Get. Set. Go ; Stupidity Avoidance Filter (It’s a real thing)

Every day when people wake up in Silicon Valley, they get up , set eyes on their mission and get going to deliver on their vision. This btw is not only limited to California but from Tel Aviv to New Delhi and from Jakarta to Sao Polo all the places that are going places have their GSG synced to some inter galactic clock.

But California is perhaps more special. If you step through the pages of history from Steve Jobs to Bill Hewlett to Vint Cerf there was always some thing in California that seems to be missing from every where else.

At 12, Jobs wanted to build a frequency counter, but he didn’t have the parts. Ever sensible, he suspected that Bill Hewlett, then the CEO of HP, might have some extras. And so, with the bizarre confidence of an 8th grader, he found Hewlett’s number in the telephone book and called it. How many 8th graders do we now know who demonstrate those chops? For example most 8th Graders in our NA250 demographic are making tough choices on what to order on FoodPanda vs building a FoodPanda. Its not their fault, generations before them are to fault for this.

Vint Cerf was born in New Haven, Connecticut, the son of Muriel (née Gray), a housewife, and Vinton Thurston Cerf, an aerospace executive. Cerf went to Van Nuys High School in California along with Jon Postel and Steve Crocker; Both were also instrumental in the creation of the Internet .

None of this happened by sheer luck, it happened because the galaxy came together in some mysterious way every single time each one of these events needed to place and connected a host of un-connected folks to achieve greatness, their unifier was the state of California or rather the mix it offered for success .

This is not a history lesson about California. This is a very primal review of why when you nurture people by having the right mix of education, industry and the dream to win big you continue to produce effective results.

We are ways away from replicating the success and my confidence continues to be eroded by the patrons of industry at large. On my return trip home the first tweet I saw was this:

Elon Musk is sending cars into space and the collective intellectual horsepower of the Neslte advertising/brand gurus could only come up with building the worlds largest saucepan. I am just shocked how in this day and age a corporation of that size comes up with such stupid publicity stunts. If that money was spent to make just 1 Nestle powered school it would make for better a cause.

But I digress, if you’ve ever met the brain trust at these organizations at least locally; the highlight of their career is to get to Thailand to shoot an ad. Given that kind of mis guided sense of achievement there is no wonder why their aspirational target is building F**ing saucepans. At least its moved on from buying fake likes to appease their middle managers to having promoted tweets.

This continues to happen and I don’t mean just at one brand or an other but collectively in society because we have completely missed the boat on building a conducive ecosystem.

We all get lucky. Once in a while we do something really stupid that could have resulted in death, but didn’t. Recently I saw someone who was texting while crossing the road on to oncoming traffic , narrowly avoiding the car whose driver slammed on the brakes. Post event, we realize that was not an ideal way to go about doings ones business. What can we do? We can make the most of our second chances by building margins of safety into our lives. We need to build that into our country and our ecosystems at large, ranging from education to industry to just the way we operate as human beings.

Ever notice how your fuel tank indicator goes on long before you’re really on empty? It’s the same idea. The difference between waiting until the last minute and refueling comfortably early gives us a margin of safety. We need to add that principle to our lives else the GSG dream will remain elusive for generations to come and next we will be building the biggest Karahi(wok).

Charlie Munger, the business partner of Warren Buffett and Vice Chairman of Berkshire Hathaway, is famous for his quote “All I want to know is where I’m going to die, so I’ll never go there.”

That thinking was inspired by the German mathematician Carl Gustav Jacob Jacobi often solved difficult problems by following a simple strategy: “man muss immer umkehren” (or loosely translated, “invert, always invert.”)

Jacobi knew that it is in the nature of things that many hard problems are best solved when they are addressed backward some things just cant be solved backward and our predicament seems to be the same, be it companies that operate in our midst our government or policy makers and even citizens can use thinking for the net benefit of society.

Simply, if you want to improve innovation in your organization. Thinking forward, you’d think about all of the things you or others could do to achieve that goal. If you look at the problem by inversion, however, you’d think about all the things you could do that would discourage innovation. Ideally, you’d avoid those things. Sounds fairly straight forward. But I bet your organization does some of those ‘stupid’ things today? Just like our saucepan example proved, thinking forward/innovating is not easy, but looking at the same problem from inversion should dissuade future generation of brand marketers in avoiding these kind of idiotic moves.

Despite ones best intentions, thinking forward increases the odds that you’ll cause harm especially in our context. But thinking backward, call it subtractive avoidance or inversion, is less likely to cause harm hopefully.

Inverting the problem won’t always solve it, don’t get me wrong but it will help you avoid trouble or at least spot it from a mile away. You can think of it as the avoiding stupidity filter. It’s not sexy but it’s a very easy way to improve. For us to foster an ecosystem like California we need an industrial level Stupidity Avoidance Filter. Its an uphill task but it must start with the realization of what we are individually and collectively doing wrong as part of the society we make up. We are all at fault in some ways, saucepan guys more so than others.

So what does this mean in reality?

