Titan: The Life of John D. Rockefeller Sr by Ron Chernow.
One of the reasons I love Poor Charlie’s Almanack is because it’s a timeless book – it’s filled with principles Charlie learned from both vicarious experiences and experiential activities, it’s a book with principles on life, business, and psychology that will still be valid twenty years from now. Similar to how Paul Graham’s How to Start a Startup will forever be valid information to technology entrepreneurs, David Sacks’ Cadence will always be meaningful to operators and The Almanack of Naval Ravikant will forever be an insightful piece of knowledge for anyone thinking of living a highly productive and effective life, my goal of writing this article is to condense my thoughts, observations, and insights into African innovation into a 6510 word article that provides some kind of guide and checklist to help entrepreneurs (particularly technology entrepreneurs) identify the right opportunities to tackle within Africa and scale those businesses.
My first two articles in this series – Innovating in Africa pt 1: Top 10 Things You Shouldn’t be Building and Innovating in Africa pt 2: Top 10 Things You Should be Building focused more on specific opportunities you should or shouldn’t be tackling within Africa and provides a framework for identifying what to build and what not to build from a technology perspective within this clime. This article however is aimed at providing a checklist. An objective checklist to score what you intend to build (or what you’re building) against to identify whether you are on the narrow path that leads to heaven (great investor returns) or the wide path that leads to hell (business closure).
While I don’t necessarily think I will be a 100% correct, I do believe you will find most of what is here to not just be meaningful and practical, but honest. I have no incentive to lie, wash, or pander to any misaligned narrative in order to denigrate or over-propagate the value of investing in or building African technology businesses. My objective is to say it as it is, and understandably so my opinion may offend a couple of people; for instance, I believe a good number of people building fintech businesses have no idea what they’re doing, I believe great fintech businesses right now are a dime a dozen, agritech is probably the vertical with the most outsized outcome opportunity, any climate-tech play where the main proposition is “saving the environment” is probably a grift, and a dedicated femtech play is vibes. If the preceding paragraph offended you, you can stop here.
I will also try as much as possible to assign quick anecdotes and data to all the points I’m sharing to make them not only relatable and practical but also verifiable. Maybe the goal of this is to help you think clearly and not to tell you how to think.
The Rules of Engagement
There are three broad sections we will be exploring in this piece structured into rules of engagement; who to build for, what to build, and how to build.
Who to build for identifies six customer archetypes, what the size of those markets are, what the opportunity generally looks like, and what building for that vertical actually entails regardless of how anyone would try to whitewash or downplay it.
What to build provides a framework for thinking about what markets to go into, not from a specific vertical perspective, but what to look out for before choosing to go into the ring and target a specific vertical.
How to build is a collection of quick tips on how to really execute within the key markets identified above; what things to avoid and what things to focus on.
My subtle goal with this piece is to make it as short as possible lol. I hope you find this enlightening. Let’s begin.
Who to Build For?
There are six key customer archetypes to target if you’re building a product within Africa – Individuals, small businesses, startups, large enterprises, financial institutions, and governments. While there are multiple sub-verticals within these archetypes that may not necessarily conform to one uniform characterization, these segments represent what I think is a general picture of who to target.
Individuals:
The largest single customer archetype from a user count perspective to innovate for in Africa is the individual market popularly referred to as B2C. There are roughly one billion people in Africa today with the United Nations projecting that to be around 2.5 billion by 2050, 70% of these people are below the age of 30 which inadvertently means increased proclivity for technology usage, and a good number of these people (42% of adults) are in some way or another already connected to the internet. This paints an attractive picture of the numerical strength of the African population and gives some credence to the popular “Africa is the Next Billion” narrative. Now let’s get to the gloomier bits.
A population of one billion people and a population of one billion economically relevant people are two different things – the former is primarily an opportunity for global manufacturing companies looking for an opportunity to improve their cost structure by outsourcing their production to less expensive parts of the world, the later is an opportunity for businesses to thrive. Africa is more of the latter than the former, and China is both.
