Thursday, April 3, 2014

Why IBM's Watson Cognitive System Could Be More Successful in Africa than in America

Last month, IBM launched "Project Lucy", a 10-year initiative to bring Watson and other cognitive systems to Africa in a bid to fuel development and spur business opportunities across the world’s fastest growing continent.

Cognitive computing systems learn and interact naturally with people to extend what either humans or machine could do on their own. They help human experts make better decisions by penetrating the complexity of Big Data.

Watson is a cognitive system that became famous with its 2011 win in a contest against two of Jeopardy's greatest champions.  Jeopardy is an American television game show that features a quiz competition in which contestants are presented with general knowledge clues in the form of answers, and must phrase their responses in question form (Wikipedia). For example when proposed with the following clue: “It’s the only American state lying south of the Tropic of Cancer”, the answer should be the question leading to that clue: “what is Hawaii?”.

The Watson win is sometimes compared to another IBM technology victory between IBM’s Deep Blue system and world chess champion Kasparov in a televised chess game, yet the Watson win was quite different. Deep Blue was a "brute force" system programmed to anticipate every possible answer or action needed and that could examine 200 million chess positions every second. Watson instead was trained using artificial intelligence (AI) and machine learning algorithms to sense, predict, infer and, in some ways, think using a large volume of data. Watson had access to 200 million pages of structured and unstructured content consuming four terabytes of disk storage. The sources of information for Watson included encyclopedias, dictionaries, thesauri, newswire articles, and literary works. Simply put, Deep Blue was the math whiz while Watson is an English major.

While the Watson – Jeopardy contest was showcased as human intelligence against machine intelligence for publicity reasons, the purpose of cognitive systems like Watson is really to have machine intelligence assist humans in taking on challenges together and achieving more than either could do on its own. For example Watson enables more natural interaction between physicians, data and electronic medical records through its highly sophisticated question-and-answer technology, and it helps physicians make more informed and accurate decisions faster and to cull new insights from electronic medical records (EMR). It does so by accessing and analyzing massive amount of data (Big Data) of medical information that one human being could not possibly memorize and analyze, even more so when one considers that 10 million new pages of medical information are published each year.

After Watson’s win in the Jeopardy game, IBM has been struggling turning the technology into big business and it has not delivered significant revenue for IBM yet. So, could Watson be more successful, and valuable in Africa?

I see several reasons why it could be.

The lack of data, and particularly reliable data, in Africa is hampering its development. Shanta Devarajan, the World Bank’s chief economist for Africa, struck a dramatic tone in his address to a conference organized by Statistics South Africa, calling the state of data collection on the continent “Africa’s statistical tragedy.” The lack of reliable data on Ghana's performance on the MDGs was identified as one of the major challenges facing the country’s development projects. In Kenya, lack of data hampers national economic and developmental planning. Better geospatial data access would be good news for the globe's poorest people, who are often worst affected by natural disasters. Access to historic data about market prices of crops, which show trends in crop price fluctuation, would enable better decision making on which crops to plant to yield the highest income.

The digital data scarcity described above is also the result of a "chicken and egg" situation. On the one hand there is little data available. Most data in the region is available in analog format (on paper) as opposed to digital format making it difficult to be analyzed by computer systems and cannot easily be transformed into valuable, actionable information. This is the case particularly for small and medium sized enterprises (SMEs) in the private sector as most of their business processes are still manual. On the other hand, people and institutions are not building their capacities in data analysis and statistics because of the data scarcity and the human capital, such as analysts and statisticians, is missing.  

So the first value of IBM’s project Lucy is to break that chicken and egg problem by making one of the best cognitive systems available in Africa. Big Data technologies have a major role to play in Africa’s development challenges: from understanding food price patterns, to estimating GDP and poverty numbers, to anticipating disease – the key is turning data into knowledge and actionable insight. When data is processed into valuable information, it contributes to fact-based decision making in the public or private spheres, improving decision’s quality. That is what Watson can be applied for.

Then I believe that once people will see the value of Watson’s analytical capabilities, they will start collecting more data to feed into the system to get even more value from it. And in turn this will inspire young talent to develop their skills in that area as I can see with my students when I teach them about the strategic value of digital information.

Africa’s lack of data could actually turn out to be an advantage. In America, we are overloaded with data from many different sources in various formats, structured and unstructured, some call it Big Data. The challenge has been really how to clean, integrate, load and transform that data from different sources in the appropriate format to be analyzed by systems specially programmed for it. So another reason why Watson could deliver value faster in Africa is that there is not much legacy data and systems in place as explained earlier and new data can be formatted for analysis by Watson. Watson represents a new era of cognitive computing, in which systems and software are not programmed, but actually improve by learning so they can discover answers to questions and uncover insights by analyzing massive amounts of Big Data. Once Africans understand the value of Watson, they will be incentivized to generate and collect data for Watson analysis resulting in reduced time-to-value.