Spending time thinking about the opposite of what you want doesn’t come naturally to most people. And yet may of the smartest people in history, have done this naturally. So we must borrow a page from history. Hearing Vint Cerf recently the central theme of how the internet came about started with avoiding things in the past that made it difficult for communication to happen between machines, Lo and behold the invention of packet switching or the TCP/IP protocols that power every thing on the internet today.

Inversion will help improve understanding of the problem(s) at hand. By forcing you to do the work necessary to have an opinion you’re forced to consider different perspectives. We need to have opinions beyond watching talk shows and regurgitating what we see as our own brilliance. We must get into the mind set of GSG and for that to happen we need some serious inversion in our thinking.

To all the startups out there specifically, if you want to have one key take away: Spend less time trying to be brilliant and more time trying to avoid obvious stupidity. IMHO avoiding stupidity is easier than seeking brilliance.

Brilliance comes over time, avoiding stupidity shouldn’t.

 

Tech bandits come to Pakistan: Economic Hit[wo]men in Startup land

Pakistan has many internal and external aggressors. We cant blame every thing on external elements, as we are, ourselves to blame for letting things get out of hand. A strange thing is happening in Pakistan, in the race to the top of Tech stardom.

Before we dive in to the details, to understand what’s going on; a brief history lesson is needed. What we read in Confessions of an Economic Hit Man an autobiographical book written by John Perkins published in 2004, provides us with Perkins’ account of his career with engineering consulting firm Chas. T. Main in Boston. What we are witnessing is a page right out of the book and a chapter out of history. The aggressors are a different breed, but the methods and mandate almost similar.

 According to Perkins, his role at Main was to convince leaders of underdeveloped countries to accept substantial development loans for large construction and engineering projects that would primarily help the richest families and local elites, rather than the poor, while making sure that these projects were contracted to U.S. companies. Later these loans would give the U.S. political influence and access to natural resources for U.S. companies.[1] He refers to this as an “economic hit man.”

 In the 5 years I have been part of the larger local tech community we have seen a transition in the tech ecosystem. We went from a largely BPO and Hire-to-Build narrative to a startup hungry nation. Which is a fantastic transition to witness. Every one and every thing under the sun, progressing towards startups. The goal; to attain economic freedom and break free from middle-class shackles. That is the fantastic bit of this story. The desire, drive and success of Pakistanis trying to use the power and reach of the Internet in pursuit of their dreams is commendable. What a time to be in Pakistan.

 The not so fantastic part is, that is giving rise to a new type of technological colonialism. In the absence of domestic funding or at the right scale or without the right appreciation for the startups at home. With that, its open hunting season for foreign VCs , Funds and Angels. It is this Angel category, that is not so Angelic , once you peel the layers of the onion. (We want all the reputable VCs and Funds to come and excited by the ones reaching out to do due diligence)

Imagine this scenario: If you are a cash hungry startup, with limited access to domestic capital and un-realistic demands local of investors to take a 50-80% bite out of your equity. You are out of luck. Well typically you were, but not really. My self and many others, who are involved with mentoring the young startup community, started getting calls from eager beaver startup founders, who couldn’t contain their excitement. Just weeks prior they had given up on their dreams, they resented being in Pakistan, they thought they were being dealt with unfairly, calling into question their belief some times. A vulnerable lot. Emotionally, mentally and financially. We need to nurture them, that is where we have failed miserably.

 So what was getting them so worked up? They were calling and unanimously repeating a few names and offers of 10-100k of patient capital. They had all found their savior(s). Formerly un-heard of Angels(in the Pakistani ecosystem), mostly foreign origin(migrants them selves in their now chosen lands) and with some really prominent yet cryptic back stories. (As in you could Google them but to the unordained, they would seem fairly legit)

 Slowly but surely, seeing & seizing this opportunity from Silicon Valley and beyond, a new breed of hit[wo]men started emerging on the scene. Friendly and at first glance harmless men and women, typically multimillionaires/trust fund babies/ inheritance Angels – empathizing with the cause of Pakistan and our youth. Oh how they “believe in them” how in their own native land(s), they are the champions of causes that are challenging our Pakistan and our youth. How they want to help, “oh just do a little some thing”. I tried to ignore the misgivings I had for these types of Angels. But your “gut” is rarely wrong.

 Then an other interesting thing started to happen; this lot started traveling to Pakistan. They started identifying and socializing with what I call the bottom of the pyramid Pakistani IT folks. Not to demean any one, but the scum of the earth types, who have no real jobs, have no technical background, have never done a startup, never written a line of code, but some how show up every where and get their pictures taken. You get a fair idea, every industry has these “kalakars” we have ours, this Angelic lot started finding these “idiots” and started harvesting relationships with them. This did not happen over night.

