African Startups are missing big time from legacy businesses and systems…
Scale builds upon scale, and we have very few things already at scale. Scale is not built upon dreams and wishes but upon solid ground first. — Osaretin Victor Asemota.
This article is inspired by a post on “X” by Osaretin Victor Asemota. I have been reflecting for some time. How can African startups get the infrastructure required for them to scale exponentially? This might not be the answer that addresses the whole problem, but at least it gives some food for thought.
Understanding the importance of scale is crucial in the quest to build a successful startup. Unlike the oft-glorified Silicon Valley model, where companies rise from humble beginnings to become titans, the reality in many parts of the world, including Africa, is markedly different. This difference primarily stems from the existing infrastructural ecosystems that facilitate or hinder rapid scaling.
The Foundation of Scale
Marianna Mazzucato’s book, The Entrepreneurial State, illuminates a critical aspect of entrepreneurship that is frequently overlooked. Prominent innovators in the US don’t just conjure disruptive products from thin air; they build upon the groundwork laid by publicly funded research and infrastructure. This same principle applies in Africa. For instance, African billionaires such as Strive Masiyiwa and Mohammed Dewji capitalized on struggling public infrastructure to launch gigantic businesses, demonstrating the potential of leveraging public assets.
During the era of privatization in Africa, savvy entrepreneurs acquired state-owned facilities, turning them into profitable ventures. This approach highlights a fundamental truth: significant growth is often achieved not by starting from scratch but by harnessing existing systems that operate at scale. You can always start humbly; you can’t scale humbly.
Strategic Integration with Legacy Businesses
For startups, the path to scalability does not necessarily involve reinventing the wheel. Instead, it consists of integrating with and enhancing legacy systems. Why should a new delivery service invest heavily in building warehouses when underutilized ones already exist and can be accessed through partnerships? This strategic leveraging not only minimizes capital expenditure but also accelerates growth. Someone with warehouses potentially has already built logistic channels you can capitalize on.
Consider a health-tech startup in Dar es Salaam aiming to revolutionize drug delivery. The most effective strategy is partnering with an established pharmacy network. By focusing on technological innovation rather than attempting to rebuild the entire drug distribution chain, the startup can enhance efficiency and scale quickly while utilizing the existing network’s strengths. This notion of I don’t work with SMEs, I’m a startup, is misleading and stills away a unique opportunity for African digital ventures to scale by focusing on technology.
The Pitfalls of Ignoring Systems Thinking
A common pitfall for many African startups is attempting to solve every problem independently, often ignoring the systemic structures that already support successful enterprises. This approach can lead to “compatibility issues”, where a startup fails to integrate into the broader ecosystem that it aims to serve, leading to inefficiencies and wasted resources. He is always living as a founder, frustrated about why he struggles to penetrate a sector that has been striving for years.
First Principles Thinking in Context
While the “First Principle” thinking encourages innovators to break down problems into their fundamental truths, adapting this approach to the local context is crucial. In environments where infrastructure is sparse, “reinventing the wheel” might be inefficient and impractical. Instead, understanding and utilizing platforms that already work can provide the necessary infrastructure for growth.
Clothing Thoughts
Building a successful startup in challenging environments requires a nuanced understanding of existing business ecosystems. Legacy businesses may not always appear glamorous, but they often possess time-tested systems and value chains that can be powerful platforms for innovation and growth. By adding value to these systems and collaborating with established players, startups can achieve the scale they aspire to more effectively and sustainably.
By adopting a strategic approach that values integration over isolation, new ventures can leverage the strength of legacy infrastructures to build robust, scalable businesses that are well-equipped to meet the demands of their markets. And maybe, just maybe, we can think about building things from scratch, relying on just public infrastructure.
