Skip to main content

Safaricom: King of Innovation

A detour from the constitutional debate. This week there has been a very public back and forth between Safaricom on one side and CCK, Yu, Zain, and Telkom on the other. The brouhaha is over a set of regulations published by CCK, which you can view here and here.

Now, I'll be honest I tried reading the regulations but I got bored, but if I'm to believe the arguments of CCK and Safaricom then I'm going to give this one to Safaricom. Why lie Safaricom deserves to be market leader. Not only have they cranked out great product after great product, they've done this while keeping their business very profitable using the "just good enough formula".

In case you have not read The Innovator's Solution, by Clayton Christensen and Michael Raynor, then I'll explain. The just-good-enough formula means that a product need not be perfect to be marketable, it must only meet the minimum threshold of the job the consumer is trying to achieve. The clearest example of this is call clarity, Safaricom's is far from perfect but it is just good enough to allow us to communicate (which is what we're trying to do) and being the market leader in low denomination scratch cards wisely ensured that we would not feel the pinch of low quality calls as bad.

Remember back in 2000, Kencell now Zain was the market leader, but they decided to go for high-profit customers (per minute) while Safaricom went for the low profit customers (per second). Eventually because of Kencell's management and ownership intrigues, Safaricom consolidate its base and moved into higher profits segments, continuously grabbing more market share. Fast forward 10 years later, and Safaricom can sit proudly on its throne as king of the telecoms.

In case you might not be able to buy the book, here is an excerpt which is a perfect description of what happened in the telecoms cellular market. (If Safaricom is the disruptor, then Kencell/Celtel/Zain is the incumbent.)

In low-end disruption, the disruptor is focused initially on serving the least profitable customer, who is happy with a good enough product. This type of customer is not willing to pay premium for enhancements in product functionality. Once the disruptor has gained foot hold in this customer segment, it seeks to improve its profit margin. To get higher profit margins, the disruptor needs to enter the segment where the customer is willing to pay a little more for higher quality. To ensure this quality in its product, the disruptor needs to innovate. The incumbent will not do much to retain its share in a not so profitable segment, and will move up-market and focus on its more attractive customers. After a number of such encounters, the incumbent is squeezed into smaller markets than it was previously serving. And then finally the disruptive technology meets the demands of the most profitable segment and drives the established company out of the market.

Comments

Popular posts from this blog

Cyber Cafe with an EDGE

Followed up from Laying the Groundwork for a rural cyber I've finally got around to writing this. Thanks for you all who patiently waited. Although I approached the project as an "internet consultant", I soon realised I would need to implement the whole spectrum of tasks required to get the cyber running. I spent almost a week laying the structured cabling, installing the software, and configuring the network. Most of the work I was doing for the first time (e.g. drilling holes in concrete to fix the trunking screws) and most of it was hard, but all of it was enjoyable. I needed to prove the project was implementable with minimal human resources (if it was going to work elsewhere). With an eye on both troubleshooting by the owner and future projects I prepared detailed How To manuals for most of the tasks. So the day finally arrived, November 17th I connected all the PCs to the internet. The results were incredible, the speeds were nearly as good as my 256K broadband conn

Differences between a Business Name (Sole-Proprietorship / Partnership) and a Limited Liability Company

While consulting for our online company registration service, Incorporator I find myself answering the question "What is the difference between a sole-proprietorship and a company?" Anybody who is considering starting a business must consider what type of business structure is needed for his or her particular situation. In Kenya there are three types of structures that one can use to start their business. 1. An LLC, or Limited Liability Company 2. A sole proprietorship 3. A Partnership A Sole-proprietorship and a Partnership are registered through the same manner (Form BN/2) with the exception that a partnership has more than one owner and although not necessary, entrepreneurs are advised to register a partnership deed as well. In this article all references to sole-proprietorship also include partnership. Understanding the advantages and disadvantages of each structure is important when deciding which one you want to use for your company.

Selling stuff online to Kenyans

You might not know this but my love of entrepreneurship is fuelled majorly by my love of computer programming. My first exposure to computers was in 1988 when I played shuffleboard on an Atari. Having been raised in the boondocks I was utterly spellbound with the concept of a video game. In 'shags' we hardly ever got toys from the shops; instead we would create our own toys using locally available material. For toy cars we twisted and shaped wire coat hangers and cut out rubber tires from old (and sometimes mom's new) bathroom slippers. For planes, we stuck a stalk of grass through a dried maize leaf and made our 'propellers' rotate by holding them out in front and running into the wind (incidentally this was my all-time favourite). For marbles we hunted for used and discarded bottle-tops (beer bottle-tops were coveted). In fact we had so many toys that our game time never felt inadequate. That was until I discovered video games. Hard as I thought I didn't see