 This too is entirely our fault, take the example of a parent who has 5 kids and plays favorite with the smartest two, the other 3 are susceptible of being naughty or just play into the hands of the less than welcome “outsiders, neighbors” etc etc. We should have watched out for our own, but we didn’t. They have 0 background in to what’s going on but they are on Whatsapp. They are living the dream, getting their pictures taken, creating and making industry events and presenting awards on subjects where they sometimes cant even spell the underlying technology let alone understand the ramifications of how they are being played. The other lot being played are CEOs from our Telcos to our Banks to our FMCGs and Govt IT bunch. You ask how? In the effort to feed the beast which is their “ego” they are championing the cause of these “kalakars”. Truly we have been trumped.

These Angelic Cyber Colonials picked up on the weakest link of the chain. They spent the better half of the last 2 years harvesting Pakistan’s cumulative equivalent of “Donald Trump supporters”. I raise my hat to them, they have single handedly with their money their gravitas and the free trips become masters of this circus of “IT Dimwits”. Given the lack of hero’s an entire breed of these folks are hero worshipers. As soon as some one familiar, reaches out to them from the West and wants to meet them; they put on their 2 sizes too small Valima Suit and show up. Slowly and gradually these “Angels” started getting invited to industry events or the lack their off, started creating with the “IT Dimwits” new events, new groups, new forums, new Whatsapp groups. With that came the condescending dis-information drive, the playing down of Pakistan and Pakistani startups along with every thing else in their way, whilst our own “village idiots”** cheered them on. Saying stuff like “Mashallah we now Have IT GURUs in Pakistan” (I am quoting from a whatsapp group). These imported gurus are cashing on the frustrations of our most vulnerable and its not just to create an “arab spring” equivalent.

These Angels are some of the worst type of people out there, they have the money the motivation and now the access to our youth to destroy and entire nation worth of rising stars and entrepreneurs, whilst leaving in their trail a sense of low self worth, self esteem and apologetic mind set. The sad part is that the one who can call out this bullshit fear the isolation within the ranks and cant live without their egos being stroked, they are the first ones to get in line to get their pictures taken, so the “Angels” are thriving.

 This proves that any one with money can get access to our most vulnerable. In this case young startup founders and the “village idiots of IT”, they are able to shape the narrative and their own glorious past stories and not a single person has fact-checked these people or their bullshit, they continue to spew hate and an agenda backed with “showing Pakistanis the way”.

 I thank them for taking the time to partake in our ecosystem. But whilst I must agree that they bring stories of and steer conversations towards building sustainable companies and ecosystems, their intent is perhaps exactly the opposite. Them downplaying Pakistani and Pakistan origin mentors and offering sage advice on domestic challenges and on mentorship is borderline arrogant without knowing the ecosystem. By flying in and meeting some folks and perhaps getting second hand info, its quite naive to think that the only veterans are the likes of them and their own friends, who actually aren’t even based here and are mostly inheritance millionaires, which no one needs to apologize for, just call a spade a spade.

 The worst part is, there are some within this lot who I am sure mean well, but they got tied up with these shallow arrogant and useless types, and are basing their view entirely on their self-hating Pakistani social circuit friends. As a participant in the ecosystem it is glaringly evident that they are cashing in on the insecurities of the “village idiots of IT”, given the fact that most their comments, engagements, awards ceremonies and media appearances are weaved around the same group of 8/10 common folks. Imagine all it takes to fuck over a large segment of our startup and investible companies, can be fuelled by 8-10 people and a few outside Angels.

 What these “Angels” are doing is not helping the ecosystem with their passive aggressive comments and observations, Facebook posts, Whatsapp rants and tweets about “oh how glorious Pakistan and Pakistani startups would be , IF only we could fix X or do what Y is doing ??? Btw we haven’t even gotten to the part where they are doling out money and advice on religion. The toxic mix gets worse, we will only focus on the money for now.

 They are talking down an entire fraternity of Pakistanis who are working very hard to build up the ecosystem by offering cheap cash in exchange for their even cheaper values.

 So like the Perkins’ account of the years gone by here’s what’s happening. These Angels are coming to town, they don’t need to convince governments any more, they need to just write checks to the Startups, before that they ensure, that they give board seats to their so called friends in Pakistan. So that their interest is protected. Their friends along with the Village Idiots, slowly but surely are government folks, people of political influence and any one in a position of power happy to take funds in exchange for favors or to be invited to Amreeka or elsewhere for “good time”. Cheap..Really cheap.

The reality is, where this money is going is in 3 very well calculated places. Grants to startups that would typically find it tough to scale, To them I say take the money and probably more. Use it to your benefit but don’t get driven by the Angels agenda.

 The second lot is the scary one, companies that have the potential to sit on and collect oodles of data on youth and youth related preferences (So startups in the hyper local and data space).To them I say, you have your entire life ahead of you, don’t sell short.

 Last but not least, retired so-called Pakistani veteran CEOs of Tech/Banking/Obsolete Multinationals and their “NEW” so called startup companies and ideas. These hit(wo)men have the right idea, they are trying to get into a parasitic relationship within the right constructs of society. The young, the under-funded and old guard, all where they can play to ego, cash or one final shot at making it big.