Another advantage is that in Africa businesses and organizations will be using a different IT paradigm. Instead of decentralized data systems installed on premise in enterprises and public institutions as is the case in developed countries, Africa is moving straight to the new model ofaccessing or creating data from mobile Internet devices (tablets, smart phones,etc.) connected to centralized IT resources in cloud service centers. By storing data in a central cloud space we may find that it facilitates data integration and makes access to data quicker and easier . For example, the use of mobile based Point of Sales (POS) systems in retail stores connected to cloud-based services provides instant centralization of data (important especially to chain stores), and the ability to access that data from anywhere there is an Internet connection.

Moreover, the use of mobile devices for data collection may allow for capture of better quality and more relevant data since it is generated closer to its source of creation.
But I think that the main reason for the potential success of Watson in Africa will be the “infinite” value it can deliver. The use of such systems could accelerate at a rate similar to the mobile phone penetration.

When mobile phones first became available in developed countries, they were a "nice to have" technology, but not critically needed. Indeed those societies already benefited from good communications for long time with postal services, express mail services, land-line phones, faxes, Internet email, etc. So the mobile phone was just another new and more convenient communication tool.  Such was not the case in Africa. Until the mobile phone arrived, there was no communication generally available: no post mail, very few phones, not to mention very limited Internet and that lack of communication has been identified as one of the main reasons for Africa’ slow development. So when mobile phones became available, their added value was “infinite” because there was “zero” communication systems available.  As a result, the mobile phone market in Africa has grown more rapidly than any other technology in any market, reaching more than 50% by the end of 2010, less than 10 years after its introduction.

Much like mobile phone use, Watson could be a game-changer in Africa. Watson’s added value in the West is analogous to mobile phone technology when it became available in that part of the world: marginal. There, enterprises and organizations have been using business intelligence systems and analytics for long time. While Watson capabilities are superior to these “old” technologies, the added value in the West was marginal. But in Africa, Watson’s value is to be viewed relative to existing data analytics capabilities.  In Africa, such systems are practically nonexistent due to the combined scarcity of data and skills to analyze that data.  This is why a system like Watson presents an “infinite” value, which could lead to a similar penetration phenomenon than that of mobile phones.

Yet for Watson’s value to be fully realized, two conditions have to be met.

First, Africa needs more, and more reliable, data and we hope that Watson’s value will incentivize stakeholders to undertake more data collection, as explained earlier. Thecurrent open government data movement could also be a factor as government isthe major data producer in the region .

Secondly, there must be more data scientist skills available. While the mobile phone is relatively easy to use, requiring minimal skills, Watson requires expert skills even if the use of artificial intelligence is facilitating the human-machine interaction. It is critical for academia to enter the game here and for IBM to collaborate with universities to promote the development of those skills in Africa.

In the meantime, an open data movement in Africa can attract expert skills from the world to analyze its data and deliver the value that may have an immediate impact on Africa's development, thereby leading to more interest and accelerating the movement.

“Watson's cognitive capabilities hold enormous potential in Africa – helping it to achieve in the next two decades what today's developed markets have achieved over two centuries.”

Seeya later alligator...

Sunday, March 30, 2014

Africa is in need of an African App and Content Store, and can bitcoin help?

In the last 5 years, Africa has seen a fast growing number of innovation hubs, labs, coworking spaces across the continent.


Here in Kigali, the kLab has become a central meeting point for young (and older!) people passionate about ICT and working on developing mobile apps to address and solve needs in the region.

The challenge for many of these entrepreneurs is to get their solutions to the market. While they usually have good technical skills (or rather the community of them offers an incredible combined pool of skills) they are usually lacking commercial/marketing and financial skills making it difficult to sell and monetize their innovation. They need to devote a significant part of their efforts in creating their own company for that purpose.

There could be a solution to that problem: making it easy for them to publish and sell their mobile applications or content in "app stores". The app store would then automatically take care of the publishing, sales and distribution of their apps or content. There are two major "app stores" in the world today: the Apple AppStore/iTunes, and the Google/Android Play Store.

The problem is that none of these stores are appropriate for young African innovators and the African market.

First these stores offer large numbers of apps of which the majority are irrelevant to or can't be used in the African market. They are in a language (English) that most Africans don't understand, they require infrastructure not existing in most of Africa yet, and they address different needs than those existing in Africa.
Apple App Store recently hit 1 million apps, Google has 800,000. Unless these stores provide a dedicated space for African apps (which is unlikely), apps from African innovators would be lost in these huge stores. If good, they could make it to the top of rankings and be more visible, but for that to happen, their target users (from Africa) should be able to find them easily.

But here comes the next problem: to buy these apps, they will need a credit card, and that is a show stopper for most Africans.

So how can we solve this problem?

