Future Africa Blog

Lessons From the Developing World - Part 2

**This is the second part of Lars Stork’s Wall Street Journal interview where he talks about business strategic planning tips.

Security at base stations was a major concern. Vandalism and theft of equipment was common, even after Celtel posted armed guards, recruited from the community and elsewhere.

Mr. Stork realized that he was fighting a losing battle and needed to enlist the help of people in the communities Celtel aimed to serve. “Working with local people is the only way to succeed in rural Nigeria,” he says. “They understand the local dynamics and know how to survive in what can be an extremely challenging environment.”

Celtel initiated a franchising program, recruiting small-business owners to act as its exclusive representatives in their communities. The entrepreneurs are responsible for marketing and distributing Celtel products and services, and for basic maintenance and security at the base stations. Celtel recognized that its partners didn’t need experience in the mobile-telecommunications industry. More important was basic commercial acumen, entrepreneurial spirit and a deep understanding of how to manage the local environment.

By the end of 2008, the Celtel network had grown to some 650 franchisees in the deep rural regions of Nigeria, and the average franchised site produced a 160% return on original investment within a year of launch. Sales by franchisees of recharge vouchers—a form of prepaid air time—exceeded the company’s initial forecasts by more than 120%. Vandalism and theft have all but disappeared in regions with high levels of franchisee site supervision.

Other companies have discovered the importance of local partners in slums and conflict zones.

The Power of Partners

The Opportunity: Hundreds of millions of potential customers live in urban slums, isolated rural areas, lawless regions and battle zones in the developing world.

The Challenge: These environments often lack functioning legal systems, theft and violence are common, skilled workers are hard to find, and poverty and distrust are among several factors that make marketing difficult.

The Key to Success: Companies operating in these areas need to find local partners to help guide their operations and develop strategies unique to each market. To sustain success, companies need to support the development of their employees, partners and the broader community.

Vodafone Essar Ltd., an Indian unit of the U.K.’s Vodafone Group PLC, serves the slums of Mumbai, some of the most populous shantytowns in the world, with partners chosen from among the local businesspeople.

“The people we work with know the slum,” says Naveen Chopra, Vodafone Essar’s chief executive of Mumbai Circle. “They might be tailors or fancy-good shop owners or outlets selling day-to-day consumables. We cannot simply walk into the slum as Vodafone and start doing business, given the intricacies. But these local businesspeople already run businesses in this market, and we wanted to benefit from their wisdom.”

Growing Together

Companies that have succeeded in these environments also realized that local partners were crucial not only in establishing their operations but also to building their business.

In Nigeria, the 25 entrepreneurs who became Celtel franchisees in the first phase of that program helped define the responsibilities of franchise holders and suggested ways they could fulfill their roles more effectively. For instance, at the suggestion of one pilot franchisee, Celtel provides four or five motorcycles to each franchised site to help franchisees deliver more-efficient servicing of surrounding villages. Many franchisees have also started to offer installment financing and barter deals for cellphones, an extension of established local commercial practices.
In Mumbai, Vodafone’s partners helped Mr. Chopra solve a fundamental problem: the difficulty of beaming cellular signals into the inner reaches of the city’s sprawling slums. The density of housing in the slums makes it impossible to erect the same sort of network of transmission towers used to serve other areas.

The company first tried beaming its service into the slums from surrounding buildings, but that failed to achieve coverage deep inside the slums. Then a large retailer interviewed as a possible distributor suggested a new approach: recruit large retail outlets around the slum to sell the company’s products and services—and also to hoist mini-transmitters above their shops. The retailers would be responsible for the security and basic maintenance of the transmitters.