Startups, consider you self warned. If you see some one or some thing that looks to good to be true, it probably is. Fellow ships and foundations are the new tool of this economic warfare, run as far away from those as you can. If some thing is free, always remember you are the product.

 

“village idiots”** are those individuals who are perpetually free and clear to do any thing but work, not to be confused with the hard working startup entrepreneurs. But rather the free loaders at every award ceremony.

The Game of Assumptions. Road to Pakistan’s GMV

This is joint post by Jawwad Farid & Faizan Siddiqi *

Before we start let us all take a deep breath and try to ascertain what GMV means.

Gross Merchandise Volume

From Wikipedia

Gross merchandise volume or GMV is a term used in online retailing to indicate a total sales dollar value for merchandise sold through a particular marketplace over a certain time frame. Site revenue comes from fees and is different from the dollar value of items sold.

GMV or gross merchandise value for e-commerce retail companies means sale price charged to the customer multiplied by the number of items sold. For example, if a company sells 10 books at $100, the GMV is $1,000. This is also considered as “gross revenue”. In this case, the business model is based on a retail model, where the company basically purchases the items, maintains inventory (if need be) and finally, sells or delivers the items to customers. It does not tell the net sales or actual amount of audited services as GMV does not include discounts, costs involved and returns of products.

GMV Estimation

  1. In order to estimate GMV we could use three possible methodologies.A top down approach that starts off with a single piece of data from an authentic and well respected source and builds up an educated estimate on top of it
  2. A bottom up approach that tries to piece together the market size based on what we know of local market participants. We pick the top 20 players, add up the sum of their GMV, scale it up by a factor of 30% to 40% and voila we have estimate number .
  3. A forward looking approach that ignores current data looks ahead 5 years to see where our market is likely to be and work backwards from that figure for estimate number 3.

With all three approaches the objective is to keep the assumptions (moving parts) to a minimum and base the model on at least one authentic, publicly reliable data point.

In the absence of transparent market based disclosures, the true answer will likely be found somewhere in between using some exotic mix of all three approaches.

To illustrate the mechanics for purely illustrative and educational purposes we will use one approach to make a simple point. Any analysis we do at this point is going to be completely irrelevant a year down the road. Perhaps even sooner, but to have a conversation and to understand the real potential of the scale of what is to come.

Given the direction this market is going and given how this specific movie has played in other developing markets before us, the current market size or efforts to estimate it are useful for educational purposes only. You can’t put them to work or use them for deal making, acquisitions or valuations given the disparity you are likely to run into when it comes to projecting the next 5 years. Nothing is constant over 5 years let alone what we are about to project out. It can no less be a basis for getting in on the action.

Model One. SBP data set

Let’s begin with a look at the most basic of our collection of known documented facts. The source for all three statements below is the State Bank of Pakistan Annual review report of 2017.

  1. E-Commerce in Pakistan has 571 merchants offering their products online. During FY 17, 1.2 million transactions valuing PKR 9.4 Billion were processed through ecommerce[1]. Using the current exchange rate of 105.25 that translates roughly into USD 89 million – the share of the local ecommerce pie captured by credit and debit cards.
  2. There are 17.9 million debit cards and 1.2 million credits cards issued by the banking system.
  3. The 9.4 billion and 1.2 million transactions suggest an average ticket size of USD 74 per transaction.

Remember that these are all unadjusted figures. We can use them as is but its best to account for and adjust some items that may impact local market size estimates.

The likely case

We take the USD 89 million figure and trim it to account for local ad spend on Google/Facebook platforms. This trimmed figure then get scaled up since a large chunk of local e-commerce pie uses cash on delivery or COD. We put in a range of values for the distribution between COD and cards and generate our final total market size estimate.

There are two key variables.

  1. The adjusted figure that represents the share of credit cards in local ecommerce sales. We can round this up to total ecommerce sales using the second variable below.
  2. The share of COD in local ecommerce sales. If we know the dollar amount of card sales, we can use the COD component to scale up total sales.

We can plug in a range of values for both parameters and see the possible range for total market size. When we do this we end up with the grid below.

Here is how you read the grid. There are two bands that represent the two parameters. The row on top (US$) and the column on left (%) that we use for navigating to the estimated value.

The row on top gives the trimmed down estimated figure that represents the share of credit cards in total ecommerce sales. It ranges between values of US$ 30 to US$ 80 million. The column on left gives the percentage share of COD in total ecommerce sales. It ranges between 25% – 95%

The table below has 5 distinct colored bands. The one that we are interested is the light green 3×3 matrix with bold figures that represents values on which consensus can be built. Primarily because these are values that we see across vendors we track and talk to. Anything outside the grid is certainly possible but is not supported by credible, authentic, publicly available data points. If you have data that contradicts these points and are willing to share it, we will be happy to update this analysis.

The range in this specific grid is between US$ 100 to US$ 500 million per year. The likely answer for estimated GMV is somewhere between US$ 333 million to US$ 500 million based on this model.