While there are one billion people in Africa, the amount of people who are actually economically buoyant enough to afford most products is a paltry percentage of the entire market itself. According to The United Nations, 34% of Africa lives below the poverty line. This means that while there is a one billion people poster population image on the doorpost, the amount of economically valid people is probably a minute fraction of that.
The next thing to look into is product proclivity and spending patterns within earning cohorts. Generally speaking, food tends to be a large proportion of what Africans spend their income on. In Nigeria (25% of the general population of Africa), more than 59% of income is spent on food. This number varies across multiple African countries – Ghana (40%), Tanzania (59.9%), Kenya (56.1%). This reinforces the saying that any product you build in Africa competes with food. Yes, your biggest competitor is not Netflix, Showmax, or Amazon Prime, your biggest competitor is a hot plate of Jollof rice served with fried chicken.
To be very clear, all Africans do not spend circa 50% of their income on food, as you go up the socioeconomic ladder, that percentage begins to decline as a percentage of total spending. However, as you go up the socioeconomic ladder, the number of people who fall into those brackets begins to reduce, and therefore, the serviceable addressable market from a volume perspective begins to tank significantly.
The thing to realize is that the vast majority of Africa’s consumer market largely dwells within the lower echelons of the socioeconomic strata, this inadvertently means that as they spend 50% of their income on food and other percentages on other essential products and services (clothing, shelter, tuition, etc), the proportion of disposable income left that can be allocated to non-essential technology products begins to dwindle. Since most technology products targeted at individuals are not “essential products”, it’s always hard to make a case for why someone should watch Netflix as against buying a pair of slippers.
The sweet spot for individual plays in Africa or B2C is building a product that individuals across the socio-economic spectrum agree is essential. Companies who crack this code can unlock massive value creation and distribution layering opportunities. This is what MTN has been able to achieve with 295 million customers across Africa and annual 2023 revenues of US$11.9bn. This is what MPesa has been able to achieve in Kenya with 30 million users and annual revenues of US$2.21bn, and this is what OPay is making a case for in Nigeria with over 35 million users. Building a massive B2C business in Africa is the hardest opportunity to scale but the one with the largest rewards at the end of the tunnel.
Someone will read this and think of this as justification to start another B2C business in a clearly saturated market (which I will speak on later). The one thing to realize is that the less a person is on the socioeconomic ladder, the less likely they are to have multiple options for any given technology service. People below the socioeconomic ladder tend to focus on core product functionality as against fancy product branding. If their first option works well, it’s really hard to sell a second option that requires them to go through another onboarding process. Simply put – there is no reason for an Aboki to have 4 bank accounts.
The largest single-earning cohort within the African socioeconomic ladder are those earning between US$50 and US$150 a month. If your product is too expensive for this cohort, safe to say you’re building a niche product (more on this later), and niche products in Africa rarely end up as unicorns.
Additional notes: I have a 2020 article on Market Sizing and Classes I probably need to update that you should definitely check out for additional reading on this.
Small Businesses:
Small businesses are the lifeblood of the African economy. There are roughly 44 million small businesses across Africa according to the Center for Strategic and International Studies. The first thing to realize is that this number is probably an understatement as there are probably multiple unregistered small businesses across Africa that no one is paying any attention to. The next thing to consider is that the vast majority of these businesses are in the physical space as against the digital space, and while there are no official datasets backing this, I want to assume we’re looking at a 70:30 distribution ratio (70% Offline, 30% online).
Building products for small businesses will always fall into two categories; you’re either helping them earn more (i.e. simplifying how they generate revenue), or you’re helping them improve their operational processes. As you can guess, businesses that do the former get more adoption than those that do the latter. The reason is simple – an SMEs main priority is earning more revenues not necessarily improving their operations, and improving their operations only becomes a priority when it inhibits their ability to earn more revenue.
Anyone building for 1.) small businesses that are 2.) offline and is 3.) helping them improve their ability to earn revenue is (if done right) building a business with massive upside. This is what Moniepoint is doing in Nigeria today, and this is what Moove is doing with mobility entrepreneurs in Africa and across the world today.
