Africa – stop wasting time and skills with the old model

Last Friday, September 25, I spoke on a panel at the AngelAfrica conference in Manhattan. Though I cannot call myself an expert on Africa, its problems and possible solutions, a lot of work on strategies for emerging countries and many discussions in the past year got me into a position where people listen to some strategic comments.

Around the world, well educated often very successful expatriates in mature countries like the US look for ways to also be successful in their home countries. We all know about the Indian professionals that went back to the country of their ancestors to be successful entrepreneurs. Now, not only India, but many countries in the emerging world provide a basis to passionate individuals for social, economical or political success.

The last frontier is Africa.

This continent has many more challenges that need to be overcome than most other places around the world. The first is already highlighted by the term we use to name the area: Africa; a whole continent. Not a country, a commonwealth, a union and not even a loosely coupled area with reasonable economical, social, cultural or political ties. From an economical perspective, only some 9% of trade happens between African countries. In Latin America that figure is 18.5% and in Europe, 71.4% (source). So the only market that is really large enough in sub-Saharan Africa to be self sustainable is South Africa. It requires the development of a lot of trust through personal networks, enterprise ties, physical infrastructure to start making a change. The conference was such a network event.

The second big challenge has to be noted when looking at the speed (or better slowness) of life. Things do not have to be as fast paced as in New York, but when a process as simple as paying your bill requires hour of travel and hours of waiting in line, then everything becomes a drag and hampers any innovation. In a recent documentary by the BBC, this is called out as a key factor that keeps Africans in poverty.

Fortunately, this is an opportunity in itself, too. At the AngelAfrica conference, Nvalaye Kouroma, the CEO of the thoughtfully named company AfricXpress introduced their mobile phone based payment solution which takes a lot of slack out of the system. Money can be transferred from personal device (typically a phone) to another or to directly pay a bill. This dramatically improves the efficiency and effectiveness of that process. It now only takes seconds – or minutes, when an agent is involved – and what is sent is guaranteed to reach its target. Compared to these productivity improvements, the transaction costs can be neglected. Now people can focus on important things in their live and not waste precious time standing in line or making unnecessary trips.

So at the conference I spoke about my favorite topic: cloud computing and I made the bold statement that is not the underlying IT that is differentiating, it is what you do with it. Leave the “IT production” to those that can deliver it cheaply, environmental friendly out of the cloud and focus on innovation that uses IT. Why waste the expertise of the comparably few college educated skilled resources working on the IT hardware, if you can have them apply IT to solve real problems in healthcare, education, energy generation or transportation.

One question I got was whether the African people shouldn’t first learn the basics: bits and bytes and raw IT and then apply that experience to more sophisticated solutions without having to rely on others to deliver IT from the outside.
But what good should that do? I guess the world’s best auto mechanics are all in Africa. They can keep cars, trucks and buses on the street that were scrap in other parts of the world. And they gained that experience over the past decades, learning a lot. But did that skill set develop into making cars, come up with extensive transportation models? It obviously did not, because you do not need to know how to repair a truck to run an advanced logistics operations. In addition even if one wanted to, there is no infrastructure in place to support an innovative transportation system and it will take decades, before one will.

That situation is very different in IT. There are now at least 10 times more mobile phones in Africa than landlines. Telecommunication companies leapfrogged the costly build up of fixed lines in the ground and only send the signals over the air. Furthermore, the ring for broadband communications is closing around Africa, connecting the continent to the rest of the world. By 2011 nearly 7 Tbit/s will be available to ocean based African countries and from there will swiftly extend throughout the continent. So the barrier to use IT innovatively is gone and my call to action is to not waste time and skills dealing with the interior of the engine. When the motor is already humming, its use will get you to greater success much faster.

Most importantly, the people are there to make all of that happen – if they are not networking, innovating or raise investment money at a conference here in New York, then they are in Ghana, Kenya, Tanzania.

It is my belief that cloud computing can be a key enabler to innovation in African and other emerging countries. Problems and concerns about security, privacy or trust can be overcome rather easily. One needs to just do it and not waste time with the old model.


Update: Good summary on the "The power of mobile money" in the Economist.

Why disappointing trains in the US contribute to few modern train systems in emerging countries

A key ingredient to a sustainable infrastructure is a well functioning train system. However, throughout the developing worlds you barely see plans for efficient, timely, comfortable railway systems. What is the reason for this opportunity gap – a gap that misses the chance to decrease emissions, traffic congestion, and fuel consumption?


One reason might be the lack of any state-of-the-art train system in the USA. A large part if not the majority of all infrastructure development projects is funded and/or heavily influenced by the US and US-educated experts. And if those experts built their expertise on the experience with US trains, they are bound to discourage investments into railways for anything but the most basic commuter services.