Which implies that our trimmed down estimate for credit card share is somewhere between US$ 50 – US$ 70 million and our estimated COD share of total sales is between 85% – 90%. Market feedback suggests that the COD share could be as high as 95% but we are happy with our 90% estimate.

Now that we have these two values, we can dig a bit more and see if we can find additional data points that would support or challenge these assumptions.

There are also two new questions that we need to answer. Both deal with growth.

  1. At what rate is the ecommerce market growing?
  2. If it keeps growing at this rate for another five years what would be the total market size? Would it be large enough to be of interest to serious money?

These questions are of interest because they allow us to tackle the same problem from another angle. Where will things be 5 years down the road? From that specific perspective how attractive or unattractive does the current market or market valuations look right now?

This is the question we should really be asking ourselves. How big will the total pie be in 5 years? Using the midpoint of US$ 400 million from above and a 30% annual growth rate for the next 5 years we end up a rough estimate US$ 1.5 billion.

That is the limit of our current analytical tools. We are bound and married to data in the visible spectrum. When we stretch the visible spectrum our numbers become questionable.

Time to throw this analysis and this model out of the window for one simple reason.

We used a similar logical rational step by step model to estimate the projected future share of smart phones in the local market in 2009-2010. The objective was to project actual smart phone in use in Pakistan in 2015. Two of our smartest analysts and a data czar took part in the exercise. With hindsight our estimate was off by about 97%. It was good thing our analysis was not released for public consumption.

Model Two – The alternate forward looking perspective

When compared to our nominal GDP basis the figure of US$ 1.5 billion is not exciting. It looks great compared to your current size but it is actually quite depressing and unlikely for reasons that we will just highlight.

One hint is the metric that measures the size of the internet economy as percentage of total GDP. The G-20 benchmark[2] for this metric is 5.5% with some economies seeing values as high as 12%. Given the availability of 4G data, the affordability of smart phones, the increasing share of data enabled phones in local phone sale and the growth of online retailers in the local economy, our benchmark figure is likely to rise.

Before you flag or question the G-20 metric let’s take a look at G-20 membership. In addition to the developed world, the G-20 also includes the following countries – India, Indonesia, Argentina, South Africa, Saudi Arabia and Turkey. We are not just talking about North America or Western Europe, some of these markets are quite similar to our own in terms of cell phone penetration, population demographics, data usage and middle class growth trajectories.

Now back to the GDP. Our estimated GDP figure on a nominal basis for 2017 is US$ 304 billion. 5 year later in 2022 this figure will hit US$ 380- US$ 400 billion using the current growth rate of 5%.

US$ 1.5 billion in ecommerce sales represents less than 0.4% of our current nominal GDP. The G-20 benchmark by 2022 is estimated to be between 7% – 12%.

Our actual number 5 year later is likely to be at least 2%. Improving logistics, lower reliance on COD, higher consumer confidence, removal of payment system frictions, better service quality, more polished players, better supply chain management, higher fulfillment rates, growing middle class, increasing prosperity and spending power are all factors that will play a part in increasing the base rate.

Some of us in the analytics world think that since we have already skipped a few steps in ecosystem evolution, our actual share may be even higher.

But let’s not be too greedy. Let’s stick with that 2%.

That 2% translates into a market size of US$ 7.6 – US$ 8 billion in 2022.   At 4% you are looking at US$ 15 – US$ 16 billion. Our current “hand waving magical wand in the air” market size estimate is US$ 400 million.

What happens to a market when it jumps from US$ 400 million to US$ 16 billion in 5 years?

When a market jumps from US$ 400 million to US$ 16 billion do you really care if your original market estimate was US$ 400 million or US$ 650 million?

If you sold out at US$ 400 million and the market jumped to US$ 16 billion… Let’s not even go there. You would be what we would define as a sucker.

If you have the staying power for 5 years, I think it’s time to buy some online real estate. If you had the foresight to buy it and have credible business management skills, it’s not time to sell, it is time to hang on to it because you are in for the ride of your life.

In English, please.

So here is what all of the above means in simple English. In case you don’t like spending too much time with tables or on numbers.

The current numbers out there, made popular by the usual suspects range between 110$M TO 170$M. The state owned official nice to have figure is 1 billion by 2020[3] subject to usual qualifications.

The question to ask your self is, if you were pitching those numbers because you work at an ecommerce store/ allied business, would you really be dumb enough to get out now or do you just need an exit valuation so you don’t get past the hype cycle you created yourself? Bonus pool? Contract renewals? End of the line?

The time is now. Raise capital and stay afloat. Sit down and plan out the long game. There is no point to get out now, as you are in the driving seat or at least have a shot at it (you know who you are). If you are cash rich it is time to diversify. Buy some of the really crazy plays out there. 500 odd players is not large enough for a country of this size and the volume we are talking about.

Imagine getting into DHA Phase 8 in 1997-98. Everyone was selling, the city was on fire, valuations were crap, sentiments and basements were both underwater and people laughed at you if you even mentioned buying real estate in Karachi. And then to make matters worse dollar account were frozen and sanctions were in place.

