Bharti Airtel and Africa
I have spent the past five years researching and advising mobile network operators in India and Africa, and like many other industry observers I have followed Bharti Airtel Limited’s recent acquisition of the sub-Saharan African assets of Zain Group with great interest. The acquisition raises many questions; both about the impact that the entry of a major Indian mobile network operator (MNO) will have upon competitive dynamics on the African continent, and the business model that Bharti will choose for its African operations. Manoj Kohli, CEO and Joint Managing Director of Bharti Airtel, once declared that the Indian model “is great for all emerging markets”. But is the true?
There is no doubt that Bharti Airtel is a highly professional and well managed company – its track record of success asserts to the fact. If its “volume” operator model can be adapted for sub-Saharan Africa then it offers the potential to significantly disrupt the status quo, especially in large and increasingly competitive markets where Airtel is the challenger – as was the case in India after the entry of Reliance Infocomm in the early 2000s.
But if the company decides to migrate its home-market model to Africa it will need to acknowledge that the way skills and activities have evolved and been divided between different firms within the mobile telecoms industry value chain has occurred in a locally specific manner in India and sub-Saharan Africa, underpinned by significantly different socio-demographic, regulatory and competitive conditions.
While Bharti Airtel’s Indian model has the potential to work in some large African markets (Nigeria being the most likely case), success would still depend upon the degree to which co-specialized partners could be brought in, already exist or could be developed. It would also depend crucially upon the ability of Bharti to transform established distribution approaches – no small task in markets such as Nigeria and Kenya where it faces negative network externalities in its battle against MTN and Safaricom respectively.
But the “volume” model would likely struggle in markets with small populations and/or very low population densities, or in markets where it is prohibitively expensive, time consuming or socio-politically difficult to build the complementary ecosystem of vendors and partners that underpin the Indian approach. In the latter case, Bharti Airtel would have to prove that it is better than the established firms at playing their own game, and that could well prove a daunting proposition.
Welcome to the Blog Discussing Complex Operating Environments
As the world enters a period of economic instability there is a pressing need for companies to identify new horizons of growth. But looking for growth through incrementally improving existing products and services in mature industries in the developed world appears a bleak prospect, and firms will need to take more radical steps to strategically innovate. Strategic innovation involves finding new customers: “new whos”; new products or services: “new whats”; or new ways of promoting, producing, or distributing them: “new hows”
Based on my research, I believe that opportunities for strategic innovation can be found in some of the most unlikely markets – what we call complex operating environments. I have identified three specific kinds of complex operating environments – conflict zones, urban slums and deep rural areas of the developing world – and would liek to discuss the success criteria for firms to survive and thrive in these new market spaces.
I have found that strategic innovation in complex operating environments differs in a number of ways. Success in complex operating environments is not about locating “new whos”— indeed, there is plenty of latent demand for products and services in these markets. Nor is it about inventing “new whats”, but primarily providing access to existing products and services that have been largely inaccessible to consumers. It is, however, about creating “new hows” – but not so much in order to differentiate how you compete. Rather, it is about establishing the foundations for an efficient and sustainable operating approach through what we term the 3Cs: Cooperation with local partners, Collaborative development of business models and Capability Building for sustainability.
Do you have experience in 'complex operating environments'? What do you think it takes for a company to thrive in conflict zones, urban slums and deep rural areas?
