African Innovators Should Look East, Not West, For Business Model Inspiration
Ventures in Southeast Asia, India, China & other Eastern markets have developed successful business models that are extremely relevant to African markets
Afridigest provides ideas & analysis for startup founders, operators, and investors across Africa and beyond.
This post is an updated version of an article first published in 2016 that remains relevant today.
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It’s common for (aspiring) tech entrepreneurs around the world to look at and try to learn from leading & emerging tech companies in the West: Apple, Amazon, Facebook, Google, Airbnb, Slack, etc.
But the reality is that, unlike counterparts in the West, African founders across many countries have to deal with scarcity in several forms: lack of capital, inadequate infrastructure, lower levels of literacy/educational attainment among both the workforce and customer base, and more. This isn’t to say that there’s any scarcity of ingenuity, determination to succeed, or hustle, however.
While Western ventures often receive attention and emulation from entrepreneurs in Africa, tinkering with business models to align with realities on the ground is perhaps more important to successful tech entrepreneurship in African markets than merely importing the latest technologies. And if one must copy and paste business models, it’s more advisable to copy from markets in Southeast Asia, for example, rather than North America.
Comparing African countries like Nigeria with more developed markets, there are a number of reasons why it may be necessary (and perhaps natural) to deploy innovative and unconventional business models including:
Different values, expectations, and preferences of African consumers (as compared to Western counterparts),
Immature distribution channels,
Underdeveloped infrastructure, and
The arbitrage challenge/opportunity of leveraging what is comparatively abundant and cheap locally (e.g., labor)
Exploring some of these challenges and their analogues in Western markets highlights why founders in Nigeria and in similar markets across Africa may want to look elsewhere for inspiration.
Electricity and other public utility systems tend to either be unreliable or works in progress.
Systems are usually reliable and an afterthought—it’s often taken for granted that they are functional (& rightfully so).
Road networks can be poorly maintained. Highways and more robust rail lines are generally works-in-progress. Motorcycles may be more prevalent than tractor trailers.
Again, the assumption (a correct one more often than not) is that infrastructure is in place and adequate.
For physical goods: Prevalence of smaller retailers, the relative rarity of larger retailers, and multiple layers of wholesalers create inefficiencies (and delays).
For digital goods & services: Smartphone penetration levels, while rapidly growing, tend to be low and the cost of data/internet access as compared to wage levels can be discouraging to consumers.
Both physical & digital distribution channels tend to be well developed and efficient.
Speaking very generally, low cost is often more important than value.
Value (or ‘bang for the buck’) is often a key consideration & can be more important than cost.
Cost of labour
Lower hourly costs provide opportunities on the labor supply side (e.g., manufacturing), but challenges on the consumer demand side (e.g., reduced consumer spending power)
Higher hourly costs provide some challenges on the labor supply side, but opportunities on the demand side (e.g., proximate customer base includes some of the highest income tiers globally)
For these and other reasons, it’s not surprising that some pioneers of tech entrepreneurship in Nigeria don’t look to the West for inspiration but rather to look to markets in the East that have similar characteristics:
“Emerging markets are only at the beginning…I love to seek inspiration [in India].”— Jason Njoku, Founder & CEO, IrokoTV
“While building a business in Africa and looking for role models to imitate, look at businesses in Asia and borrow a leaf from them.” — Marek Zmyslowski, Founder & CEO, HotelOga (& Former MD, Jovago/Jumia Travel)
“Interested participants in the Nigerian tech ecosystem, should read ‘The Golden Tap’ by Kashyap Deorah. We have the same challenges as India.” — Chijioke Dozie, Co-Founder & CEO, Carbon
The truth is, regardless of whether you’re in the startup world in Lagos or the corporate world in Los Angeles, it’s probably wise to pay attention to new business models being developed in fast-growing emerging and frontier markets in the East.
(A good place to start is ‘The Next Wave of Business Models in Asia’ which gives a contextual overview of “two distinct, yet overlapping, waves of innovation” across China and India.)
Thanks for reading 🙌 If you have feedback or questions, let me know by leaving a comment or sending me a DM on Twitter @eajene. If you liked this post, subscribe and share it with your networks. Thanks and see you soon! 👋