If only you had listened we wouldn’t be having this conversation right now and you wouldn’t need to work today.

This promises to have the DHA/Bahria style returns the average saiths are looking for – Not 10X but 100X if you call it right and have staying power. If you know what you are doing and you have the right people on side to help you scale and sustain. This isn’t for every one. Most people will die due to inexperience, greed and timing challenges. Only a few will survive.

Here is another kicker for my many friends shopping for exits and posting pictures with our esteemed friends from China. What we must all realize, is that if a Daraz type transaction goes through, it does zero for the ecosystem.

Most if not all the money exchanges hands out side of Pakistan and no value is created till such time that a new operator/player is fully involved domestically. All they buy is a brand and a functional site, albeit well known and mostly with other sister properties regionally. A regional/geographic play for the buyer and if the price is right, a fantastic one in 5 years.

Yayvo and the lot, if a transaction does go through, the buyer actually buys a really big tongue twister. A race to the bottom with out VC money to burn. Race to the bottom (cutting price) type outfits are really not needed.

The data in its true form shows that you don’t need to underprice to deliver. Investors must ask what is the rocket science in selling product at steep discounts funded by their dollars? It is the oldest question for sales team – anyone can sell at a discount – why do we need you?

The market has the appetite for real players with real service. More so if you own data, fulfillment, delivery, service quality and warehousing. Beyond self-promotion on social platforms and hashtags the substance is lacking or lost in translation. If hashtags were GMV all these social media types would be billionaires.

All others who aren’t in a race to the bottom or a rush for quick exits in the end will do better. Write this down on a piece of paper and look at it when people mention exits. Just two words, two syllables. Long Term.

A small slice of a US$ 15 billion dollar pie goes a long way. Not everyone will make it to the table or have the appetite to sit or stay on it. Those who do will all have one thing in common. A healthy respect for other people’s money and the ability to play the long game.

* All the nice informative bits in this piece including the easy to read tables in color were crafted by our resident numbers guru Mr. Jawwad – ask the right question – Farid. I would recommend a google search, if you haven’t met the gentleman or crossed his path. He is even more polite than his prose in real life as long as you don’t mention funding or short term exits in his presence.

All the other nasty, waspy, brutal parts that will eventually piss of the ecom/bankers/transaction types were crafted by yours truly.

[1] State Bank of Pakistan, Annual Review, 2017. Page 25. This is the first year that this number was tracked and reported by the central bank. That by itself is a market action trigger.

[2] The Internet economy in the G-20, Boston Consulting Group, 2013-2014

[3] Source PTA Annual Report, 2016/17

Alibaba and its Chaalis (40) choices in Pakistan | 阿里巴巴及其在巴基斯坦的40個選擇

These days its seems like not a day goes by and some one or the other publishes a picture, a leaked story, an input a whisper about Alibaba talking to some one in the country. That in it self is fantastic and super exciting. The choices for Ali Baba are literally unlimited in what they do and I have no magic ball to foretell the future. But the implications for Pakistan will either be really good or really bad.

Lets list the public rumors in place over the past week or so.

  1. Alibabas Ant Financial services to acquire stake in Telenor Bank in Pakistan.
  2. TCS putting out pictures of Alibabas visits to Pakistan
  3. Daraz not being far behind saying again some one is buying them, this has been on going since a few months after they came in to being

 

Lets evaluate the Telenor news first, minus the percentage stakes being discussed at this stage that’s immaterial to any one unless you are a shareholder, given you are not, lets focus away from the noise.

 

So if Alibaba does buy out the stake say at 40%, what happens? Look at the shareholding structure above. Whilst the news it self will be great for Pakistan(consumer confidence etc). Just my sense is, the monies wont land here post acquisition the B.V/Dutch Hold Co will probably partake in that transaction. The company is setup for tax optimization and there is nothing wrong with that either, all businesses are setup to maximize shareholder value, there should be no apology expected from Telenor for watching out for their shareholder interest.

So all this celebration of Ant Financial coming to town, could be misguided, as it may not really have any short term benefit unless the government mandates domestic injection, then it’s a different story, given our Chinese friendship that should be a baseline ask. I neither know any info nor do I want to speculate, I am analyzing the data and facts available in the public domain.

What no one is talking about what Alibaba’s entry to Pakistan will mean for digital marketing and advertising and the potential blow it will deal to OLX, Daraz,  Classifieds online and offline and Ad-Networks like FB Audience Network and Google ADX.

You are probably wondering what the sale of shares in a Microfinance Bank has to do with advertising? You cant be blamed for wondering, its simple, some thing you have never heard of, but it is a rising tiger in the world of advertising to rival Google and FB, Its called Alimama .

Launched in November 2007, Alimama (www.alimama.com) is an online marketing technology platform that offers sellers on Alibaba Group’s marketplaces online marketing services. Now that is the real Crouching Tiger, Hidden Dragon that will come to town when/if Alibaba comes here.

