These are my notes from Oliver Rippel’s talk at NetProphet 2011. Oliver is the CEO of MIH, a group company overseeing African and Middle East online properties like Mocality and kalahari.net.

The state of e-commerce in Africa

• As soon as e-commerce becomes more than 1% of retail sales, that’s when it becomes mainstream
• US not the most successful e-commerce market - Korea is, with 9% of retail sales online. US is at 4%
• E-commerce in Africa is still nascent:
  • Egypt - 22% Internet penetration, less than 0.01% online retail penetration
  • Nigeria - 29% Internet penetration, less than 0.01% online retail penetration
  • South Africa
    • 6 million Internet users, 12% penetration
    • 0.4% online retail penetration
    • 16.7% credit card penetration
    • 14 e-commerce sites in Top 100 SA sites

Positive e-commerce macro-indicators in Africa

• Big average projected real GDP growth
• There is a growing middle class of 320m Africans
• High mobile penetration (World average: 60%; South Africa: 92%)
• The promise of accessible and affordable broadband Internet is there

Lessons for building a winning e-commerce business in Africa

MIH’s focus is on the full e-commerce value chain The brands cover the whole purchase cycle: awareness, interest, decision, action, post sale, resale

• Embrace mobile
• Leverage offline
  • Go where the users are - online marketing on its own simply won’t work
  • Go to shopping malls and put up posters - whatever works
• Cash is king
  • 50m million banks accounts in Africa, 95% of transactions are cash-based
  • The only mobile payment system that is scaling is M-Pesa in Kenya: P2P payments
  • They are converting a cash economy into a digital economy, so that can now also be used for e-commerce
• Build trust
  • Open marketplace model is inadequate in low trust early stage environment - unlike eBay
  • Instead, MIH uses controlled marketplaces that reduce barriers for buyers by building a trusted brand

BlackBerry maker Research In Motion just cut their earnings guidance for Q1 2011, blaming slower sales. Even as the future of RIM looks bleak from a US perspective, you wouldn’t think so looking at the South African market. BlackBerries are simply everywhere. I’ve always wondered why BlackBerry has such a large portion of the SA smartphone market, and I can think of two four reasons:

1. Most BlackBerry contracts come with unlimited free data, which (to my knowledge) no other smartphone handset does at a reasonable cost.
2. When it comes to business users, it’s still the only phone trusted by corporate IT departments.
3. A capable smartphone at a reasonable price (although an influx of cheaper Android and Nokia phones might make this a moot point). (Thanks Steyn for pointing this one out in the comments)
4. The popularity and cost-effectiveness of BBM (although WhatsApp largely takes this away as a selling point). (Thanks Stafford for pointing this one out)

Now, here’s where it gets interesting. The latest earnings guidance cut clearly spells big trouble for RIM, and in a great blog post on Forbes, Eric Jackson lists 10 questions he would ask CEO Jim Balsillie based on that news, including the following:

Your bullish analysts used to say “yes, the US business is dying but International is going to keep growing.” You seemed to be saying last night that demand is drying up in Latin America too.  Does that mean the US was a sign of what is to come for your future International growth?

Now combine that with a recent IDC report that predicts Africa would become the first truly post-PC continent:

IDC estimates that in South Africa, 800,000 PCs were shipped in 2010 and the number is expected to decline by about four percent annually to reach 650,000 by 2015. Meanwhile, 1.3 million handsets were shipped in 2010 and that rate is expected to increase at a compound annual growth rate (CAGR) of nine percent to reach 2 million annually by 2015.

You have to ask yourself: how long can BlackBerry keep its apparent dominance in the smartphone market in South Africa? As mobile demand increases it appears that they will simply be unable to produce hardware that can keep up with consumers’ ever increasing smartphone requirements.

