Wednesday, November 4, 2015

How Lean Startup Helped Serve Communities in Kenya

Guest Post by Jennifer Maerz, Contributing Editor of Lean Startup Co., with Kirsten Cluthe as Contributor.

Here’s the thing about The Lean Startup methodology. It isn’t just for use by one industry, or one staff size, or even in any one country. Our customer-first, rapid trials-rapid discovery ethos is adaptable to all varieties of mission driven, enterprise, and startup companies around the world.

At The Lean Startup Conference on Nov. 16-19 in San Francisco, innovative thought leaders from around the globe will offer examples of the remarkable changes they’re making across industries using our simple methodology. And yes, we’re very excited for you to meet them all.

As we lead up to the big day, we’re spotlighting speakers who’ll be involved in our hands-on workshops, lightning talks, keynotes, interactive breakout sessions, and other learning and networking events.

First up in our speaker spotlight series is an edited transcript of our Q&A with Rocio Perez-Ochoa, co-founder of Bidhaa Sasa, a non-profit working to distribute beneficial goods to rural communities in Kenya. She will be offering her startup story in an afternoon breakout session on Tuesday, Nov. 17. The Lean Startup method helped Rocio and her co-founder get their idea off the ground, and to continue to grow this important business. She revealed the key things she’s learned in the evolution of her organization.

The inspiration for Bidhaa Sasa? Fix the distribution bottleneck in rural Kenya.
“My business partner and I [previously] worked in East Africa with companies that provide energy solutions to people living without electricity. In some countries, like Kenya, the vast majority are not connected to the grid because there is no grid. This is especially true in rural areas. There are a few technology companies developing small, mostly solar-powered solutions to help people [get] electricity in their homes.
“We felt very frustrated because we could see how households were still living in poor conditions despite companies working to developing technology solutions for them. “There are many gadgets out there that could help ordinary rural families improve their lives — goods like solar equipment for lighting and electricity, water filters to drink clean water with, and stoves for healthier cooking do exist.
“Most companies were focused on the tech and very few even admitted there was a distribution bottleneck. So we decided to set up Bidhaa Sasa to try to understand why these goods don't reach the ones who most need them.”
They aimed to understand the user before worrying about the technology
“Many of the tech businesses we met in East Africa were ‘back to front’: the technology seemed to be at the centre, not the user. Businesses were focusing on inventing new products and tech almost for the sake of it. Managers did not seem to really understand the users' pains and the way they currently go about solving their problems.
“In mid-2014, I re-read The Lean Startup and suddenly things started to make sense. I could see why so many tech businesses I was very familiar with were going nowhere and why they were making similar mistakes.

“The customer development theory was an eye opener and gave us the final push to launch this venture. It makes so much sense to design a business around the customer instead of the product.”

Don’t get into a “startup mindset.” Instead, get into your customers’ mindset.

“Sometimes it was difficult to abstract the core ideas from [The Lean Startup] theory, to remove the Silicon Valley/high-tech component in most of the examples in book, and to apply these ideas to our very particular context. But we did not waste any time worrying about the practical things of starting a new company (and in Kenya, everything is harder than in your average developed country). We went straight into customer discovery. We spent around six months running surveys and meeting prospective clients. We first ran a problem discovery exercise and then a solution presentation one.
“Our MVP is a service MVP. We offer a small range of technology goods (a solar lamp, a solar system, a cook-stove, a radio, and a mobile phone) on credit. We deliver the goods to clients' doorsteps no matter how remote they think they are. We also educate the users on how to best use the goods, we install the solar systems in people's houses, and we manage the product warranties.
“We want to be known as a client-centric company that responds quickly to our clients' needs and aspirations. One pending feature is adding a TV to our range, since that's the top aspiration for most of our clients.”
Bidhaa Sasa moves at the pace of its client’s needs, not some board member’s desires.
“There is always a temptation to move faster because, oh yes, we are selling. Our clients are honoring their debt and are quite technology savvy. This is not a surprise to us because we are selling to early-evangelists, who by definition are early adopters.
“It is sometimes difficult to slow down things and focus on learning rather than on P&L and operational issues. We could streamline operations with fancy equipment, like tablets instead of pen and paper, but that would not speed up our learning.
“The most important challenge for us is understanding our customers. One can imagine the gulf between us, the founders, typically middle-class first-world producers, and our clients, who are subsistence farmers. We are not even Kenyan, and know nothing about farming.
“Test-selling to early-evangelists is helping, but we are barely scratching the surface of how life in villages is organized. What is the decision process inside a family? What level of risk are these low-income families able to take? Why do they even buy from us?”

They want to understand the role of community in a person’s purchasing power, which is crucial to their business model.  
“One of our key problem hypotheses is the lack of credit available to an average rural family. They don't have stable incomes, they don't have bank accounts, and they are barely consumers. If one does not make these technology goods affordable, very few will ever buy them.
“So we decided to offer payment plans. But will clients pay on time given their low-income status?
“Our bet is that life in a village depends heavily on others and that the social network is intrinsic to it. We also believe that any head of family, no matter how poor they are, will always try to find ways to improve the lives of their dear ones.
“To test these hypotheses we created a way to sell on credit to a group of people rather than to individuals. The members can help each other if someone has problems with the repayments.
“This experiment is crucial for us and we hope that we will learn from our initial groups how influence works in practice in villages, [as well as] who are the leaders and the followers. And to what extent is social cohesion really responsible for our current zero default rate — or is it pure luck?”
Next steps for Bidhaa Sasa: depth of customer knowledge over geographic expansion
“For now we don't have any plans for expansion. I am much more inclined to go for depth rather than spread. There are literally hundreds of thousands of potential family clients in our region in Western Kenya.
“We don't look at expansion for the sake of it because of what we have seen many times in this part of the world: companies with new products or services have a tendency to spread themselves very thin. I think [that’s] because they are chasing the early adopters from one region to the next, even across countries.

“That is all good if you have the resources, but I don't think you can have a long lasting business if only early adopters ever buy your product or service. All you are doing is postponing the tough problem of crossing the famous chasm.”

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