From Silicon Valley to Swaziland, Rick & Wendy Walleigh [i love reading books .txt] 📗

We advised the honey company not to aggressively pursue supermarkets in Nairobi unless they could really differentiate their honey. Alternatively, we suggested a more regional marketing strategy and perhaps pursuing second-tier stores and informal markets in Nairobi where the potential volumes might be lower and the logistics more cumbersome, but the competition would be less fierce. We also suggested emphasizing the honey-containing, proprietary products that they had developed. We felt these could be differentiated and would face less direct competition. The proprietors thanked us for our advice and, as we left, gave us a bag of mangoes from one of their trees. We also got a sample of the honey-based cough syrup.

As we discussed this business in the car, we concluded that there are a lot of similar small businesses with undifferentiated products. They can typically succeed in a small market with a lot of hard work and personal touch from the owners. Good customer service in a small area combined with personal relationships and supported by hard work allows them to provide enough profits for a decent income. However as those who work in marketing and sales know, to expand beyond this size, these businesses cannot rely solely on the charisma and energy of the owners. At this point they need to have some other distinguishing characteristic and/or unique position in their market if they are to grow. This to me is always the largest challenge to business growth (in any country in the world). I hoped the honey business would succeed and grow, but unless they developed their proprietary products, I saw them quickly hitting a ceiling.

Our visit the next day was to a slightly larger firm with better short-term prospects. The company produced and bottled yogurt for sale to retailers. The company had been started by a young accountant who had waited for it to grow before leaving his accounting job to work full time making and selling yogurt. The company provided twelve jobs. It also benefited small, local farmers by purchasing eight hundred liters per day of their milk output. This milk was pasteurized in a large cauldron in a small shed outside a house that had been the accountant’s home. He had originally set up the business in his home, but when the business grew too large, he and his family moved nearby and let the business take over the whole house.

The yogurt production process was pretty simple and very manual. After the milk had been boiled, it was poured into large containers and the yogurt culture was added, which turned the milk into yogurt. Some of the yogurt had strawberry or vanilla flavoring added before bottling for sale. The bottling process was not what you would see in a large beverage company. Two liter pitchers were filled from the large yogurt containers. The contents of the pitchers were then carefully poured into 300 ml and 500 ml plastic bottles, which would be sold at retail. The bottles received heat seals, which were carefully placed by hand and then affixed with the heat from a common laundry iron. The next step was manually attaching the labels and adding the plastic screw cap. The completed bottles were then grouped into dozens and covered with heat-shrinkable plastic. The plastic was shrunk to fit with an industrial strength heat gun. The employee performing this operation said that the business originally used inexpensive handheld hair dryers, but they wore out too quickly.

The owner said that he had more demand for his yogurt than he could supply, so planned to double his capacity. TechnoServe was helping him to get the necessary financing. I asked about product differentiation. He said that people just liked his yogurt. He thought it might be a little thicker than the large commercial brands. One of his larger competitors was beginning to worry about the competition from our entrepreneur’s increasing sales and thought that his success was due to his salespeople. The competitor hired away all the salespeople at much higher salaries, but it only caused a short-term problem for our entrepreneur, and he kept on growing. He was selling locally as well as to many small shops in Nairobi. It sounded as if the short-term prospects were very good for him. Of course, he couldn’t afford to compete head on with the large dairy products company, but he could potentially grow to a company with fifty employees while purchasing milk from hundreds of small farmers. This was already a success story, and it was growing. It was another heartwarming experience where an entrepreneur’s pursuit of profit was creating opportunity and economic growth, and it helped to reassure us that this was a proven path to helping the poor.

A few weeks later, Fred showed us another success story based on another of TechnoServe’s proven approaches to helping the poor. Fred had been really busy and felt the need to take a weekend break out of town with his family at the Outspan hotel in Nyeri. Fortunately, he invited us to go along and made special plans for us. First of all, he took a circuitous route to Nyeri to show us the variety of Kenya’s terrain north of Nairobi. In this area, the Rift Valley meets the watershed of Mount Kenya and evolves into the plains of northern Kenya. As we drove, the landscape varied dramatically depending on the direction of the view.