The “How Angry Birds would look on a BlackBerry” joke is funny, but there is certainly some truth behind the joke. As the line between work and life continues to blur, you don’t want a business phone that can also make calls. You want a personalised handset that can also be used for work. This is something RIM simply hasn’t figured out how to do, so they continue to double down on the “corporate security” angle. As Slate recently pointed out in a review of the PlayBook:

The incoherence, I think, is a sign of something deeper: Research in Motion doesn’t know what kind of company it wants to be. It made its fortune selling gadgets to chief information officers””IT guys who wanted to give their employees access to office e-mail on the go, but only in a way that accorded with corporate security policies. When they talk about RIM’s strengths, the company’s leaders like to point to their “CIO friendliness.”

The trouble is, being friendly with CIOs doesn’t matter as much as it used to. Nowadays people don’t ask the tech guy which mobile gadgets pass muster. Instead, tech guys look to employees to decide which gadgets to support. RIM’s strategy””to infiltrate companies as a first step to becoming a mass-market hit””has been eclipsed by the Apple approach, which is to infiltrate schools and homes, and then hope that regular people nag their IT guys to let them use iPads at work, too.

Meanwhile, Nokia appears to have given up on the US, but they’re coming for Africa in full force:

Nokia is already working with developers in several African countries and Peng feels that Nokia’s next big growth opportunity is to go beyond bringing affordable voice and SMS to delivering affordable web and applications.

“Rural populations live their lives largely outside of the reach of high quality services; through solutions like Nokia Data Gathering, we are already supporting field workers to collect, send and receive information quickly and securely via a mobile phone helping circumvent infrastructural challenges and speed up data collections needs in sectors such as health, agriculture, environmental conservation, population census and emergency services,” added Peng, in a press release sent after her speech.

It might not happen in the next few months, but I think there is a dangerous trend on the horizon for RIM. Between mobile handset growth in SA, trouble in the US market, and huge competition on the way, there’s a perfect storm brewing in BlackBerry land.

In one of his characteristically brilliant essays, Paul Graham recently wrote:

I think most people have one top idea in their mind at any given time. That’s the idea their thoughts will drift toward when they’re allowed to drift freely. And this idea will thus tend to get all the benefit of that type of thinking, while others are starved of it. Which means it’s a disaster to let the wrong idea become the top one in your mind.

The importance of focus in a startup, or any other business for that matter, is such a basic principle that no one disagrees with it, but it is still such a difficult thing to get right.  One of the reasons is that you don’t want to stifle innovation, and some of the best ideas can come from a completely random project you went off to do in your spare time.

Whatever your feelings are about side projects that take you off your main focus, it is important to recognize them for what they are: distractions.  This doesn’t necessarily mean it’s bad, but let’s call it what it is — these projects distract you from your “top idea.”

For the products I’m responsible for at Yola, we have name for such distractions.  We call them “squirrel projects.”  If you’ve seen the movie Up, you’ll probably immediately know what I’m talking about.  If not, here’s a refresher:

I don’t think “squirrel projects” need more definition than that video…  So, when one of your team members go off on a sometimes-random-but-always-guaranteed-to-be-cool tangent, it’s important to do two things:

• Call it out as a squirrel project
• Determine whether or not it’s a squirrel worth hunting

Figuring out if it’s a squirrel worth hunting depends mainly on:

• The timing of the project
• The potential value of the idea

I’d say that 2 days before release day is a pretty bad time to go squirrel hunting.  But what if you’re in the beginning of a sprint and something great comes along?  Adjust.  Reprioritize. Throw some things on the backlog, and make room.  Because sometimes, it’s worth it.

It’s also important to note that “value” doesn’t necessarily mean immediate ROI.  There are different ways to get value out of a squirrel project.  Sometimes it’s the potential for revenue down the road.  Sometimes it’s the time spent now on automation tasks that will save you a bunch of time later.  And sometimes, it’s just plain cool (two words and a hint for something you should try on Yola: Konami Code).

