Like it or not, Africa's mobile operators are central to the success of start-ups and for operators wanting to create "digital transformation", they need new products and services. But each side needing the other does not mean that mobile operators know any better than any other large corporate how to do innovation, either internally or externally. Russell Southwood looks at Kenya's dominant operator Safaricom and how it has struggled to innovate.
This is a story that looks at whether a large corporate in Africa can innovate. The story is told two ways: firstly, by looking at how a company chose structurally to address this issue; and secondly, how it played out in terms of the personalities within the company. Both play an important part in the success or failure of corporate innovation.
To set the context, Safaricom is the dominant mobile operator in the Kenyan market and its main shareholders are Vodafone, Vodacom and the Kenyan Government. It controls over three-quarters of the revenues in its chosen markets and has the largest number of voice, smartphone and mobile money users. If you're a Kenyan start-up, it's hard to avoid Safaricom if you want to launch a B2C service.
In 2010, Bob Collymore was appointed CEO of Safaricom and among the first things that he did was to set up an Innovation Board (with outside members) in February 2011 and a Safaricom Academy. The Academy provides "provides talented mobile application developers and graduates an opportunity to further develop their skills and set-up start-ups through tertiary training and incubation". Both of these were in structural terms things that happened outside of the company and did not affect its internal processes.
In January 2012 Collymore said in a Fireside Chat at Nairobi incubator iHub that "... the company had fallen short as a company in terms of innovation." He pointed to the lack of products and services from the company that could really be described as innovative.
In November 2016, Safaricom launched its own start-up investment vehicle, Spark Fund which has to date invested in 6 start-ups: iProcure (agriculture supply chain); Eneza (edtech); Sendy (couriers); mSurvey (mobile market research); Lynk (household jobs); and Farm Drive (agricultural analytics).
The fund has US$1 million to invest in amounts of between US$60,000-US$216,000 per investment so it is probably now almost fully invested. Making investments clearly deepens the company's relationship with potential new market players but a million dollars can only really be described as "lunch money" alongside the scale of the company's operations and the new markets it might seek to capture. And in financial terms, the jury is still out.
In March 2017 I spoke to Veronica Ogeto-Tchoketch, Safaricom's internal Head of Innovation about its new incubator premises and the forthcoming appointment of an external Head of Innovation. So why move?:"We're going to be moving to another premises with easier access and agility". Jokingly she asked me how easy I found it to get into Safaricom's HQ premises. Not very had to be the answer. But that's just one reason:" Here we're caught up in corporate processes and we'll be able to be more nimble. We'll be able to try and fail faster and not succeed in everything we do".
In April 2017 Kamal Bhattacharya was appointed Head of Innovation responsible for Safaricom Alpha, Safaricom's Innovation Center in Nairobi. Bhattacharya came from IBM Research's Kenya operation via a short stint sorting out iHub under its new owners. When I spoke to him in 2013 at IBM Research he had been doing a project using mobile data to track traffic flows in Nairobi: https://www.youtube.com/watch?v=DTh8jtAHodY Making business opportunities out of the company's data was clearly part of what he wanted to do. The new Innovation Centre was consciously placed outside of the corporate processes to be more nimble.
From inside, Safaricom launched two new platforms in the autumn of 2017: Digifarm and Masoko. The latter is an e-commerce platform designed to compete with the likes of Jumia.
Digifarm is an agricultural services offer for which Safaricom provides the technical platform and partners like iProcure and Farmdrive (both companies Spark invested in) and Arifu provide the services. Digifarm has impressive user numbers but less signs of sustaining revenues. Masoko's Sharon D'Souza Holi in an interview today with techweez admitted that it "did not take off as expected". Doing your own start-ups is not as easy at it looks as though it should be when you have all those mPesa subscribers.
So Safaricom has both supported external start-ups, invested in them and launched its own platforms that compete with other start-ups. Unsurprisingly there have been dark mutterings about how it takes other people's ideas. Although I have never been able to find any evidence that this has happened, there are understandably high levels of mistrust of the company in the very sector it is supposed to be making friends with.
In September 2018, Kamal Bhattacharya, eighteen months after taking the job, quietly resigned from Safaricom. There were a number of articles noting his exit and hints at internal differences but then the water closed over and things went quiet. The trouble started when began using data analytics to look at Safaricom's own products and he found that some of them were cannibalizing each other. Michael Barber, Safaricom's Chief Data Scientist - who left shortly before Bhattacharya - described his responsibilities on his LinkedIn page as "rigorously analyzing revenues to identify testable hypotheses for intervention".
After this, things very quickly became nasty and personal. Internal managers in Safaricom began saying what has Alpha (the brand name of Bhattacharya's team) ever really done? It costs us all this money and nothing has come out of it. There were snarky comments about messaging app Bonga being its only visible product. Battacharya comes from outside telecoms and therefore, the argument went, what does he know about the business? There were also fears that maybe he was lining up to be the next CEO after Bob Collymore departs. Nairobi loves gossip and this is what went round.
There was also the accusation that some of what he was suggesting would cut income in the short term, leading to cuts in staff bonuses. This sounds familiar to me as there is another large African mobile operator that bought video rights and held off launching a service because they thought it would impact on managers' bonuses.
It is easy to talk the rhetoric of taking risks and failing but staff who rely on their quarterly results to set their bonuses are unlikely to be first in the queue to take a commercial risk or adopt a different approach. Structurally it is hard to get existing managers to play someone else's tune.
Bob Collymore's contract has been extended until August 2019, just ten months away. By any measure, as CEO he has shown a strong commitment to innovation but as yet there is little sign that it has borne fruit. After eight years, Safaricom remains the de-facto monopoly player that has as yet not managed to adapt its business model for future or some would say change its spots.