This is where I advocate for Africa to create its own African App Store platform. If such an appstore would exist, it would allow African innovators to publish their apps and have them easily accessible by African users. This will be an easy way for them to monetize their efforts and allow them to focus on more innovation instead of creating their own company.

What are the requirements for such an App Store to be successful?

Many of those requirements will be similar to those required by the Apple or Google Store. First is to put in place strict technical and quality criteria for apps to be published in the store. Quality should also imply ease of use to compensate for the low ICT awareness in the region.

Another requirement is to provide an appropriate payment mechanism. In Africa, people don't use/have credit cards. They use mobile money like mPesa in Kenya. The app store should support mobile money payments. The problem is that each telecom company in Africa has their own mobile money and that they are incompatible. For example, if you have a Tigo mobile phone, you cannot send Tigo mobile money to an MTN phone. In addition, you cannot send money outside of the country as the currency is different. The appstore platform should support all mobile money in all coutries, which is probably impossible because telecom companies are not willing to open up their mobile money system to other companies. Unless an independent organization like Swift in the banking word organizes a cross platform payment system, I can't see a solution to this problem.

This is where I'm proposing to investigate the possible use of bitcoin.

Bitcoins are a so-called 'cryptocurrency' which exist only digitally and function without the involvement of conventional financial institutions. Launched in 2008, they form a kind of virtual currency that can be transferred between users in what can best be described as a peer-to-peer electronic cash system. Bitcoins are purchased using ‘real’ currencies and then stored in ‘e-wallets’ from which payments can be made. They are universal and can be used in any country.

Not being a technical person I propose the following idea for my readers who have more technical expertise than I to comment.

An appstore is mainly about micro-payments. Typically content like songs sell for $0.99 or apps for a few dollars. Using bitcoins would make it easy to pay in any country independently of the local currency. The challenge is: how can African users buy bitcoins? Most Africans today have access to mobile money. They exchange cash for mobile money on their mobile phone which they can then use to pay for things they buy or to send to other phones through a mobile call/sms. In each country, there is an existing network of telecom representatives or counters where people can exchange cash for mobile money.

If we could find a system to transform mobile money to bitcoin, they could use bitcoins to buy mobile apps or content in the African App Store from any country in Africa.

One of the problems of bitcoin is the volatility of its exchange value. This is mainly because its use it not very spread yet and most bitcoin buy and sell activities are speculative in nature. As the use of  bitcoin extends, volatility should diminish.

But bitcoin volatility should not impact appstore transactions for the following reasons:
1) Appstore transactions are micro-transactions. Volatility is a concern for people investing significant amount of money in bitcoins, not if you spend a few dollars or less.
2) Appstore transactions are short term transactions. When the user decides to buy a song for $0.99, he or she buys bitcoins with his/her mobile money and send those bitcoins to the appsstore to execute the buy. The appstore then does the same operation in reverse (if so desired by the owner of the song) transforming bitcoins back into mobile money for the content owner. This should take a few minutes, the value of bitcoin is not going to change much during that time. The value of bitcoin here is mainly to serve as an exchange currency allowing you to get payments across country borders and currencies without the cost of international transfer usually charged by banks. In addition, banks would not allow transfer of such small amounts, and if they do the transfer cost would be prohibitive relative to the amount transferred.

So the question is: can someone develop a mobile application that can instantly transform mobile money into bitcoin and vice versa bitcoin into mobile money? I found two such applications: Kipochi and Bitpesa. However these seem to be specific to mPesa, the Vodaphone mobile money used in Kenya. Is it possible to develop bitcoin-mobile money exchange apps that can work for any mobile money in any country? Or does each country need to develop such an app specific for that country's mobile moneys?

Looking forward hearing back from you and your suggestions.

If we can solve this problem, we can implement an African Appstore and open the gates to Africans innovations with an easy solution for the monetization of their mobile apps, games or content. This could change Africa's mobile apps market and launch a new industry in Africa.

Seeya later alligator...

Sunday, March 16, 2014

"One Laptop Per Child may be done", what is the future in Africa?

The following paper appeared in VB  News this week: One Laptop per Child may be done.
While I have been critical about some technical aspects of the OLPC project, it is sad to see this project shutting down. I still believe that Negroponte's vision is the right one. But a vision without execution is hallucination, and maybe it was the execution that failed. In this fast moving IT industry it seems that OLPC was not able to adapt and deliver solutions fast enough and that they miscalculated their market. This is just my assumption as I have no information and OLPC has always been very mysterious, not posting much information on their website. This may also explain why they did not answer my recent emails.
Perhaps another mistake was to concentrate a lot of efforts on proprietary hardware instead of the content. I think that it is really innovative e-learning content that can make a difference in children's education, more than technology that changes almost month by month. Perhaps a better model is to develop that content and make it available on any technical platform, but targeting mobile Internet devices that become more affordable than the OLPC itself.
An example of such content is delivered by Mediae, an organization producing media for education and development. The challenge is the development of quality content both from a technical stand point and from an educational point of view. In Rwanda we have the new Africa Digital Media Academy (ADMA) that trains people doing just that. ADMA can train people creating good quality digital media content, companies like Mediae can help these people developing content for education and development, Rwanda is implementing a 4G wireless network across the country within one year, and affordable tablets become available on the market, It seems that the stars are lining up for a great future for e-learning. And this is not AID or charity! There is business to be done here. Alex Lindsay, founder of Pixel Corps, the Californian company that is partnering with the government of Rwanda for the ADMA estimates that the educational digital media market for Africa is a multi-billion dollar market.