Fred also wanted to show us the Nyala dairy, a very successful TechnoServe project that he had initiated many years ago. The “dairy” was actually a collection point for the milk from over five thousand smallholder farmers, each of who had typically less than four cows. The farmers delivered their milk by whatever means they could, such as by bicycle or donkey, to Nyala, where it was weighed and tested for quality before being put into the large cooling tank. Once a day, a large tank truck from a commercial milk producer would pick up the milk from the tank. In this way the farmers were assured of a reliable buyer for their output. Based on their record of milk deliveries, farmers could also access credit to purchase supplies such as feed and veterinary medicines. Dairy programs, such as Nyala, had become a model for increasing farmers’ incomes. Dairy farming is particularly attractive in this respect because, in contrast to seasonal crops, it produces output every day.

It was during the trip with Fred and family, while observing many small towns and varying terrain, that I finalized my concept of the Walleigh Bare Dirt Index of Development, for which I expect to be immortalized in the economic development community. My proposition is that the amount of exposed bare dirt in a community is inversely proportional to its level of economic development. Poor communities have a lot of exposed bare dirt, e.g., parking areas in front of stores, side streets, and even main roads. At the other extreme, the most developed communities, e.g., cities in the United States, have no exposed bare dirt. Every square foot of ground is covered by concrete, asphalt, or deliberately planted grass or shrubbery. There is no bare dirt to be muddy when it rains or dusty when it’s dry. Because poor communities have no money to spend on paving roads and parking lots or planting landscaping, as foot or vehicle traffic increases, the natural vegetation is worn down and bare dirt is produced. As a community improves its economic condition, limited funds begin to go into paving and landscaping, but a lot of bare dirt persists. The amount of bare dirt ends up being proportional to the level of poverty and inversely proportional to the level of development. QED. I’m just waiting for the recognition.

Although Wendy worked on all three Kenya entrepreneurship programs, she spent the majority of her time on Young Women in Enterprise (YWE) sponsored by Nike. This innovative program encouraged young women to become entrepreneurs. It provided training in both urban and rural settings around Nairobi, and participants included both high school students and school leavers (meaning dropouts) some of whom were already mothers. Since the Kenyan economy didn’t generate enough jobs to employ all of the people leaving school each year (either through graduation or dropping out), self-employment was seen as a very viable alternative for achieving an income. The YWE program taught young women interpersonal and life skills as well as about business and concluded with each of them developing a short plan for a business that they would actually like to start. These plans were judged, and some of the most promising were awarded small cash prizes, which could be used to help start the business. The girls in all of the sites had completed their assignments and so TechnoServe teams had been going around to the sites to judge the business plan submissions and award prizes to the best.

As part of her YWE role, Wendy had participated in several of these events around Nairobi, but we had both been asked to participate in an all-day session of judging and awards at our most distant rural site. It was about two hours away over mostly poor roads, some under repair with long diversions over stretches of dirt and gravel. Since it was far away, we had been told to be ready to leave the office by 7:00 a.m., so Wendy and I arrived at 6:45. This being Africa, someone didn’t get the word about the 7:00 a.m. departure, so we waited for her and left at 8:30. We already knew it was going to be a late day, but this would obviously make it later.

After the uncomfortable, but not terrible drive, we arrived at the rural school where we were to have the judging and the awards. The school buildings had local stone walls and mostly dirt floors. The small assembly hall had a concrete floor. All of the windows were just openings in the walls that could be closed with steel shutters. There were no lights in the classrooms. The outhouses were behind the school buildings. The exterior features of the outhouses were unremarkable and the interiors were Spartan, a concrete floor with a rectangular opening.

The TechnoServe team set up our operation as quickly as possible, but we were obviously way behind schedule. There were forty-two girls that we would interview. We had planned to have four panels of judges, but we only had enough of us for three. That meant each panel would have to interview additional girls and that would put us even further behind. We plowed ahead.

The process was that each girl would come into one of the judging rooms, briefly describe her business, and then the panel would ask questions. Evaluating the young woman’s answers and her written plan, the judges would award points based on standard criteria. I had no idea what to expect. Our first contestant had me very worried. She came in, said a few quiet greetings, and sat down. The head judge greeted her and tried to make her feel comfortable, explaining that she could answer in Swahili or English, whichever was easier. Then someone asked her to briefly describe her planned business. She just sat there. After a long pause, the judge tried to coax her a bit, offering a question with a simpler answer. The girl finally uttered a few words. It continued in this way for the next twenty minutes. I’m sure it was painful for her. It was definitely painful for the judges. We hoped that all the interviews wouldn’t be that difficult.

The next girl came in, vivacious and confident. She explained her business and why it was going to succeed. She told us how, if she couldn’t raise all the money she needed, she would start the business in a different way