Small businesses are a straightforward business segment to serve if you can help them earn more revenues and charge them in a non-obtrusive way. Businesses with business models structured like this tend to become really consequential entities over time.
Startups:
If you’re building for startups primarily, you need four fundamental things to be correct; 1.) You want to find a Paystack/Flutterwave type business early in their journey and support their growth as they scale 2.) You want the service you offer them to be largely correlated to growth in their core business (card processing for Paystack, wallet provision for OPay/Moniepoint, Investment services for PiggyVest) 3.) You want dozens of similar companies and similar prospects to exist and use your service 4.) You want them to not sit down and make a business decision to build out what you offer them in-house (because if they can do it, they probably should). To have all four of these aligned is genuinely hard and I personally won’t make too many bets in that direction.
Startups are a great cohort to build for, but I generally believe there’s a level of scale a startup needs to achieve to be a profitable customer to you in the first place. My personal thesis on this is clear – it’s pretty difficult to build a highly consequential business if the foundation of your business is servicing other African startups.
Large Corporations:
Large corporations are one of the best customer groups to build products for. If you’re a retail customer, banks don’t really like you, what they like are your deposits, on the flip side they not only love large corporations, they adore them. If you want to verify, observe how banks treat you when you make a complaint with your N20,000 (US$12.34) account balance, and how banks treat their large corporate customers with N2 billion (US$ 1.23 million) in their account balance. Note: it’s not the same.
Large corporations also tend to be good at one thing and are usually very okay with outsourcing important segments of their businesses that are not within their core competencies to third parties. Depending on how the corporation in question is structured, and the relationship you have with them, you may be able to leverage their distribution to provide additional services to them that may be extremely lucrative to you.
However, with large corporations, sales cycles tend to be long, and if you don’t have the patience (or runway) to wait it out till a deal is secured you may get regularly frustrated (or run out of business). If you’re in financial services and your solution competes with a bank’s existing offering, be prepared to fight a pitched battle against a Head of Commercial Sales who will go out of his way to make sure you don’t steal his customer and make him look stupid at his internal monthly performance review. The apple of the eye of most banks are large corporations. People say banks can’t compete, try and touch the apple of their eye and see what comes next.
Financial Institutions:
While banks are service providers in certain contexts, there are others where they are customers. Serving banks is a pretty lucrative business that if done well can even lead to an acquisition by said bank.
However, the bar to entry for this space is getting higher as banks are gradually morphing from financial service providers who use technology to technology companies who provide financial services. Banks today have built in-house technology competence, and therefore just offering technology alone isn’t enough to sway them in your favor. This situation is not uniform across all African countries. In part 2 of this series, I spoke about the opportunity in Innovation Arbitrage and how going to African countries that are “in the past” and still behind in their technology evolution journey and building solutions for those markets is a huge opportunity for anyone willing to take their time to play in that space.
In mature African countries like Nigeria, the “provision of technology” play will find deeper expression with Tier 3 banks and MFBs, in other African countries that are still behind in their development journey, this may be the prevalent way to capture the large commercial banks and distribute other commercially relevant services to them.
Governments:
Governments are a unique cohort. For one they tend to not be too price sensitive, not necessarily because they have a lot of funds to spare, but because “someone important” has an incentive for a contract to cost 20% more than it ordinarily should. Governments are also not too particular about product quality – a good product with strong supporting stakeholders will perform better than a great product with no supporting stakeholders.
There are also national, regional, and sub-regional government archetypes and these tend to behave very differently based on a couple of factors including; budget, entrenched approval processes, stakeholder incentives, etc.
A single government contract executed excellently can meet your annual budget projection and surpass it, however, acquiring government clients can be one hell of a ride if you don’t know how to go about it. Safe to say if your objective is to target this customer cohort, you need to be prepared to redesign your business model (at least for government-specific projects) to be competitive.
WHAT TO BUILD?
The biggest conundrum startup founders face in Africa is identifying what to actually build. Excluding AWS, no one else is happy when a startup decides to blatantly copycat an existing player, claim they are revolutionizing something, and highlight largely meaningless product features that make them different from their competitors.
