Rob Katz

How to leapfrog? Look to the black market

Regular NextBillion readers won’t be shocked by a recent AP news article about cell phone use in Africa. It’s even been noted as a “worldchanging” leapfrog technology – and rightly so. However, this article sticks out from the rest when it analyzes why cell phones came from nowhere to become a huge business and a big BOP friendly technology:

“The mistake, providers say, was to make plans based on GDP figures,which ignore the strong informal economy, and to assume that becauseland line use was low, little demand for phones existed. Thereal reason for weak demand was that land lines were expensive,subscribers had to wait for months to get hooked up, and the linesoften went down because of poor maintenance, floods and theft of coppercables. Cell phones slice through all those obstacles and provide African solutions to African problems.”

WRI research has shown that GDP and other formal economy data tend to underestimate the buying power of the poor by up to 50 percent. Taking the informal sector into account, the BOP isn’t so “B” anymore – which means that cell phones are just the start. Businesses that understand data aren’t always the most accurate picture of the market can do what Celtel, Safaricom, MTN, and others have done in Africa: profit by serving previously ignored markets.

(HT: Jeremy Faludi and the WorldChanging team)