Seeya later alligator...

Friday, February 28, 2014

Why $19Billion for WhatsApp could be a bargain for Facebook and what does it mean for Africa?

Facebook, the world's largest online social network acquired WhatsApp the world largest mobile messaging service for $19 billion. WhatsApp’s price tag is by far the company's largest acquisition, bigger than any that Google, Microsoft or Apple have ever done. It puts WhatsApp's capitalization (founded five years ago in 2009) higher than that of for example SONY founded in 1947.

It is this high price tag that has been the subject of most media published in the last days. The consensus seems to be that it is a brilliant move by Facebook but some called it "pricey" or some called it "over priced" like that journalist on French TV news who said that we are going back into a new bubble! 

I join the minority of people who think that $19 billion could be a bargain!

In this posting I would like to explain why and what the potential impact could be for Africa.

I can understand that for traditional economists such a high valuation does not make sense for a company that was barely making any money (they had $8.257 million on their bank account in mid 2013), that was in business for less than 5 years, had only 55 employees and never spent 1 dollar in marketing! Robert Reich, former United States Secretary of Labor declares that WhatsApp is everything wrong with the U.S. economy!

To explain that valuation we need to understand how new technologies are disrupting traditional business as we move into the Personal Data Economy. (Explaining this new economy does not mean any endorsement on my side, see this interesting blog post: "The Cost of Identity in The Personal Data Economy"). 

The Personal Data Economy and its supporting innovations

Businesses are dependent on marketing (since the mid-1950s) to find the right products for their customers, ideally for each customer individually: one-to-one marketing. For long time the notion of one-to-one marketing has been largely a myth and the holy grail for marketers particularly in consumer packaged goods industry. One-to-one marketing is almost here and this change is driven mainly by three new technology based innovations that emerged less than 10 years ago: online social networks, mobile Internet devices and Big Data.

Indeed the leading online social network organizations like Facebook, Twitter, LinkedIn, etc. did not exist 10 years ago. I remember people' sarcasm wondering why would anyone want to publicly tell their friends how they feel, what they do, what they think, what they like or not, share personal pictures or videos, etc. Well 10 years later, Facebook has 1.23 billion users (more than 17% of world's population)  who are active on their website every month doing exactly that.

Clearly, the incredibly large number (more than a billion!) of Facebook users is exceeding anything we have seen in this industry before.

One reason for the large number of online social network users is the fast emergence of mobile Internet devices like smart phones and tablets. Global unit shipment of smart phones and tablets started to exceed PCs since end of 2010.

In developing countries in particular, more people use mobile devices to access Internet than PC.  In India that inflection point happened in mid-2012. 

                                                  Source: StatCounter Global Stats, 11/12

It is clear that in the future the majority of people will use mobile devices to access Internet, even more so in developed countries due to the lower cost of those devices. And because online social network's appeal is based on the capability to share thoughts, events as they happen, mobile devices that you carry with you are becoming the access interface of choice.

Online social media collect trillions of diverse data from billions of users every day. Here are some numbers: YouTube: 100 hours of video every minute of every day, Twitter: 100 million tweets per day, Instagram: 40 million pictures per day, SMS: 100,000 SMS/sec, Facebook: 30 billion pieces of content per month. That is Big Data! And all this content is recorded and stored by these social network companies.

The real value of those online social networks is not in the service they deliver, but it is in the data they collect, reason why they offer the service for free. As Andrew Lewis said in a community weblog: "If you are not paying for something, you are not the customer, you are the product being sold!". The information contained in the social networks is a real treasure for marketers. It contains a myriad of information about each individual user making it possible to profile them into categories that can then be targeted by customized advertising: close to one-to-one marketing. 

New technology can analyze billions of pictures and automatically classify them (and thus the people represented on the picture) in relevant categories that can then be sold to marketers for content monetization. For example, they can be categorized as People (e.g. infant), Interests (e.g. golf), Travel (e.g. beach), Sports (e.g. basketball), Landmarks (e.g. Eiffel tower), Entertainment (e.g. Rock'n Roll), Activities (e.g. wedding) and more. The following people will likely receive offers for newly weds in their mail or on their Facebook page.