This segment doesn’t provide a list of ideas (my article on top 10 things to build does a decent job on that), this section provides some general pointers to help you really think about which markets to venture into and which to stay away from.
Focus on Sustained Tailwinds where the player with the biggest advantage is unserious.
The way this happens is usually straightforward – a company identifies a problem in a market and commits itself to birthing what is a novel solution at the time to solving that problem. Because this problem is a noteworthy one, and one that a lot of people/companies face, they naturally attract a lot of business opportunities and begin to scale the business. However, similar to Clayton Christensen’s The Innovators Dilemma framework, these market leaders begin to focus on improving their core product, serving their most profitable customers, and scaling their revenues.
However, when a market tailwind begins to emerge that requires a rethink of existing business models to capture, what does this market leader do? Nothing. Why? It is easier to keep things running as usual and continue growing at their projected growth rate than to redesign their existing business model and face the risk of trying an experiment that may not work. This is a popular psychological problem; people are more scared of losing what they already have than losing the opportunity to multiply what they already have by 100x.
Startups tend not to have this problem; a startup is by definition on the ground and can only take one path forward from its present position – up. This means the risk of ruin is less and they can make those outsized bets that culminate into successful technology companies.
Find a sustained market tailwind where the market incumbent with the largest advantage is too caught up in their old ways to identify the changing landscape and disrupt them. This is what Paystack/Flutterwave did to Interswitch, Chowdeck did to JumiaFood, and what OPay and PiggyVest did to bank apps.
In Paystack’s case, Interswitch was the clear market winner, but the tailwinds from increased adoption of eCommerce meant that while Paystack could redesign the business model by improving the gateway UI significantly, scrapping integration fees, offering public APIs and even having payment links for non-technical users, Interswitch (who had all the advantages, technical know-how and talent required to pull this off) missed this opportunity because they still held on to their old model that was inadvertently made redundant.
Unlock Consumption
Unlocking consumption is a very interesting play for technology businesses. The way to think about this is to ask yourself two simple questions; what are people/businesses in a specific vertical not doing today because the technology required to do it is either too expensive, unreachable, or doesn’t exist, and is the latent size of that market large enough for me to consider building in it. Answering this question makes it possible for companies to build truly consequential businesses that may look small at first but can eventually evolve geometrically into massive enterprises.
Paystack democratized access to payment rails for collections and that heralded the birth of a plethora of startups in other verticals across Africa including PiggyVest, Chowdeck, Bento, etc. Startups like RiseVest and Bamboo made it possible for people to trade stocks virtually and that opened up its own business vertical, and the improved access to POS terminals across Africa (largely heralded by Chinese firms) unlocked the agency banking market across Africa. Find a market with a clear structural inhibitor, build a solution that removes that inhibitor, and scale that solution within that market.
Stay Away from Saturated Markets
A saturated market is not a market where there are many players, a saturated market is a market where the market leaders have already been defined. Having multiple people playing in a market is not a sign of saturation, in fact, it’s a sign of opportunity. MoniePoint entered the agency market when there were already existing players but no definitive market winners (except for maybe OPay).
If a market already has a winner, the resources, brand, and distribution they have built over the years isn’t something you can disrupt via just a “better product”. If your product is actually superior, the market leaders will just task their engineers to build out your product stack and distribute it to their existing customers.
If the market already has clearly defined market leaders, not market players, and what you’re offering isn’t a fundamental redesign of the business model itself, it is very unlikely your business will be able to sustainability stand its ground against existing competitors.
Niche Markets Don’t Work
Niche markets are popular in Western countries where GDP per capita is high, and people’s disposable income stack is a bit broader. In Africa, this is not the case, and therefore building and scaling a niche product is always going to be a problematic venture to engage in.
Niche products tend to be focused on a very specific user group facing a specific problem and adding value to them. The problem with this strategy is that the economic relevance of the African market is generally small and niching it down means making that market even smaller.
