South Africa plummeted into stage 6 load shedding on Thursday leaving most parts of the country with prolonged outages and cold breakfasts. Stage 6…
Africa’s startup ecosystem is in a state of flux. These are the formative days, the few million years post big-bang, if you would. So there are many questions and many gaps that need to be filled as we seek to learn from other innovation centers around the world, while at the same time setting the rules that will work best for our context all while actually building this thing.
In a sense, it’s like setting about building a structure while figuring out what the actual structure should look like in the end and not just that but also how to build it, while building it.
One of the gaps we frequently see in African startups is an apparent lack of the ‘business dimension’. Many had cool ideas, many had great ideas, many had the technical part sorted out — they had the skills to code their product — but few had a solid foundation in terms of the actual mechanics of taking those components and turning them into a viable, marketable and profitable product and overall profitable business.
One part of this problem relates to having a sound business model that works for what you’re trying to do. What’s a business model? A business model describes the rationale of how an organisation creates, delivers, and captures value (economic, social, or other forms of value). This ties in aspects of defining what your product is, how you will go about making it, who your customer is, how you will reach them with your product, what it will cost you and how you will make money in the process and the specific activities and resources needed to make it all happen.
Let’s set aside the actual conversation about what a business model is, what classic business models exist and how to define the business model that works for you and try to put this whole discussion within our context. This is quite simple really and Mbwana Alliy already did a great job with his article on whether or not the cloning model is right for Africa by noting that you can’t lift already existing strategies into the African context and expect them to necessarily work exactly as they do in their regions of origin. This includes business models.
Alliy gives a great example of FlipKart in India. While FlipKart could be called the Amazon of India, at the execution level, they are very unique to their context in terms of how they execute the payment and fulfillment components of their model. For FlipKart, Cash on Delivery offered the ideal mechanism for dealing with this and that’s because in India, they could not succeed at doing more or less the same thing that Amazon does (e-tailing), in the same way that Amazon does it. The ‘what‘ is similar to both, the ‘how‘ is different.
This does not just apply to just how to capture value from your customers (one aspect of a business model), but to the entire framework of all that goes into your business model.