I am now living since 3 years in one of the largest and most affluent metro areas of the US, specifically in a county adjacent to New York City and have been visiting the US regularly since 20 years. Before that I lived in Germany and traveled as a consultant all over the world, often relying on public transportation, not only because it might be cheaper (it often is not), but it usually is more comfortable, reliable and/or effective than taxis, rental cars or the plane. But only in the US trains consistently fail to live up to any expectations relative to other places I worked, lived or spent vacation at. The latest experience which triggered this blog entry was on the brand new, highly praised and probably most expensive train over here: the Acela Express from NY Penn Station to Washington D.C. Union Station.


Many different little things really show you what the general mindset about the train service is (see later), but the biggest frustration came already the day before boarding the train. Though I was checking schedules and prices 1-2 weeks before, I didn’t expect any shortage of seats as it is in the middle of summer and neither out nor back was the busiest time of the day. Therefore, I did not feel the need to book right away, knowing that my meeting might change. However, when I finally went to the website the day before, the total price for the trip was suddenly up 120%! The business strategists at Amtrak apparently think they are primarily competing with airlines. So it would be appropriate to replicate the price determination process of airlines where seats get more expensive the closer you are to the travel date and the fewer places are left on the vehicle. However, as the Deutsche Bahn in Germany a couple of years learned the hard way, the competition is actually the car. Therefore, you need to provide as much flexibility, simplicity and predicticability that you would also get from taking your personal vehicle. By increasing prices without any business reason (the train was at least half empty) and by tying your ticket to the actual train, you fail completely on all three attributes. Especially, when the only other alternative you modeled the system after – airplanes – are now doing even better than you. The price for the same time and date via Delta would have been nearly 50% lower. Only because I needed the actual hours to work on the train, I stayed with my choice.


Here are the other gaps / failures I identified on that single roundtrip:

• Train design failures:
  
  • Hook for jacket missing
  • Old curtains that primarily collect dust, but barely defend bright sunlight
  • Tip of the arm rest based of metal, much longer than necessary. But that is exactly where many people place their arms, thus making it uncomfortable
  • No place to put trash at your table
  • Installations under the opposite seat leaving not enough room to really stretch long legs
  • Loudspeaker announcements too loud or not understandable
    

• Operations design failures:
  • Conductor wearing sunglasses, shouting “Ticket!” and slamming the doors – no eye contact, no “please”.
  • No information about the service on the train
  • No service in business class (cart coming by only on the way from D.C.)
  • No Wifi on board, in Penn Station, in Philadelphia, in D.C. – only at the stop in Newark MetroStation

• Business design failures:
  
  • Price for tickets go up contrary to business reason (many unsold seats), making the train uncompetitive to both car and plane
  • Tickets are tied to a specific train, so you cannot simply adjust as meetings change
  • No way to book at connecting ticket from the suburbs (or hard to find)

These might be all little things, but combined, they make up a major performance gap for the high-speed poster child train. If you then add to this all the aspects of the normal subway and commuter train systems it is no surprise that people don’t appreciate the train in the US and are therefore not the advocate to install modern train systems across the world. Unfortunately, that leaves a major opportunity on the table not only for the US, but also the emerging countries.

Overcome Lack of Scalability

(this post is the summary for my presentation at the Münchener Kreis on May 12th, 2009 in Berlin)

Emerging countries are developing an increasingly supportive infrastructure to bring more and more people out of poverty: A marketplace for social businesses, extended reach of social services and widespread Information and Communication Technology (ICT). The three “basic interventions” for sustainable improvement the Noble Price laureate Muhammad Yunus calls out. This lecture focuses on the enabling function of ICT and its impact on social businesses, social services and innovation.

ICT is becoming widely available throughout the world, including rural areas of emerging countries such as China, India and even Africa. Mobile telecommunications nowadays covers nearly all people in South Africa and already more than one quarter of the population in one of the poorest countries on Earth, Bangladesh.
Microfinance provides hundreds of millions of loans to people that are not served by normal financial institutions, creating local entrepreneurship and sparking a local economy.
This is a highly promising foundation for the developing world.
Unfortunately, this foundation is only rudimentary as it lacks a critical element for long term improvement: Scalability. Trying to overcome this situation with traditional solutions is expensive, slow and short of any innovation.

Fortunately, a new computing model has emerged that fundamentally transforms one of these “basic interventions” and makes IT in general more accessible, affordable and – most importantly – more scalable: Cloud Computing. Based on a Dynamic Infrastructure that is standardized, highly automated and centrally managed cloud services provide IT-as-a-Service; faster, simpler and cheaper than ever before. Using Cloud Computing and applying its principles is already transforming social business and social services around the world to overcome the lack of affordable scalability: Microfinance institutions in India and Latin America use standardized backend services from a cloud-based processing hub, cities in China provide a cloud-based innovation infrastructure to local entrepreneurs and African hospitals collaborate using a cloud-based open education system to provide medical instructions to the broad population via mobile phones. All of these services require a minimum of locally deployed IT, configuration efforts and maintenance expenses. And they all have inherently affordable scalability in common.

In summary, the opportunity to leverage ICT to gain widespread access to affordable services is hindered by a foundation that lacks scalability. Business-as-usual cannot be the solution to this problem. With Cloud Computing emerging countries can leapfrog generations of traditional ICT and create an environment where results are sustainable and can be reached much faster, simpler and cheaper.