While ThePeer wanted to expand into something bigger, its initial focus on the wallet payment channels on gateways while innovative, was too niche a solution to give them the bandwidth to scale their product, and ultimately their business. Other verticals like Femtech experience the same outcomes. If you’re building in Africa, it is in your best interest to not niche down (unless when niching gives you a clear objective advantage) but to expand your target users as quickly and as practically as possible.
HOW TO BUILD
Being clear on How to Build is very essential because how to build creates a framework for how to run a technology business from first principles that has the capacity to scale into something phenomenal. This segment provides a framework for how to actually build a winning enterprise.
Develop a Winning Management Philosophy
A great business is usually a function of two distinct variables – a high-quality idea, and a unique management philosophy. A management philosophy is basically HOW a leader organizes the teams and resources within his disposal to hit the company’s stated objectives and goals. A high-quality idea tends to be one where there is some form of novelty – a new/revised business model, new technology, new overarching market insight, etc. By design, a high-quality idea can only come to fruition when a winning management philosophy is deployed to tackle that problem. A mid-level idea can come to life with a basic management philosophy, but a mid-level idea with a winning management philosophy tends to be the foundation for wildcards (simple ideas that just work i.e. Moniepoint, OPay, etc.). A sub-par idea with a winning management philosophy will usually not yield anything (this is similar to pouring water into a bucket – the minute the bucket is full any more water you add is just a waste of resources (This is generally why you shouldn’t be thinking of launching a mobile payments application).
The way to think about a management philosophy is that there are no copy-and-paste approaches to developing one. What worked for CEO A will not necessarily work for you. This is primarily because the variables differ significantly across board – you’re a different person, serving a different market, during a different timeline, with fundamentally different market tailwinds. You must find a management philosophy that doesn’t just work for you but can be modified to suit the requirements of your business as it begins to evolve; there’s a different philosophy required to go from 0 to 1 (getting a startup off the ground), from 1 – 100 (scaling a startup to market relevance) and from 100 to 1,000,000 (expanding an existing business). A proper management philosophy enables you to build an effective business at whatever point you are in your journey.
Management philosophies are also only valid in time and not in perpetuity, and as such leaders must invest heavily into tweaking their philosophies as their businesses evolve. The foundation of market disruption is usually that the philosophy required to start and run that business ten years ago has not only become redundant but also moribund, and someone somewhere has figured that out and latched on to that to build a better business.
Banks are a case in point; while there are a couple of banks who buck this trend, there are banks with millions of USD in revenues, that cannot AFFORD to attract and keep high-quality technical talent. Some of these banks have to rely on third-party contractors to build their integrations and certain bits of their products for them. This isn’t primarily a resource problem (most banks have way more revenues and resources than startups), it’s a management philosophy problem; the philosophy required to run a bank today in a highly technologically driven world is remarkably different from what was required 20 years ago when most of these banks were formed and banks didn’t require a lot of technology.
The test of a great management philosophy; am I making the best of the resources within my purview; monetary, human, brand, etc, and/or do I have a path to getting there?
A Culture of Experimentation will always win.
Building a startup is an inherently random and non-obvious process. The way to think of it is to ask yourself why certain consequential businesses today got passed on by leading investors when they were starting up, and why other non-consequential businesses attracted huge investor resources but fell flat on their faces. The answer is simple; the future is inherently random, startups are on a mission to create order within that system (by creating predictability), and the best way to do so is to develop a culture of experimentation.
A culture of experimentation is simply a dogma within a company that encourages product people and other teams within the company to develop multiple hypotheses, test them out, tweak them as necessary, and more importantly DOCUMENT THEIR RESULTS.
As a technology company you don’t always need to be right, you just need to be right a couple of times, but the handful of times you are can make the difference; Amazon is famous for having a culture of experimentation, and a lot of failed projects – The Fire Phone, Amazon Wallet, Amazon Local, etc. but all they needed was one success – Amazon Web Services (AWS) a pioneer in the cloud computing market. Today, AWS represents more than 74% of Amazon’s operating income.
