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The rise of African start-ups is a business opportunity, not a threat

January 19, 2016 • Startups, Top Stories

Giorgio_Heiman

Giorgio Heiman, VP Africa, Orange Business Services.

We are in the middle of a tech start-up frenzy, with research suggesting that South Africa alone is home to more than 5000 tech start-ups. Rather than just seeing this rise of new potential competitors as a threat, enterprises should take the opportunity to transform themselves, work and learn together – and bottle some of that entrepreneurial spirit.

Last year, a report on tech start-ups published in The Economist, likened the sudden growth in digital start-ups to “an entrepreneurial explosion”. The report explored the fact that “digital startups are bubbling up in an astonishing variety of services and products, penetrating every nook and cranny of the economy. They are reshaping entire industries and even changing the very notion of the firm.”

Enterprises should be ready to immerse themselves in the start-up culture. They can learn from the way these new market entrants use the latest cloud-based IT, insight drawn from big data, and the power of a digitally connected social world to create new experiences and services for customers.

As a growing global phenomenon, tech start-ups are being driven by decentralized global technology investment and a voracious start-up culture, accelerated by an increasing trend to set up businesses, particularly amongst Generation Y.

The beauty of tech start-ups is that the barriers to entry are relatively low. While developing countries may look towards their developed counterparts to put the latest technology on the table, they can use this technology to create a product or service that is tailored for success in their region.

For the foreseeable future, African nations will have to be satisfied with getting the majority of their phones, tablets, music players, televisions, and other gadgets from other continents, but the apps that drive these devices offer real business opportunities. Each region is different, and the people living in that region have different cultures, daily needs, and life experiences. All it takes is for one enterprising individual to recognise a localised opportunity and create a bit of code that could result in a widespread appeal in the target region.

Many new entrepreneurs have already woken up to these possibilities and are using the low barriers to entry to bring innovative software to market, often becoming very profitable very quickly. The younger generation is taking the lead, with 65% of tech entrepreneurs being under the age of 35, according to a recent Ventureburn survey.

If they have certain shortcomings in terms of their programming capabilities, this is no longer an issue, as the Internet has decentralised business, which means that entrepreneurs can source elements they need from across the globe at the best price. Given these conditions, it is little surprise that a start-up culture is taking root amongst Generation Y members.

Besides tech, start-ups have become disruptive forces across markets, in various industries such as insurance, hospitality, travel, healthcare, education, transportation, retailing, marketing, sales, advertising, financial services, communications, entertainment, and investing.

With business models that are built around the shared economy, and new channels of engagement and market access, start-ups are producing prominent growth, valuations and multiples upon going public.

A recent study by the Business Performance Innovation Network found that large enterprises are emulating and learning from technology-savvy, fast-moving start-ups. Key lessons include becoming customer-centric in their thinking, accepting that some projects fail, adopting radical approaches, and disrupting the status quo via technological innovation.

The digital transformation and new ways of working are key in achieving these ambitions. Strict hierarchies and closed-door policies hobble innovation. Enterprises are quickly learning that they should foster a so called Intrapreneurship’ culture, where employers encourage an entrepreneurial approach amongst employees, giving them the freedom to collaborate, contribute ideas and input at all levels to grow the company.

This concept, plucked from start-up culture, is about making employees feel part of the bigger picture. Google, for example, has kept at the cutting edge of innovation by tapping into its employees and letting the ideas filter up.

Entrepreneur-driven market disruption in the technology industry isn’t going to go away. Start-ups can bring significant value to customers faster than you may think.

Some of South Africa’s most innovative start-ups include the likes of Hippo.co.za and Gust Pay. Hippo.co.za is a comparison engine website which saves users time and money by offering multiple quotes to compare, from some of the country’s leading brands. Gust Play marries the ideas of mobile payment, NFC and wearable tech with a wristband that makes mobile payment convenient and efficient.

Looking into Africa, Nigeria also has a thriving start-up market, with names like Konga, Nigeria online megastore and IrokoTV, which has been dubbed the “Netflix of Africa”.

The lesson to be learnt is that enterprises should not rest on their last sale; they should act like start-ups, and ensure they are nimble, customer focused and have their pulse on the latest trends.

Another way of reaching out to the start-up culture is to offer your organization’s experience and knowledge as an incubator for new talent. Orange Fab, for example, is a three-month accelerator program for start-ups with existing product lines, looking for support, funding, office space and distribution opportunities. Partners include Visa, Airbus, Hilton Worldwide and Peugeot Citroen. There are now eight Orange Fab accelerator programs based on four continents.

One of the success stories to come out of Orange Fab is Afrimarket. From the beginning of this year, Orange customers in France could access Afrimarket on their mobiles through Orange Money to make purchases on behalf of relatives who live abroad. The decision to take a minority stake in the company by Orange, reflects its new strategy of funding start-ups through vehicles such as Orange Digital Ventures, which as a budget of €20 million in its first year to invest in minority interests.

Pierre Louette, Deputy CEO of Orange, explained that Afrimarket is a start-up in the development phase with an original and promising offer. “It’s a good example of the type of project that our new Orange Digital Ventures fund is interested in investing in. We’re supplementing Orange’s existing open innovation initiatives, such as Orange Fab.”

South African business incubation models are also on the rise, looking to assist start-ups across markets including tech, agriculture, manufacturing, and sustainability. These include names like The Innovation Hub, Cape Town Garage and SA Business Hub.

The large enterprises that will succeed are those capable of adapting to these disruptive technological influences. This means ditching out-dated mindsets, dated business models and inflexible infrastructure. The clever ones will be able to answer the question “how would we react today if we were a start up?” and be ready to act in the face of digital upheaval.

By Giorgio Heiman, VP Africa, Orange Business Services



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