Lessons for brands in Safaricom’s new SME consultancy

A mobile subscriber withdraws money from an M-Pesa. The launch of the mobile money service in 2007 has spurred growth of Safaricom. PHOTO | FILE 

By  Silvia Mwendia

In Summary

• Telco giant’s launch of new products is carefully calculated to cement its market leadership.

Last week, telecoms giant Safaricom launched ‘Ready Business’, a new business solution for small and medium enterprises (SMEs) that sees the telco giant enter consultancy to drive future growth, in a key strategic move to create a position in a new high-growth market.

The new business solutions will see Safaricom provide SMEs advisory and technology services. It will work by ranking an SME’s processes against best global practices, offering a consultant to fill in and advise on the identified gaps, and solutions that also span voice and data bundles for both mobile and fixed lines, and M-Pesa payment solutions.

These services are expected to help SMEs tackle their communication challenges.

“The ‘Ready Business’ platform seeks to empower SMEs to become competitive, efficient and help them deliver better experiences for their customers through the intelligent use of technology,” said Rita Okuthe, director, Safaricom Consumer Business.

Over the years, Safaricom has grown to achieve market dominance in both telecoms and in financial services through its M-Pesa product.

According to the Quarterly Statistics Report Second Quarter for the Financial Year 2015/2016, Safaricom leads the market in the number of mobile subscriptions at 64.7 per cent and the same goes for voice, messaging and data.

In mobile money, the brand leads with the value of their mobile commerce standing at Sh253 billion in December 2015, far ahead of the Sh12 billion posted by Airtel Money, which came in second.

Thus, the secret to Safaricom’s outstanding performance has been growth in the telecoms market, followed sequentially by a rise in the financial services market.

On this basis, the ‘Ready Business’ comes as both an extended marketing tool in providing consultancy to SMEs that highlights their needs for Safaricom products, and an entry into a new sector of business consultancy.

It’s a portfolio strategy that aligns strongly with the findings encapsulated in the Boston Matrix, a product portfolio management and analysis tool, developed by Bruce Henderson, founder of global consulting and management firm, Boston Consulting Group (BCG).

The Boston Matrix was designed to help companies “decide which markets and business units to invest in”, according to an article by Martin Reeves, Sandy Moose and Thijs Venema in a 2014 article titled “BCG Classics Revisited: The Growth Share Matrix” and published on the website BCG Perspectives .

The matrix was based on the factors of company competitiveness and market attractiveness “with the underlying drivers for these factors being relative market share and growth rate”.

Problem child

In their 2014 article, the three authors explain the reasoning behind the Boston Matrix.

“The logic was that market leadership, expressed through high relative (market) share, resulted in sustainably superior returns. In the long run, the market leader obtained a self-reinforcing cost advantage through scale and experience that competitors found difficult to replicate.”

The matrix is divided into four quadrants on a market-growth (vertical axis) versus market share (horizontal axis) that explain the product life cycle. In the first quadrant is the ‘question marks’ or ‘problem child’.

Here the market growth is high, but the market share of each participant is low — everyone is a beginner at this stage in a new or emerging market, such as SME services in Kenya.

It is advised that these business units should either be concertedly invested in, or discarded, depending on their potential of moving into the second quadrant called ‘stars’.

In the stars phase, products experience high growth and move to achieving a high market share.

According to the Oxford Learning Lab, a subscription video streaming service providing marketing knowledge, stars should be invested in so as to maintain their leadership status in the market.

Next up is the cash cow. Here, the market growth is low, but the market share of key firms remains relatively high.

“These units usually generate cash in excess, but opportunities or new investments are limited, due to the low growing market,” said Oxford Learning Lab.

Cash cows should be milked by using the money made to sustain stars, and invest in new product development and grow problem children that have the chance of becoming stars.

Strategic path

The last quadrant is the ‘dog’ or ‘pet’. In this phase, the product is in a low market growth and it has a low market share.

“Pets’ are essentially worthless and should be liquidated, divested, or repositioned given that their current positioning is unlikely to ever generate cash,” said Reeves, Moose and Venema.

Whether Safaricom is applying this matrix intentionally or not, its strategic path to date has demonstrated the application of investments that open up new market segments for the telco.

Such moves a key to long term brand success, in that firms never know when saturation could hit their current market, according to Mudit Sharma, a project manager at Dalberg-a global development advisory firm.

“We can never be a 100 per cent sure about what is their exact motivation, but it seems that it is a good approach. Even if their market has not hit saturation point and there is potential for growth, every company has to pursue new markets and new segments,” he said.

However, the business environment today is not what it was in the 1970s when the matrix was developed bringing into question the relevance of this strategy three decades later.

As Reeves, Moose and Venema write in their article, today’s marketplace moves faster and is more unpredictable. Data also indicates that “market share is no longer a strong predictor of performance.”

In an analysis of publicly listed companies from 1980 to 2012, BCG discovered a collapse in the relationship between relative market share and sustained competitiveness.

- African Laughter