The company with the largest experimentation bandwidth will always win in a random market because they have a higher chance of getting something right. Ifeanyi Duru of Moniepoint has a very interesting read into how they pioneered Pay with Bank Transfer within the Nigerian market, and Tobi Amira (also of Moniepoint) has another one on how they built the Moniepoint agency business on the back of multiple product iterations.
The real insight into building a culture of experimentation is actually documenting the results of experiments in an objective way for all stakeholders to interact with. Human civilization has not advanced because of the ingenuity of any one generation, but the collective and progressive intelligence of all human beings. The first car was developed in 1886 by Carl Benz, but the principle of thermodynamics (on which internal combustion engine cars are founded) was developed six decades earlier by Sadi Carnot, and the ancient Greeks centuries earlier postulated numerous theories that evolved into thermodynamics.
You cannot build a high-functioning culture of experimentation if knowledge from product and even marketing experiments sits only inside the head of a senior product person or the CEO. Experiments must be objectively documented so that every relevant person across the organization can from a single platform observe all the experiments a company has undergone, what they tried to achieve, and why they failed. Sometimes, the key variable behind a hypothesis failing may have changed with time (and new technology), but the lack of documentation means no one can actually identify that and try the same experiment again to see if the result may actually be a high outcome opportunity for the business in question.
Your business must be a collectively evolving and experimental enterprise if it is going to thrive in the haphazard world of technology innovation.
Develop a Working Marketing Model
Similar to the preceding point, you must build a repeatable and consistent marketing model that works for your business. You can’t just deploy marketing resources randomly on campaigns based primarily on “who your target customers are and the best channels to reach them”. You must take a step back and figure out what marketing model – channel, content, brand representation, platform, frequency, etc. tends to bring the most value for customers interested in your value proposition and double down on that. You will only get there by developing a hypothesis, testing it, recording results, and trying again.
While companies launch new features regularly, companies usually don’t launch outrightly new products with the same frequency, therefore, a company can develop a marketing model that works, align all marketing campaigns to this pre-defined framework, and revalidate bi-annually or annually whether this model still works or whether it needs to be tweaked. A marketing model should also be cost-effective, a marketing model that converts but costs 50% of your annual revenue to do so is not a marketing model you should embrace.
PiggyVest is a great example of a technology company with a well-thought-out marketing model that works. Lade Falobi’s Marketers For Geeks issue on how PiggyVest built its content engine provides some insights into this.
60% Distribution 40% Product.
Too many people think a great product is all you need to succeed. While a great product has all it takes to give you a leg up in the market, having distribution cements your long-term viability within any industry.
No one has a monopoly on technology competence, and as such anyone can replicate your product (assuming you don’t have a novel technology advantage) and deliver it to customers the way you do. In fact, as markets mature, product innovation inadvertently plateaus, and product engineers are forced to add incremental features to products that try to move the needle forward (until the next new technology breakthrough or business model redesign) occurs. If this is your market’s dynamic, you want to be thinking strongly about how to build a solid distribution moat that allows you to continue to scale exponentially when the market becomes mature, and people can match you on product quality.
If you’re number three on the leaderboard for product quality, and number one on the distribution leaderboard, you’re in a way better place than the guy that’s number one on the leaderboard for product quality and number three for distribution.
Regardless of how great your product is, a person with a deeper distribution moat can replicate your product and push you out of the market even if you’re the market pioneer. That’s exactly how Microsoft leveraged its distribution via its Office suite of products to scale Microsoft Teams into a 320 million-user business and disrupt Slack’s key market.
The minute your product begins to show some signs of PMF, you must begin to double down to define a distribution framework that allows you to scale non-linearly even as competitors enter your market and begin to replicate your product.
Paystack isn’t necessarily the best payment gateway, what they do have is a distribution model they developed early on (a focus on the developer), that scaled phenomenally and has given them preference in the sight of the developer ecosystem. That distribution model is a consistent component of their go-to-market strategy as they begin to scale into new African markets.
Team Functionality and Composition
The best ideas are only as valuable as the people tasked with making them possible. If your goal is to take down Jericho, you need a team of competent people driven towards a single goal and willing to do what it takes to make it a reality, any other arrangement will impact the quality of your execution.