Coming back to our friends at Google and FB, they don’t have an office here, they don’t have a presence, the bulk of their advertising revenue are generated through product advertising, FMCGS, CPGS, Brands, Product Pushers. The success of FB viz a vi the advertising agencies they work with, is lukewarm at best, both companies have struggled to keep the conversations ongoing with counterparts in the country. Google has been more serious with boots on the ground, FB is still enjoying the consumer play of people using credit cards to buy ads.

But where is the real commitment to operate in Pakistan a market of over 200M consumers? Perhaps we shouldn’t blame them, has any one from Government really gone to FB beyond data requests and to Google beyond resetting passwords for accounts and offered them a real stake on the ground in the country from location to access to talent to tax breaks to legal protection? If not then we will continue to wait for them to show up at our door step where as other markets that welcome them will prosper.

Look at this example from Amazon,  shopping for a city to bid for amazon to come to it to build a second head quarter. That’s what government commitment is and should be if you want to attract the best.

Given what Google has done in healthcare alone, for a country like Pakistan where Chikungunya and others abound our government should be bending over backwards to invite Verily to de-bug our cities and towns if  it is not interested in the digital play, the human life play should matter.

Lets look at what will happen, when Alibaba in any form comes to Pakistan, they aren’t going to just sit idle and away from the Marketplace business which is their core. When that comes, so will Alimama, that will wipe off the entire value from product listings and classifieds businesses and thus wipe major value of AD Exchanges but wait, there is more, none of this will happen tomorrow. Some specialized verticals may continue to operate but it will be only a matter of time till they also become irrelevant or be bought out in the process.

Google and FB have to  take notice(More FB than Google). That is a fairly tough ask when Google is rightfully busy in the region with India, their interests aligned with launching payment tech (Tez) and their Next Billion obsession. FB on the other hand lacks even the commitment to operate out of market, they roll up from SG to UAE, where the hummus isn’t playing the unifier role it should between the German-Venezuelan + Pakistani mix . The UAE based leadership team responsible for PK has probably come here less than a dozen times. Credit where its due, Google guys are practically here every other week.

If FB , had they not put partnership folks and not just hired entry level talent from this country, would eat away at least 30% of other Ad Networks existing business and probably increase their pie by an other 80%, all they had to do was pay attention, there is still time if the interest level changes. Data is great, but context is the killer, it feels strange to be preaching context to Facebook.

Even beyond FB , WhatsApp related growth could potentially outpace all other business related growth in the months and years to come, no less for that you need to come to Pakistan beyond conferences and meet real businesses and hire customer advocates that have some real experience beyond trips to incubators, it has no real material output for Pakistanis beyond photo ops. Its time for the industry to grow up. Besides pretend to be grown up and promoting  self recognition.

Google is in a far better position, but I fear all their market education that had the best of intent will be ridden out by Alibaba in weeks, months and years to come. Their(Google’s) teams have really done a stellar job to educate the market. Fb is trying hard, they had a better value proposition, its easier to market on FB. Every one uses FB no new account is needed to market, any kid can do it all you need is a credit card ( what happens when the central bank decides that it is no longer cool to loose out 45m$ in FX via card or third party transaction. Invoicing becomes key.) Hence the conversation is much easier from FBs perspective with marketers; the results on the other hand are debatable as are the conversions.

The market is missing a unified sales platform and payments, when both of those arrive, any guesses as to what will happen?

This brings me to TCS/YAYVO, from a Pakistani standpoint that deal makes the most sense for the exchequer, but from a value perspective Alibaba gets more out of buying TCS for logistics and fulfillment than it does to buy Yayvo for e-commerce. (Even if it paid 3/4x Revenues it would be a sweetheart deal)

Neither the TCS Ecommerce brand nor the way the operations are structured offer any thing that 2M$ cant replicate in 6 months. That is all it takes. TCS should be courting Alibaba to offload equity in the overall entity, e-commerce is some thing they should throw in for free. Make no mistake, Alibaba is already Pakistan’s largest e-commerce player by volume, you ask how? AliExpress.

Once FTA between China and Pakistan is sorted out, none of these brands will matter every one already knows Aliexpress, at least they get their products on time. The logistics game is a serious deal, check this out Amazon building an airline/Distro hub.

In the mean while if Alibaba wants to buy some thing to just try out and experiment, its not a bad deal to get Yayvo too. But by way of technology and talent, there is no real value to be driven from Alibaba’s perspective in buying Yayvo. Every other week, some Investment banker, market broker or some one is pitching the Yayvo deal, that is an indicator that they have run out of growth capital. Any plans of grandeur they may have had are actually on hold from the looks of things. Their SKU base is stagnant. Their systems are a mis mash, the sites performance are basic at best. So this is not going to be a tech buy for Alibaba an accu-hire for mid level talent yes for sure.

Which brings us to Daraz, perhaps Alibaba should do real due diligence there. Its simple, buy 5 products a day for a month and deliver to 5 cities a day, figure out the fulfillment ratios vs order placement and go from there. In developing markets that a better test than looking at a PowerPoint deck prepared by some one else.