Those technologies can be quite accurate and capable of distinguishing very similar but yet different pictures. Here is an example of automated categorization of skying vs. figure skating pictures.

The market of techniques and technologies to analyze and transform complex unstructured data into actionable information is booming. Sentiment analysis technique can detect favorable or unfavorable opinions toward specific subjects such as organizations and their products from analyzing large number of documents or social media data. An enterprise can then combine this unstructured data analysis with its traditional data analysis and utilizes both types of information to discover significant business insights that could not otherwise have been obtained. For example, trends in the numeric data can reveal a slowdown in sales in a particular region during a certain time period. Analysis of the related documents, using sentiment analysis can discover customer complaints and product reviews, can help determine the cause of the slowdown. 

In summary, affordable mobile Internet devices have accelerated the use of online social networks allowing people to share information about themselves or things of interest to them at a pace never achieved before. New Big Data analytic technologies allow to extract insights from this large volume of data that can be leveraged by businesses to make better decisions and deliver one-to-one advertisement to their customers,  dramatically changing the way business is done is many industries.

Big Data  is the next frontier for innovation, competition, and productivity that puts the one-to-one holy grail of marketers within reach. It is in this context that we must analyze WhatsApp's acquisition by Facebook.


What has been driving WhatsApp' success?


WhatsApp is a different social network than Facebook and it brings another profile of users. How can we explain its success?

Mobile phone saw the fastest growth ever for a technology and in particular in Africa. But phone calls were still expensive for the poorest and telecom companies started offering SMS (Short Messaging Service) for a cost of typically less than one hundredth of a one minute voice call. So SMS became most popular with poor populations.

But the cost of a SMS was still very high, it was actually a rip-off! If you consider that a one minute phone call represents about 500,000 bytes of information depending on the codec you are using, an average SMS of 20 characters only uses 20 bytes, i.e. 25,000 times less, yet the telco company would charge you only 100 times less!
WhatsApp became popular because it allows their users to send text, multimedia, voice messages for free, by using the Internet to send data instead of the cellular network. They do it using a "chat app" build for the mobile phone. It allows free unlimited texting (although the cost is 99 cents per year after the first year of service), anywhere, without advertising. It also lets users communicate with people overseas without incurring charges for pricey international texts and phone calls.

Examples of other chat apps vendors are GroupMe, Line, WeChat, Kakao Tech. Almost 19 billion messages were sent per day using chat apps in 2012, compared to only 17.6 billion SMS messages. Users of chat apps were found to be about six times more sociable than texters using SMS, sending around 32 messages on average every day, compared with just five SMS texts.

In addition to its free messaging service, WhatsApp lets users chat with their phone contacts, both one-on-one and in groups. The service allows people to send texts, photos, videos and voice recordings over the Internet. They have just announced that they will add voice calls.  So while WhatsApp offers similar services than Facebook, a major difference is expressed by a WhatsApp user: "Facebook has become a junkyard of updates from people I don't really know. WhatsApp allows me to chat with my friends only when I want, saving me from logging on to Facebook and being inundated by its news feed and it's always on". 

The success of WhatsApp is also due to the availability of low cost feature phones that incorporate access to Internet (3G/EDGE or WiFI when available, non-HTTP/non-web socket data channels) and are capable of supporting third-party software like WhatsApp through platforms such as Java J2ME. This led to fast penetration of WhatsApp in emerging markets like India, Africa or Latin America. A recent survey found that 55% of mobile messaging users in India use WhasApp. Last year Nokia announced a low cost ($72) mobile phone with a WhatsApp button to access the free texting service. The cost of those feature phones is easily offset by WhatsApp free texting services replacing the "high" cost of SMS.

At the time of its acquisition by Facebook, WhatsApp had 450 million users and was adding users at a rate of 1 million a day! Their users are extremely active, sending more than 600 million photos a day -- more photos than Facebook users upload. A whopping 70% of WhatsApp users are active every day. By way of comparison, 62% of Facebook users are active daily. People around the world send 19 billion WhatsApp messages per day, including 200 million voice messages and 100 million videos.

Why did Facebook acquire WhatsApp?


In business, the biggest challenge is to find customers willing to buy your products or services. There is a cost (market research, marketing, promotion, sales force, etc.) associated with that challenge: it is the Cost to Acquire Customers (CAC). That cost then needs to be put in balance with the ability to monetize those customers, i.e. how much money can that acquired customer potentially spend with you over his/her lifetime: the Lifetime Value of a Customer (LTV). Many businesses fail because their CAC exceeds their LTV. CAC obviously varies across industries and could vary from few dollars to thousands of dollars per customer.

