Build on Existing Distribution Networks

Nokia Siemens Networks announced a “Village Connections” pilot project in Eastern Cape, South Africa last week. The initiative, part of a broader goal of providing wireless access to 5 billion people by 2015, is an attempt to lower the capital and operating expenses that keep most operators away from remote, rural villages. Wireless subscribers to this service are also expected to benefit from lower fees.
Nokia Siemens Networks (NSN) claims the reduced costs are enabled by an innovative “distributed architecture.” These technology and business-model advances push call control and customer management out to rural access points, each of which serves approximately 80 subscribers and runs on a basic computer equipped with a simple software application and wireless card.

With this initiative, NSN moves toward a potentially lucrative opportunity – a franchised service model for phone and Internet connectivity. NSN claims its GSM Access Points are “plug-and-play” and backed up by solar or battery power. The challenge remains, however, in identifying, training, supporting and managing a large number of geographically-scattered rural franchisees.

NSN (or other multinationals) will maximize their chances of success by identifying and securing good distribution partners. While every rural village has a small shop or retailer, networking companies don’t have enough boots on the ground to train entrepreneurs or install and service even the most self-contained access points at each location. They may, however, be able to piggyback on distributors who regularly supply soft drinks, beer, soap or other goods to those retailers. Distributors would gain a new revenue stream and operational efficiencies (i.e., shopkeepers could place orders using the new phone network). Village retailers could benefit from offering a new product line to their customers, beginning with phone service and extending to handsets, additional airtime and phone accessories. These shopkeepers are also the most likely to know how to run a business and protect valuable equipment. Schools might also be potential partners. In many rural villages, the school is the first (or only) place with a PC, electricity, adequate security and sufficiently educated personnel. And, if bureaucratic snags can be avoided, it may be worthwhile to partner with a government entity. Such alliances might help technology companies solve the rural distribution riddle.

Also in the news:

• OLPC Punts
• Dell Joins HP on Chinese Shelves
• M-banking Programs Supported By World Bank (and Gates)

Designing for Global Markets

GE Chairman and CEO Jeffrey Immelt offered up this week’s nugget at a gathering of Indian Institutes of Technology (IIT) graduates in California’s Santa Clara Convention Center. During a wide-ranging address, Immelt characterized three generations of technology business: the past, in which developed-world companies designed for mature markets; the present, with developed-world companies tapping emerging-market manufacturing and personnel resources to deliver products and services to mature markets; and the future, when developing-world companies design and sell products and services to mature markets.

Vital Wave Consulting wondered why Immelt’s three generations each ended with mature-market (rather than global) buyers, when GE’s revenues from emerging markets are projected to grow from $10 billion to $50 billion between 2000 and 2010. Last year, nearly 20% of the company’s $163 billion in revenues came from emerging markets, and revenue in these markets rose 14% in the first quarter of 2007. Emerging markets already represent the fastest growing markets for global technology companies, and overall revenue potential in these regions will soon overtake that of mature technology markets. For GE and other technology companies, a more accurate description of the third generation of technology business is global companies designing for global markets, not just the developed world.

Immelt’s audience of primarily Indian-born engineers, eager to compete in the world’s most advanced markets, was receptive to his suggestions. Successfully designing for the developing world, however, presents a worthy challenge and, in the long-run, larger rewards. Business trends suggest that companies based in developing countries will not only be selling into mature markets, they will also be designing for emerging markets around the world. With lower cost structures, technical expertise, and a broader understanding of global problems, emerging-market entrepreneurs may bring a richer set of solutions to local challenges. Multinational corporations, however, retain the advantage of global scale. To lead in developing countries, they must develop effective strategies to design for the world’s growing mass markets. First, however, they must acknowledge that the market opportunity is global and that, if they don’t act fast, their counterparts in developing countries will.

Also in the news:

• Via pushes forward in emerging markets with a Mecer PC
• Vodafone and Nokia petition for m-banking regulatory changes
• Rare interview with Aga Khan: Development through venture capital

Mobile Banking Lacks a Global High-Tech Leader

Using mobile phones for financial transactions, or m-banking, has seen rapid adoption in countries like the Philippines and Japan. Though the service remains fragmented and country-specific, this week’s CIO magazine points out the growing opportunity for m-banking in Africa.

CIO bases their assertion on survey results from South Africa, where local bank subsidiaries are already processing thousands of mobile transactions each month, and the biggest barrier to wider adoption seems to be a lack of consumer awareness.

Finding signs of m-banking success in South Africa is not surprising. Vital Wave Consulting research reveals that the mobile phone saturation rate among South Africans living at or above subsistence is comparable to the level in European markets. Saturation in South Africa (and Nigeria), together with rapidly increasing mobile penetration rates in other African countries, create a fertile user base. And mobile phone-based financial services are particularly attractive when poor roads and public transportation systems make a trip to the bank an expensive, all-day journey.

There are ample, quantifiable business opportunities in the m-banking value chain for multiple players, including banks, international credit companies, carriers, and software designers. While financial service providers are moving quickly to realize these opportunities, no global technology leader has stepped forward. A multinational high-technology company capable of providing such mobile solutions has much to gain by enabling comprehensive m-banking across emerging markets.

Also in the news:
• Microsoft is putting their money on smart phones as the next computer
• GSM and CDMA search for the best foothold in developing countries
• Vodafone unveils handsets designed for emerging markets