Disruptive innovation from an internet probox

 

Social networking concept. FILE PHOTO | NMG 

By DAVID J. ABBOTT
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“While you see a few Bentleys in Nairobi, it’s the Probox that really moves the economy”, observed Andy Halsall, CEO of Nairobi-based Poa Internet.

Just as Equity Bank  focussed on the unbanked, the big financial institutions ignored, Poa seems on the verge of doing the same thing in providing internet connectivity.

With a vision to bring internet to every home in Africa, Poa Internet aims to connect the underserved communities of Africa, improving lives through unlimited access to knowledge and opportunities.

What can we learn from this innovative disruptor start-up?

While others may have seen the opportunity, and choose not to pursue it, Poa Internet acted on what others failed to notice, walking to the beat of a different drummer.

A revelation came to Halsall, a computer science student and London Business School alumni while working for Fon, a Spanish firm that was rolling out large internet networks for leading telecoms like Deutshe Telekom -- that with a dash of imagination -- the cost of internet access need not be so high.

Staring in 2015 in the UK, Poa Internet began its Kenyan operations in 2016 with a focus on the vibrant, once informal settlement of Kibera. While most internet providers start with serving the more affluent, that can easily afford the service, Poa had a very different mindset.

It began in lower-income areas, other internet providers choose not to focus on. And, in the process, hired many of its 100 staff from those same locations. Today Poa offers unlimited home internet at a cost of Sh 1,500 per month, at about a third of the cost of the competition.

Plus, their now 12,000 customers get unlimited access to 10,000+ poa! hotspots for free, when they're on the move.

When compared to, for example, North America or Europe, Kenyan internet access is relatively expensive, in the range of Sh 100 to 200 per 1 GB [roughly $1 to 2] where say in the US it would be Sh 30 to 40 per GB.

While traditional providers like Safaricom  and JTL have to roll out an expensive ‘last mile’ fibre network to the customers’ doors, Poa was able to reduce costs, by using a different technical solution using radio wave technology, that normally has been used to provide internet access in rural areas.

Not an easy task, Halsall and his team have over the last five years been working on a learning curve to adapt the ‘rural technology’ to urban Nairobi, by perfecting the equipment and software to deliver high-quality internet, while keeping costs at a minimum.

And the winner is …

The turning point for Poa came in 2020 when it applied to Africa 50 Infrastructure Fund [established by African governments, including the African Development Bank in an innovation challenge asking applicants to provide solutions on how best to roll out affordable internet across the continent].

Out of the 750 that applied, in November 2020, Poa won a cash prize from Africa 50, which led to the infrastructure investment platform to recently inject a largely equity investment of $28 million in the Kenyan start-up, that Halsall expects to break-even “in the next couple of years”.

This is in addition to the initial investment in 2016 and 2018, and more recently, from the Nairobi-based private equity investor, NovaStar Ventures, that will now allow Poa to roll out their services more widely both across Kenya and into the rest of Africa.

When asked about threats from the ‘big players’ competition, Halsall has a different perspective, seeing the large incumbents like Safaricom, Telkom and Airtel as partners, who all work together to provide much-needed products and services in the internet ecosystem.

Facing the innovator's dilemma

What can we learn from the success of this Kenyan start-up? Poa’s approach is right out of the pages of the Innovator’s Dilemma, Clayton Christensen classic on how innovation really happens, first published in 1997, [three years before scaled up internet access came to Kenya].

As Christensen points out, disruptive innovators, almost always come from the most unexpected places, very rarely from large dominant corporate players, who although they have the financial and operational resources, and staff with the knowledge and skills, they are too busy focussing on their already profitable markets, and with pressure from their shareholders to produce even greater profits, keep doing, what they have always been doing.

Disruptive innovators -- like Poa -- focus on markets that the large dominate players see as too small a market share and as a result: unprofitable. After all, if you were going to roll out an internet service offering, do you focus on sedate tree-lined Muthaiga with Bentleys in the driveway, or noisy bustling Kibera where ‘Black Mamba’ bicycles ply the lanes.

Not the obvious

Being an innovative disrupter is counterintuitive, and that’s the dilemma. Focussing on the traditionally profitable markets is not likely the place where one will be forced to be ingenious and resourceful [as opposed to resource rich] to really come up with an imaginative solution.

If you are doubt, just look at the humble origins of both Apple and Amazon, both started in a garage, and began in niche markets, big players did not notice.

Innovative disrupters generally begin in the thought to be unprofitable markets, and gradually perfect their product offering, and gradually move up the value chain to more lucrative markets.

In the case of Poa, this was all the time spent since 2016, adapting the internet radio wave equipment to the Nairobi setting, continually tweaking the software, and scaling up the venture.

With no large multi-storied offices, Poa operates from an administrative office in Lavington, with stress on having most of the staff out in the field, delivering low-cost internet access to customers.

In architecture, form follows function. In business, structure follows strategy. In other words, you first decide on the distinctive approach and structure the company to best fit. Poa had the vision to see the infrastructure required for cost-effective internet connectivity differently, which allowed them to pursue a Kenyan homegrown strategy to connect people to the alternate universe of knowledge and business.

In speaking with Andy Halsall, one gets the sense he has his soul invested in Poa’s success. Reminds one of what the founder of IBM, Thomas Watson said: “To be successful, you have to have your heart in your business, and your business in your heart.”