The price of $19 billion to acquire information of 450 million WhatsApp users is a CAC of about $42 per customer. That is a bargain in many industries, particularly compared to some of its competitors. LinkedIn's share price values that professional social network at $153 per user. Twitter trades at $140 per user, and Facebook itself is at $123. But the cost is actually lower than $42 because WhatsApp can provide Facebook with more than 450 million phone numbers as they have access to the phone numbers in the address books for those 450 million people. Here is an excerpt of WhatsApp agreement you sign before using it: "... you acknowledge and agree that you will have to provide WhatsApp with your mobile phone number... You expressly acknowledge and agree that in order to provide the Service, WhatsApp may periodically access your contact list and/or address book on your mobile device.."

More importantly WhatsApp market penetration has been significantly faster than that of Facebook in its 4 first years of existence.

The fast growth rate of Whatsapp was a major threat for Facebook and the acquisition cost was growing accordingly. So there was not much of a choice and others before like Google tried to acquire WhatsApp but the synergy was probably best with Facebook as we will see. Facebook can now merge the list of their customers with those of WhatsApp and combine the information collected about their users in Facebook with WhatsApp's information making their data even more valuable. 

But there are more reasons for that acquisition. 

First we have seen that the future is the use of Mobile Internet Devices for access to Internet. This is why the mobile advertisement market is growing at 40+%. WhatsApp users are exclusively using mobile devices providing Facebook with access to that market. 

Second we have seen than WhatsApp market penetration is particularly high in emerging markets where Facebook is lagging even if they are growing. WhatsApp acquisition extends Facebook's market leadership to emerging markets.

Third, the growth projection for WhatsApp is that they could reach 5 billion users within the next years. Their pricing strategy of 1 dollar per year which should be easily accessible even to the poorest people makes this a potential $5 billion revenue per year, probably an illustration of the "Fortune at the Bottom of the Pyramid" book by Prahalad.


What could be the impact of this acquisition in Africa? 


As WhatsApp becomes popular in Africa, it means that it will become more than extensions of people's social lives. In this High Tech business, constant innovation is required to keep ahead. WhatsApp needs to constantly create new value for its users in Africa. For example, combining social network-style services with existing mobile money systems. It has to go beyond replacing SMS to provide a range of connected services like games, virtual content, video/voice calling, e-commerce and more.

It should not ignore the local advertising culture and invest in raising awareness with a traditional media campaigns (billboards, media ads, etc.) which are still efficient in Africa. That is how Line a messaging company in Thailand was able to take over market leadership from WhatsApp.

Africa is the next frontier for many businesses. The "Fortune at the Bottom of the Pyramid" and the fast economic growth rate of the past decade has put Africa in the center of attention of many global companies looking for new growth markets to compensate for the anemic Western world market. However, the lack of data in the continent is a challenge. Shanta Devarajan, the World Bank’s chief economist for Africa, struck a dramatic tone in his address to a conference organized by Statistics South Africa, calling the state of data collection on the continent “Africa’s statistical tragedy.”

WhatsApp may soon become the largest private data data collector in Africa. While they have a "no advertisement" policy, Facebook doesn't. Consumer goods companies can't wait for it.
But WhatsApp can also become a cheap and efficient tool for data collection, I mean a tool to reach people and ask for information. Several companies entered that business in Africa: Open Data Kit, Camfed, EpiSurveyor, TextIt. However for it to work WhatsApp will need to open their system (through an API) which is not the case today, probably to protect itself from spammers. 

Another potential mover is the recent announcement by IBM to make its Watson cognitive system that famously won the contest against Jeopardy champions,  available in its research lab in Nairobi. So more data collection capabilities combined with access to advanced Big Data technology may break the data-analysis chicken and egg problem in Africa.

Communication is required for any economic development to take place. There is strong evidence that big data can play a significant economic role to the benefit of not only private commerce but also of national economies and their citizen. WhasApp can deliver both improved and affordable communication and data collection to the benefit of Africa if used appropriately.

Seeya later alligator...

Thursday, February 27, 2014

How African Ingeniosity Can Sometimes Beat the Best Engineering School in the World

Dr. Ernst Friedrich "Fritz" Schumacher in his influential book "Small is Beautiful" speaks about sustainable development and appropriate technology. Appropriate technology is generally recognized as encompassing technological choice and application that is small-scale, decentralized, labor-intensive, energy-efficient, environmentally sound, and locally controlled. 

I'd like to share such an appropriate technology that I recently found in a school in Kigali.

In my posting "OLPC: from MIT lab to the reality on the ground" I explained why the OLPC laptop was inappropriate for Africa. In particular, the OLPC short battery lifetime of 2.5 hours created a logistic nightmare in that school who had just received 907 OLPC laptops for their students. With only a few power plugs in the school, how could they possibly reload these laptops (907 of them!) every night? I was desperate but did not want to share my feeling with the school as I really think that these laptops could make a difference for these kids even if they may not be the best solution.

