What taxi services in Nairobi tell us about scale and replication
On my way to this year's SEED Symposium in Nairobi I caught myself thinking back to last year's event when my move to Nairobi was still in the planning process. I had pre-ordered a taxi to get to the event with a driver I knew at an agreed price of $20 each way, and had no real idea where exactly in the city the event was taking place. I now call Nairobi my home, and whilst it'll still take some time to fully know my way around, this year's journey to the event felt much more familiar, and the police stopping us on the way accusing my driver of speeding didn't come as a big surprise to me. Instead of taking a pre-ordered taxi for $20, I took an uber for $8.
Since uber started its operations in Kenya in 2015, it has recorded some remarkable growth - reporting more than 1 million rides and 1,000 drivers in May and planning to be in every Kenyan town by 2017. The availability of affordable taxis with professional drivers and reliable cars has definitely increased my quality of life here and a quick look on uber's website confirms that the company has successfully expanded their business model to various cities around the globe including Hanoi, Manila, Lagos, Accra, Pune and Sao Paulo to name a few.
It seems obvious that uber's global expansion is a successful example of scaling an innovative business model, in similar fashion to many inclusive businesses such as Mobisol scaling its solar operations across different countries in East Africa or Bridge International Academies planning its expansion of low-cost schools from Africa to Asia.
This year's Seed event focused on replication. 'Scale' and 'replication' of business models often seems to be mentioned in the same breath and whilst there are certainly links and overlaps, I tend to think about replication as being distinct from simply setting up more branches or growing a business through a franchise network, but to already take successful business models and/or technologies from one place to another - often (always?) this means a successful model from one business is picked up by a different business.
Anyone who is familiar with Starbucks, for instance, might discover similarities when visiting one the 33 JAVA House Africa branches in Nairobi. And a friend recently told me that Nairobi based Artcaffe is more or less the exact replication of an existing brand in her home country Israel. Mobile money, pay-as-you-go for solar products or telemedicine are some models that easily spring to mind when thinking about replication in the inclusive business space.
I didn't fully agree with the open definition and interpretation in some of the sessions and associated publications (see below diagram) at the symposium, but there were certainly some interesting discussions and enterprise examples. Spouts of Water, for instance, adopted a water filter technology developed and used by social enterprise Hydrologic in Cambodia to produce and sell its ceramic water filters in Uganda.
Figure 1: Pathways to Replicate, Source: Replicating Eco-Inclusive Business Models, SEED Study 2016
There was general consensus that business models and/or technologies cannot just be copied from one context to another but require careful adaption to the target market and its underlying socio-economic contexts, which in turn requires specific knowledge of the same - 'adapt or die' was how one of the panellists referred to the issue.
The need for adaption goes hand in hand with innovation. The case was made for business model rather than technology innovation, or as Harald Schutzeleichel from the Solar Federation put it: 'What we need are not more solar lanterns but more people who bring them to the last mile and make them affordable'.
Getting the right people with appropriate know-how on board, lack of suitable working and expansion capital were among some of the replication barriers discussed. So was competition. Again, the taxi service uber provides an interesting example here. Recently, Easy Taxi has tried to enter the Kenyan market with exactly the same business model but opted out in May. Safaricom's Little Cap was launched in July this year. Weeks after its launch uber cut its prices by 35%. And even though Little Caps offers a higher profit share to its drivers than uber, by being a trusted brand and offering cheaper fares, it doesn't look as if Little Cap is becoming a serious threat to uber in Kenya.