Regardless of how smart the leader is, the quality of execution is reliant on the quality of the team, and as such companies must develop standard models to attract, retain, and advance high-performing individuals that help them hit their execution goals.
Also, finding ways to identify valuable persons within your organization (regardless of where they sit on the corporate hierarchy) and rewarding them accordingly is sacrosanct to developing a high-functioning organization. I recently read that Steve Jobs had a tradition of identifying the 100 most important persons at Apple every year (not the 100 most senior persons) and rewarding them with a retreat.
A company can implement a similar system by creating an employee-driven evaluation process where employees can vote on who they think are the most valuable persons to them at the organization. Each vote will carry different weights; a team member nominating their boss carries less weight than a team member nominating their peer, and the highest valued vote would be a team lead nominating a subordinate. What this does is actually give senior management a proper view of who the most important people are within the organization and allows them to create active exception systems that prevent them from losing such persons.
Losing a competent employee for a funny reason like; they prefer remote working to coming into the office, or their compensation has grown mildly in the last two years or someone internally is trying to punish them is just counterproductive. Nothing is worse than losing a good hand and having to hire someone new, take them through a learning curve, and paying them more than the person that left.
You can’t beat an incumbent with a better product, you must redesign the business model.
If you’ve spotted a gap in a market, and the most favored player to solve that problem isn’t serious about it, it is naïve to think that developing a better product alone will be enough to actually take that market.
A case in point; community notes on X (formerly Twitter) is a phenomenally potent fact-checking tool that I think has gone a long way in reducing misinformation on the platform. Imagine someone decided to build his own micro-blogging site and make community notes his key product anchor (before X launched it). They’d see some mild success in the early days, but the business would eventually plateau and fail when X launches their own version and distributes it on their existing platform. You can’t sustainably beat an incumbent with a better product, you must redesign the business model.
The difference between a better product and a redesigned business model is that anyone can improve their service by reverse engineering your product, but a redesigned business model takes a lot of time and courage by management, and that gives the startup the required leeway to scale within that market before the incumbent can become a major threat again.
Paystack was launched in 2015, but it took Interswitch a couple of years to redesign their payment gateway business model to match the new paradigm and compete favorably with Paystack.
Side note: Paystack only disrupted one line of business within the Interswitch product portfolio, Interswitch is still arguably one of the most successful and profitable fintech businesses within the African ecosystem.
Expand to Markets where there are opportunities, not other African markets.
The biggest mistake startups make is expanding because they think they “have to” and not because they “need to”. As a rule of thumb, if your business cannot hit a certain level of scale in your home market, it is very unlikely expanding to other African markets that speak different languages, have a different culture, and (more importantly) have other existing players (who are not idiots) will be the winning strategy.
Too many startups are subsidizing operations in countries they have no real revenues coming from all in the name of “we are present in multiple African countries”. We must think about expansion from first principle. Odunayo Eweniyi COO of PiggyVest has an interesting take on PiggyVest’s approach to geographical expansion that I find intriguing.
Your next market after your home market doesn’t have to be in Africa, it could be in Latin America or Asia, but it has to be somewhere where there is an opportunity for your product and a channel you can leverage to get in. The whole idea of hinging your destiny to expanding into other African countries that presents an uphill task (especially when it comes to scaling) is creating massive waste in our ecosystem.
Nigerian Fintech Startup Migo is a great example of this; the company raised a US$ 20 million Series B round in 2021 and decided to expand to Brazil as against other African markets. Although expanding to other non-African markets isn’t necessarily a hole-in-one approach (Paga attempted a Mexico expansion that didn’t quite pan out as expected), it’s an important feeder that allows companies to think from first principles and really evaluate their approach to geographical expansion.
Conclusion
Building and innovating in Africa can be a daunting task, however, understanding the key variables to tweak and redesign that gives your business an edge, and actually tweaking those variables may be key to building phenomenal technology businesses in Africa.
Inspired By The Holy Spirit