A few months later, at the OLPC booth at a conference in Kigali, I saw the OLPC solution to the problem developed by their MIT experts. They built a multi-battery charger capable of recharging 15 OLPC batteries at once. I was excited by that solution until they told me the price for it. I don't recall exactly how much it was, but I remember it was in the thousands of US dollars. I was not able to get an answer to my email to OLPC org to know the current price.

I found that charger at the National Library in Kigali. Here is a picture of it and how it works.

                                       OLPC multi-battery charger (capacity: 15 batteries)

                                First you need to remove the battery from the OLPC laptop

                                    Then you insert the battery in the multi-battery charger

When charged, you need to reinstall the battery back into the laptop.

Recently I went back to the same school I left desperate 18 months earlier. I was helping journalists from a french TV station working on a documentary about ICT in Rwanda. I invited them to come film young kids working with the OLPC laptops in that school. I was a bit apprehensive, hoping that they found a problem to the battery problem.

And here is the solution they designed: a cabinet that can host 60 OLPC laptops for recharging.

There is no need to remove the battery from the laptop. Instead you insert the laptop with its recharging cable in the shelve inside the cabinet where there is one power plug per shelve to connect the small charger.

This charging cabinet hasn't been tested yet, this is the first "prototype". But at first it offers some significant advantages.

Here is how the school had to handle the 907 laptops. After each class, they had to bring the laptops back into a secured storage room to prevent theft. As air can be very dusty during dry season, the laptops were stored into boxes to protect them from the dust. The chargers were stored separately. The transport from the storage room to the classroom and back was happening every day. Because of the battery charging logistic problem, the laptops' batteries were not recharged. Instead the school was using home made multi-power plugs and each laptop was connected to power for use by the students in the class. Just that installation of 50+ laptops to be connected before being used took 45 min when we visited the school last week.

The Rwandan made charging cabinet is designed for one classroom. In Rwanda you can have from 50 to 60 students per classroom. In the final design it will be secured with locks on the doors addressing the security problem. By storing the laptops into a closed cabinet, it will address the dust problem. The cabinet being in the class room, it will spare the transport of the laptops to the secured storage room, freeing that room for other purposes. The laptops will be stored in the charging cabinet at the end of the class, connected to the power plug in the cabinet and recharged over night, ready to be used again the next day. So there will be no need to install power for all laptops (45 min). Instead the students will just take the laptop from the cabinet in the classroom, without the power plug that will be left in the cabinet, and they will use the laptops from the recharged battery.

Last but not least the cost of one charging cabinet for 60 laptops in $147!!! and it provides work to a local artisan!

There could be few problems still to be solved, but these are not difficult to address. One could be the heat from the chargers in the cabinet. Small fans could be installed (local cost is around $10). Another one is that if the charger stay connected after the battery is fully recharged, it will still consume a little bit of electricity. One could use a power plug with a timer (estimated cost: $15) for the cabinet cutting of the power after the time needed for the recharge. This is an appropriate solution and all material required can be found in Rwanda and it can be build locally, meaning it can be repaired locally if needed.

When visiting the National Library to take pictures of the OLPC multi-battery charger, I was wondering why it was stored in a corner. They told me that they were missing a piece of equipment and that is was therefore not working for several months as they can't find that piece.

So make your choice: four OLPC multi-chargers (for 60 batteries) built by the best engineering school in the world in the US (to be shipped to Rwanda) for thousands of dollars or the locally made charging cabinet for $147?

If you choose the first solution, beware that its main material is aluminum a limited earth resource, its carbon footprint will be high as you will need to ship the equipment from the US to Rwanda in the middle of Africa, that it will cost you probably 10 times more, and that all that money will go back to a company in the US to pay a few people operating a production chain.

If you choose the second solution, its main material is wood a renewable earth resource, its carbon footprint will be minimal as it is locally produced, its cost will be affordable and it will generate a large number of jobs for its manual labor based production and that money stays in Rwanda and will impact hundreds of people's life through the workers salary supporting their families.

Rwanda currently has at least 210,000 OLPCs so there is a need for 3,500 of these charging cabinets. This can generate jobs for years.

That is what I call a sustainable and appropriate solution for Africa which I have been advocating for years in this blog.

Seeya later alligator...

Sunday, February 16, 2014

The Very Profitable "Non-Profit" ETS Business and its Impact in Africa (ETS is the organization managing educational tests like GRE, SAT, TOEFL)

Educational Testing Services (ETS), founded in 1947 and headquartered in Lawrence Township, New Jersey USA, is the world's largest private nonprofit educational testing and assessment organization. It delivers educational testing services like GRE (Graduate Record Examinations), SAT (Scholastic Aptitude Test), TOEFL (Test Of English as a Foreign Language), any many more.
These tests are required by the majority of universities worldwide for students applying to their education programs. We at Carnegie Mellon University in Rwanda require students applying for our Master of Science in IT to take the GRE and TOEFL tests like we do on our main campus in Pittsburgh.

