Are the future business models in Africa?
Updated: Oct 18, 2017
As I walk down the aisle of an Aldi store, the simplicity, efficiency and the cost effectiveness of their model is undeniably present. The chain seems to be growing at an impressive rate in the US. This particular store is in one of the most affluent neighborhoods in the United States. You would be forgiven if you wondered out loud “when did the rich start needing ‘discount grocery’?” Ordinarily when you think discount, you often think poor to middle class neighborhoods. As you stop and observe the fresh produce, it is as good or even of better quality than that of other well known stores. The only things stripped out are unnecessary cost generators like unending grocery bags, high inventory and high staff counts.
The story of Aldi dates back to 1913, when Anna Albrecht opened a small grocery store in Essen, Germany. Competing against the then market leaders - co-operatives; they took up a discount model with a lean operation to be competitive and successful. So necessity became the cornerstone for their successful model. Talking about necessity, I think it is time, we start investing in businesses that have created successful models out of some of the toughest environments.
I think of African businesses and wonder how many great models are yet to be uncovered because of lack of investment and/or scale. Some of these businesses have endured interest rates north of 25%, lack infrastructure, have weak support institutions, weak government regulations and have barely any concrete data. Yet somehow they have survived for decades, in spite of all these challenges. Would it be that far fetched then to think that there might be gold hidden in the business models emanating from Africa? What if we could bring those models to scale? Or implement such models in a market where interest rates are at 3% with developed infrastructure? Would they be successful? Will the next significant wave of global business disruption come from such places? If yes, what is preventing this from happening?
Perhaps too many times we kill future business models by either not investing in them or over investing in them. Yes, too much capital can also kill innovation! Business executives worrying about the competitor next door, might need to be more concerned about the developing business model from across the Atlantic, which could completely wipe out their businesses in the near future.
With the little data available, we don’t know what’s out there and maybe it’s time we started to find out. Like most frontier and emerging markets, I believe the future business models are in Africa.
First published on LinkedIn