Squirrel projects aren’t bad.  But they can be devastating to your focus and momentum if they happen at the wrong time, and/or they have no potential for value.  So go hunt the good ones, and let the bad ones go.

I’ve been thinking about Evernote and Dropbox, and the characteristics that make them successful freemium businesses.  Of course, a lot has been said about freemium, and Ning’s recent decision to drop that business model has placed it under renewed scrutiny.  But I don’t think it’s time to bury freemium just yet.  I wanted to write down some quick thoughts on what I believe are three essential characteristics of a successful freemium business:

1. Be patient with users.  Evernote’s cohort analysis shows that initial conversion rates are at about 1%, but once users have been with the service for 18+ months, that jumps to 4% — more than enough to be profitable.  And it’s not actually a bad thing to have free users for that long — at that point they are so invested that they’re not going to take their data elsewhere.  They know and love the product, so when they hit the storage limit, they’re comfortable with paying.
2. Have a natural (and inevitable) path to upgrading.  With both Dropbox and Evernote, if you use the product long enough, you’re going to have to upgrade — at some point you’re going to run out of storage.  If you don’t have a natural path to upgrading you need to create one, or you’ll find yourself in trouble.  Users will use your free product for forever and be happy with it.  You need to make it inevitable that a certain % users will hit one of your limits.
3. Have a great free product.  It might sound contradictory, but if your free product sucks, the switching cost will be very low.  Dropbox and Evernote are successful because users love the free product, so when they run up against the limits, the decision to pay is an easy one.

To put it another way, I think that to be successful as a freemium company you need to (1) have a free product that users love, (2) be ok if those users don’t convert to paying customers for months, but (3) make it inevitable that at some point, they will have to upgrade if they want to keep using your service.

If you haven’t seen these great talks on freemium, I highly recommend you invest the time to watch it - very informative:

• Dropbox CEO on Startup lessons learned
• Evernote’s CEO discusses how to make freemium work

Hey, South African tech industry?  Meet me behind the rugby field at 15:00.  We need to talk.

I’ve been back in South Africa for 3 months now after 6 years working in Silicon Valley, and I think I finally figured out what’s been bothering me about the tech industry here ever since I got back.  The problem is that we have some serious Goldilocks issues going on right now.

This one is too cold

The first problem we have is a severe inferiority complex.

Remember: just because we’re not in Silicon Valley doesn’t mean we don’t know what we’re doing.  Like Morpheus says in The Matrix: “Some things are true whether you believe in them or not.”  We’re good at what we do.  We’re really good.  Why does it matter if anyone knows it at this point?  They will, soon enough.

I know that many of those dudes in San Francisco treat us like the little brothers of the world — adorable but not to be taken seriously.  But that doesn’t mean we have to grovel.  Who cares what they think?  Haven’t you heard?  Silicon Valley is dead.  You can be brilliant anywhere.  So we might as well be brilliant in the most beautiful place on earth.

This one is too hot

But we also have a second problem.  Some of us tend to overcompensate.  You see, since we have this inferiority complex, there is a danger in wanting to “show them a thing or two.”  So we livetweet from events that we’re not attending.  We write reviews of products we haven’t seen.  We fight about what the definition of a startup is, as if that matters.  We show up at conferences and give talks on who we are instead of what others can learn from our experience.

No, not cool.  There is no need to overcompensate.  We have some very unique skills, and we have the benefit of the element of surprise.  No one thinks the next Facebook is going to come from South Africa.  Let’s keep it that way — don’t let them know we’re here!

This one is just right

But there is an alternative.  We can make great products, build great companies, and take over the world without anyone even knowing where we’re from.  Does it matter where WooThemes are from?  It matters to us.  It doesn’t matter to anyone they sell their products to.

So, please.  Stop being apologetic about our skills.  Stop wishing we were Silicon Valley.  Stop pretending to be in Silicon Valley.