ETS has made "fundamental contributions to the progress of education worldwide through educational research and analysis, fair and valid assessments, innovative product development and informative policy studies." While ETS is a US organization, the world education system is benefiting from their services and ETS "develops, administers and scores more than 50 million tests annually in more than 180 countries, at 9,000+ locations worldwide." In Rwanda, ETS' tests are delivered by the College of Business and Economics (ex School of Finance and Banking) of the University of Rwanda.

So what is the problem? The problem lies in the high cost of those tests that make them unaffordable for the majority of African students.

The official fee for the GRE test is $185 "worldwide". This is the cost for the computer based online test. But to offer an online testing facility, ETS ( or rather its subsidiary Prometric) requires the installation of robust test centers and rightfully so as they want to guarantee the integrity of the system. The problem is that this investment can only be justified in countries with a large number of students taking the test each year. That is not the case of Rwanda and as a consequence they can only offer a paper based test. That is further penalizing Rwandan students as they are paying an additional cost of $50 for the paper test (probably because its grading can not be easily automated) and a cost of mailing the test back to the US. The the total cost of GRE for Rwandan students (and probably in many other African countries in a similar situation) is $266. Similarly the TOEFL test cost is $251 compared to the official fee of  $170. That represents a premium of 45%! I guess this is another negative example of the concept of a poverty premium that was first outlined in a 2002 HBR article by C.K. Prahalad and Allen Hammond: "Serving the World's Poor, Profitably".

When adding the cost of GRE and TOEFL, Rwandan students need to disburse $517 for both tests. They may have to pay an additional cost for the use of a credit card for the registration as payment is due by credit card which they obviously don't have making their online registration even more difficult. The neighboring country of Uganda is offering online testing at a lower cost, but Kampala is 12 hours away from Kigali by bus and we heard stories of students who had to take the tests after a sleepless night in a bus, not the best conditions!

More importantly the sum of $517 is equal to 80% of Rwanda's GDP/capita of $644. To put this in perceptive this would be like asking US students to pay $41,360 (80% the US GDP/capita).

To address this problem at CMU-Rwanda we divided the admission process in several selection steps, pushing the requirements for the GRE and TOEFL scores at the end of the process instead of requesting these before students can submit their application for our master program. During the first selection steps, we evaluate applicants based on their transcripts, statement of purpose, recommendations, interest, etc and we eliminate students who are not qualified. In doing so, we only send pre-qualified students to take the GRE and TOEFL tests avoiding the cost of it for those who are not preselected. But we still require the GRE and TOEFL scores to make the final admission decision.

As the chair of our admission committee I have been investigating if ETS would be willing to lower the fees for these tests in Africa. While ETS offers test fee reduction programs, they are only available for U.S. citizen or resident alien. My request to representatives of ETS and their Prometric subsidiary was met with a negative answer. I don't know if I was talking to the right people, but I found absolutely no compassion for the situation that their fees was creating in Rwanda and Africa in general.

Therefore I wanted to understand if perhaps their financial situation did not allow them to offer that reduction. As ETS is a private non-profit organization, they are tax-exempt and there is very little transparency to their cost structure has they are not obliged to publish their annual report. From Google and from ETS' own website, I was able to find the following facts:
In 2011 ETS had 731.4 million USD in assets and an income of 1,056 billion USD. One wonder what these assets are and we don't know the answer but this is a significant number. ETS claims 2,500 employees on their website, which translates their income into $435K/employee, not bad at all but this is a non-profit organization remember... I know that comparing this with my former company is not very relevant but I can't resist: IBM made $100 billion with 435K employees in 2011, i.e. a revenue per employee of $230K employee. I should have worked for ETS!

How does that translate into salaries at ETS? I was able to find that information in ETS' 990 form.  Form 990 is an annual reporting return that certain federally tax-exempt organizations must file with the IRS. In that form dated 2011, I found the following facts:
- ETS's president salary (reportable compensation from the organization) was $1,254,023 plus $80,374 of estimated amount of other compensation from the organization and related organization. That makes a total of $1,334,397 in 2011.
- ETS has declared 36 Senior VPs, vice-presidents, Chief of something in 2011. These executives made an average salary of $399,496. The average total compensation (including the "other compensation mentioned above) was $411,655. As a reference, the US top executive median pay in the US in 2012 was $101,650 per year (from the United States Department of Labor). At IBM VPs would make an average salary of $160-200K, with an additional bonus of 40% if they deliver good results (IBM is a for profit organization). The salary of the vice president of the United States is currently $231,900.
- ETS has declared 19 trustees paid an average of $54,166 for 6 hours of work per month.

I don't think that I need to say more, and I can only hope that this level of salary will not desensitize them from the African situation. It seems to me that there is room in this non-profit organization to offer African students test fee reduction proportionate to their living standards just like some global companies (e.g. Coca Cola, Microsoft, Samsung) do in their market.

Seeya later alligator....