Leapfrogging ICT (Information and Communication Technology)

Leapfrogging ICT

(this will be a string of blog posts on this topic to prepare leading to a presentation at the Münchener Kreis on May 12th, 2009)

In various emerging countries we are observing a tremendous growth of mobile communications. In some African regions it is already more probable to have phone coverage than electricity; Nokia's growth in the past years has been fueled by cheap, but profitable devices for underdeveloped markets; conducting banking businesses when there is no bank can be done via mobile phones. These examples and data points show how a very modern technology - the mobile phone, connected to an IT backbone - can spread swiftly in places where previous technologies have not been seen.

For developed countries an evolutionary approach to technological innovation is the norm. In the example of Information and Communication Technology (ICT) phone calls were first made over fixed phone lines, then these lines were shared with slow Internet access, later separated electrically into analog phone and digital data connections (DSL) while in parallel mobile phones became widespread. Now voice calls are often still be made on the plain old telephone system, over data lines (VOIP), or the mobile phone. Internet is accessed over DSL, cable-TV lines, satellite, wireless LAN or, more and more so, the mobile network.

For emerging countries this development can look very different. When such a mature technology like mobile communications meets an environment that is highly compatible with some of its characteristics (here: long distances, low investment capabilities), the chance that the newer technology will strive is much higher than that the older - though usually cheaper - technology will be rolled-out at first. For a communications infrastructure with Internet access this means in emerging countries: no land lines and no desktops, except in the occasional Internet-cafe. Everything is connected via the mobile phone. A web site is visited via the mobile phone. A business is conducted using automated processes leveraging the mobile phone. At least one whole generation of ICT is being leapfrogged.

This has broad implications that I will discuss in further postings. Some of these topics will be:

• Products: Emerging Markets consumers want simple, robust and cheap devices, but not old and scaled down "stuff"
• Business Models: New markets require new business models. When a phone call is only initiated to signal the receiver, but not to actually have a chat, then no revenue is generated directly
• Economy: As entrepreneurs in rural areas have an infrastructure in place to establish businesses, they start a local, formal economy that can self-propell itself

Earth 3.0 will be very connected. Less with cables. More with waves.

The Surf is On

In a recent Business Week article Steve Hamms quotes Navi Radjou from Forrester Research that "these Web 2.0 companies are surfing on the old wave. They're not creating the next one", asking "what's wrong with silicon valley?".
Maybe nothing is wrong and this is exactly the way it is supposed to be.
In her book about technological revolutions Venezuelan scholar Carlota Perez clearly distinguishes between two phases:

• The installation phase where the main discovery sparks innovation in related technical domains
• The deployment phase where innovation happens by applying that new technology in many other domains.

Bursting bubbles and clanking crashes in technological as well as financial areas would indicate the transition between phases. As we are now also witnessing the financial bubble bursting - while we were before hoping the Internet bubble would have been the only one out there that "had" to burst - her startling prediction not only for the bad, but also for the good times should be analyzed more closely.
Perez describes the deployment phase we should be in by now as the start of a golden age where people are harvesting the innovation made in technology. By taking e.g. the infrastructure of the Internet, the ease of application programming in Web 2.0, the pervasive communication via mobile devices and the ability to apply algorithms to massive amounts of data (a combination we now call Cloud Computing), we can create innovative solutions for really hard problems that are part of Earth 3.0. The breadth of these solutions one can build are already startling:

• Create applications can enable people to find again and stay in touch with friends from various decades of their life (Facebook.com, Stayfriends.com, Reunion.com etc.)
• Automate the processing of loans and and loan collections in a way that even micro-loans become profitable, thus enabling rural villagers to become part of the formal economy
• Learn a foreign language interactively, but fully automated by reading from and speaking into a mobile phone

If Perez is correct, this is just the very start of deploying the innovation that has been made in the last decades. Obviously, in parallel to this deployment phase, many unrelated research will happen eventually sparking another technological revolution (and corresponding bubbles).
But right now the bursting bubbles created perfect waves that we can surf on. We should enjoy and embrace that opportunity.

Hagen

Why "Earth 3.0"

The name of the blog was inspired by a new section in "Spektrum der Wissenschaften" (the German edition of Scientific American). This excellent magazine dedicates part of their editorial content to a perspective how we deal with the world in the time of post-industrial revolution.

If Earth 1.0 was the earth as we - human beings - found it, then Earth 2.0 is how we formed it through our activities especially during the ongoing technical revolution. Some of these activities were directed towards positive goals, but many led to unintended consequences, such as global warming. In this deployment phase of technological innovations humanity has much more sophisticated resources to address the problems of Earth 2.0, improve it and invent with much fewer side effects. A focus on sustainable solutions developed in a collaborative way that include people in every corner of the world is what Earth 3.0 is all about.

Therefore, this space will be used to explore ideas triggered by external events, derived from other publications or sparked by thoughtful discussions.