Instead, follow Seth’s advice.  And forgive me for quoting verbatim, but no one says this better than him:

Yes, I know you’re a master of the web, that you’ve visited every website written in English, that you’ve been going to SXSW for ten years, that you were one of the first bloggers, you used Foursquare before it was cool and you can code in HTML in your sleep. Yes, I know that you sit in the back of the room tweeting clever ripostes when speakers are up front failing on a panel and that you had a LOLcat published before they stopped being funny.

But what have you shipped?

What have you done with your connection skills that has been worthy of criticism, that moved the dial and that changed the world?

Go, do that.

There is a very interesting and healthy debate going on in the Agile Development world about Minimum Viable Product (particularly in startups).  Before I get into the topic I’d like to address today, I just want to do some positioning and say that in this debate, I currently (but am open to being convinced otherwise) side with writers like Andrew Chen (read his excellent post, Minimum Desirable Product) and Jason Cohen (read Releasing Early Is Not Always Good? Heresy!).  The other side is represented by posts like this one by Jeff Atwood: Version 1 Sucks, But Ship It Anyway.

While the debate is still ongoing, I’d like to write about a very specific related aspect, namely product development process (and those of us who would like to argue for fairly strict compliance to it).  Two recent blog posts address the topic of compliance directly, and I wanted to reference them and then write a quick response on why I think process is so important, especially in agile development.

The first is Seth Godin’s Dancing with entropy.  His rant on compliance actually inadvertently includes a pretty good description of what Product Managers do:

People are often paid to enforce compliance. The job is to ensure that everything is in its place, that errors are zero, that things are delivered on time and as expected. The random event is a problem, something to be feared and extinguished.

His main point seems to be that you should embrace the unknown, and “dance with it”:

Most people, though, the ones with great jobs, are in the business of dancing with entropy, not creating it. Take what comes, sort it, leverage it, improvise and make something worthwhile out of it.

I’m assuming he refers here to the definition of entropy as “a measure of the disorder or randomness in a closed system.” This is a great sentiment and we should all be able to deal with the unknown, but in practice, creating Ordo ab Chao during development can only happen effectively with proper product process behind it.  You can’t dance with entropy without bug tracking, if you catch my drift.

The second is a post by Aslam Khan entitled Forced compliance is an obstruction to discipline.  I respect him a lot for his forceful call for self-discipline in development, and I don’t doubt his sincerity at all when he writes:

Surely, we have learned enough from spectacular failures that governance does not give people an opportunity to exercise self discipline. When you give a person a chance to develop personal discipline, then forced compliance is unnecessary. With forced compliance, we force people into ignoring their own discipline because the system will “sort” it out for you. It breeds an attitude of “the system failed me and it’s not my fault”.

This is an ideal situation, and I agree with Aslam that personal responsibility is an essential quality for any developer — and PM, and designer, and human being, for that matter.  But personal responsibility is just not going to get you all the way there.  And by there I mean a product that is successful in the eyes of the company and its users.  I’m not arguing for the perfect product — there is no such thing.  But there is such a thing as desirable products that work the way they are supposed to and meet customer needs.  And for that, you need more than personal responsibility.

It is a mistake to think that process/compliance slows down development or inhibits innovation.  Compliance puts boundaries around what is within scope, and allows you to know when the product you’re working on is ready to launch.  Compliance also doesn’t mean that you don’t trust your team, or that you think people aren’t capable of working on their own.  It’s not about keeping tabs on people, it’s about making sure the product doesn’t get out of control.

By compliance I don’t mean an inability to roll with the punches and remain agile, but that a certain degree of process is needed.  In an earlier post on the software product development lifecycle I go into more detail on what I believe is a good process for product development.  I also discuss three outcomes recommended by Pragmatic Marketing: Requirements, Functional Specifications, and Technical Specifications.  I do believe we need this level of process, and compliance to it, to build great product.  We should embrace it, not fight it.  You know, dance with it.