Every so often I hear venture capitalists and entrepreneurs in Silicon Valley ask a recurring question regarding Tech Startups in Africa- why not just use the “copy to” strategy? Clone an e-bay, clone a Groupon… After all there are 1,000s of Groupon clones in China! And the Samwer brothers in Germany are notorious for doing this right that it angers many innovators in America.
I have decided that this strategy is not as easy to implement as it sounds, even though it does work in some cases. Why? Here are the reasons I have come to realize how, why and when it can work or not work. But often it comes down to the need for local or incremental innovation:
Tech Adoption Cycle is not necessarily the same Everywhere- Focus on fundamental Need
Job sites like Jobberman in Nigeria are in many ways direct clones of other job sites around the world. I recently met Paul Bassat, who founded the leading job site in Australia and then actively cloned or invested in other job sites across Asia. Why does this work so well? Job search is a fundamental need all over the world and the profile of job seekers looking for high value jobs (i.e. entry positions out of university etc..), for instance- many speak english as the language of business and many recruiters are somewhat global and standardized in nature. But the key thing is that both sides of a 2 sided marketplace are pretty technology savvy and can use a computer to both post a job and search for a job. Paul Bassat understands what it takes to make job sites work, no matter what context- so he is perfectly positioned to act both as a cloner and investor.
When does this not work? When there is a fundamental mismatch in tech adoption and assumptions on business models. I see a ton of social media and SMS marketing startups in Africa and even mobile commerce. I am currently in Tanzania after 9 months away from Africa and I find it’s easy to assume western notions as a given for African consumers and businesses, but even resident Techies in Africa and all over the world often forget their target customers are not like them. Some companies have never used traditional marketing before- or they believe that a billboard ad is by far the most effective way to advertise because “big gorilla company next door” does it so it must work! Attention can sometimes be the number one issue for companies trying to deliver marketing solutions to businesses- try live in the african business’s shoes for a while before you try push your whizz bang social meda, SMS marketing solution- you’ll find that small businesses in particular are very busy running their business to spend up to a day learning your technology for a benefit they can’t quantify yet.
I spent 2 weeks in Alaska installing my friend’s Point of Sale (POS) system on the iPad and learnt first hand how hard it is for small businesses to adopt tech even in America. In Africa, although people are used to paying for utilities, airtime and some services with mobile payments, the leap to do so for things like travel tickets (i learnt first hand with yellowmasai.com) etc… comes down to trust/fraud fear factors in commerce which are still lagging behind the technology’s actual effectiveness. Its a matter of time till this changes as everyone gets used to it. On business models, as an example, transaction fee models may not always be the best way in Africa because the initial volumes needed can be very high. At yellow masai- I quickly realized that it was hard to negotiate lower transactions costs online when the payment infrastructure does not support it- but there was simply not enough volume currently to make it profitable to lower transaction fees to an acceptable rate.
Another way to look at this is through an economic lens- customer acquisition cost and time. This can be very high or lengthy since you are actually investing a ton in customer education of say “why SMS marketing is effective”- then once customers adopt your solution and finally get it 6 months later, they may stick around forever and their referral to their friend’s or relatives business becomes easier. So in many cases, its a “last man standing” play- at some point the adoption picks up and whoever is left around wins and wins big dominating the market. Add a payment wall and you often increase your adoption barrier- Why do you think- “freemium”, models are so popular? You don’t need to get paid at the same time that your customer has to “learn” that your solution is worth it.
Design Thinking and Focus on Product
The other big one is simply a back to basics focus on design. Just because Groupon works around the world- doesn’t mean it will work the same way everywhere for mobile first Subsaharan Africa. Even for the normal web, when you analyse commerce sites in India and China, they look very different in style from their western counterparts. Smart startups trying to clone or copy understand this, take the obvious feature phone ubiquity and importance in designing for bandwidth constrained environments. We see this first hand with the growth of mobile social networks such as Mxit. There is a reason I spent a few hours at Stanford’s Liberation Technology group a few weeks back, where I learnt that Professor Josh Cohen spends time in Kenya understanding local contexts and leading design sessions- and was even more delighted when I saw a Kenyan Computer Science Masters Student as the Teaching Assistant! A strong focus on design for unique environments can help foster better products that can get adopted faster.
Local execution is often Key
Back to commerce- when you look at India, you quickly realize that the Cash on Delivery (COD) model is an essential ingredient for ecommerce in that market- even though many indians own credit cards, there is still a huge trust factor. Whilst we have mobile payments in Africa- m-commerce on a scale to Amazon or ebay won’t be fulfilled until we sort out the fulfillment part of the equation- India solved the payment, fulfillment, fraud in one go- one company to watch is FlipKart and how they succeeded. So a clone of say ebay or Amazon even with mobile money simply won’t work in sub-saharan africa until the complete fulfillment puzzle is solved in the way India solved it. One could ask can COD clones to sub-saharan Africa be the solution to kick starting a bigger m-commerce revolution? Yesterday, I was impressed to learn that in Tanzania a form of COD (more like product on delivery) + mobile payments exists that actually mirrors a traditional western style e-commerce transaction- you can order Dodoma Wine from the vineyards by calling and paying with M-PESA and it would be shipped by bus and you’d get alerted to pick it up from the Bus Station. This already works and is in use, with more careful design could it be scaled up for the masses (not just Tanzania wine addicts) and for other goods? Not sure, but its easy to fall into the trap of assuming it might without questioning all the assumptions and going through a more investigative design process.
Of course these factors are in fact intwined. A compelling product designed for the right audience in africa and executed in a local manner is what works and simultaneously lowers acquisition cost and time- or face a long process of educating your customer “how the west does it and so you should do it too..”- as we well know, Africa is not Europe or America.
So does the “Copy to” Strategy work? Yes, but I think technology adoption for many countries can lag due to the fact that many consumers and businesses don’t live on their computers for the length of time the west has as well as other factors such as literacy and a fundamental belief that ICT can actually improve their lives or deliver return on investment or business efficiency. Some startups don’t have the funding, expertise or patience to sustain this and often get impatient and distracted and open other business such as a consultancy (I see this time and time again). Some of the smart and persistent ones actually figure out the bottleneck that is slowing down their business and directly solve it for themselves, sometimes discovering a whole new business there as they realize it’s a problem someone else has. In the end it actually comes down to innovation, even if incremental can make an idea in one context work in the other.