Daraz will be a multi country Rocket Internet deal involving Alibaba so where-in other markets Rocket may have inherent business or operations value, in Pakistan : besides burning cash on brand building, iffy customer experiences, multiple management team exits and struggling market place/drop shipper experiments they have been consistently underwhelming consumers.

A cursory glance at  FB posts or comments on paid adverts in local publications will tell part of the story. Its not easy being the first here. Just cant blame them alone, they have done more for market making than any one locally has. User sentiment abound. I am sure some one as sophisticated as Alibaba would try to get a discount on the offer given the customer toxicity. No one does “one day sales” better than Alibaba and its singles day, just apply that metric to compute GMV and if all holds true, perhaps Daraz really has value beyond what meets the eye.

Daraz is a foreign owned venture, if Alibaba does acquire Daraz / or its parent co, that money wont see the light of day in Pakistan. Again not a great deal for Pakistan or Pakistanis, the value of the transaction will unlock offshore most likely. Long term e-commerce will come, but short term No cigar.

All these factors to one side, a real funded player in any one of these 3 domains comes to town, it will be good news long term. So heres to hoping that we at least get a true payments play first, every thing else will find its way on its own once that happens.

 

 

 

 

 

 

 

 

The End of Apps : OK Google, Alexa.. From AMP to PWA to AI

 

Play First, watch for about a minute then read on.

In 2016 Vani Kola, MD, Kalaari Capital asked Rajan Anandan, MD, Google SE and India, at the Kstart Digital Marketing Summit to share his thoughts. In retrospect when I watch this(he did know some thing) clearly the rest of us are only finding out.

If you watch the video, he categorically said if you are building apps you are toast. He wasn’t wrong really, he was actually so very right. So if you are a young scrappy developer in Pakistan and you are building Apps, for the most part, just don’t do it. You need to up skill your self and get on the new-age band wagon.

Google and FB are obsessed about bringing every one online because when you the user come online you will spend time in front of their ads and hence GF (Google and FB or your Digital Girl Friend) will make money on advertising eye balls. Like the proverbial girl friend, GF are also only happy when money is spent on them, albeit their platforms or when they make money, the online equivalent of investing in any relationship.

So why re invent the wheel? Cash in on that obsession. That obsession can only be fueled by fast access to data, super clean interfaces, offline content access(PWA) and converting the slow web(to AMP- Accelerated Mobile Pages, Or Instant Articles based) items.

So ask your self, why aren’t you already on this bandwagon, why aren’t you picking up this skill and adding it to your repertoire? I can think of a couple of reasons; if you develop for the domestic market, Your average client is an idiot, your boss is probably an even bigger idiot, if you work for an FMCG your boss or marketing leader is obsessing about Likes and shares(tragic) if you work for a development shop then you are probably building for the ecosystem around you, neither is benefitting your cause. If you work for an e-commerce player, you are still trying to figure out what it is that your employer actually does and how broken your systems really are. You need to step back and re evaluate where you are as a developer.

But your primary resource is knowledge and information both accessible online and free, you need to see past the so called nonsensical thought leaders domestically and try to grasp what’s happening and how up-skilling your self will increase your marketability and keep you relevant. They only care about doing Banking Summits, Ecommerce Summits, Mobile Payment Summits , Advertising Summits and give awards to each other. When I see what the average person/organization is working on, I feel the IQ in the room dropping collectively by a 100. We need to be innovating, the first pre requisite for that is to be on the stack, technologies and methods that are making waves across the world. Not what we learnt in programming class or what our egg head “team lead” says or does. Nine times out of ten I can bet, they are just happy in the fact they know more then their boss who is probably in their 60s and they are happy to be the “technical” guy at work that their boss leans to for support. In that sort of eco system you will always remain mediocre. So step away.

The world doesn’t end with AMP, it’s a starting point, get all the worlds information to load faster, So that’s happening weather you like it or not/same with instant articles(albeit inside of FB), Next come PWA(progressive web aps, the antithesis of real aps, it’s the evolution of the web, a website that works like an app, wow, what a cool concept. The thing is, you are already late to the party if you have not starting working on this for your client facing work. So you have super fast pages ala google cdn, you click you come to a PWA site that’s light weight, works in offline mode and doesn’t need you to get a 25mb app to do the same thing. Wow?

Whats the use case, in our part of the world(which is the fastest growing part of the digital world at the moment) the average user has a $32.26 USD smart phone, with limited capabilities, they delete apps daily to make room for others, but as data prices fall they can add to home screen a PWA and viola, no need to install un install, for content based apps which is the bulk of use in our region. Just like an app needs internet connectivity so does a PWA, what the PWA does is, it uses less data to actually cache every thing. So the user experience is fast, it off loads the processing online with keeping space free for camera and other user needs.

So the use case is brilliant. Further as most of the lower spec phones do not have a licensed play store, this is the fastest way to deliver your content. Also fear the wrath of Google when and if they brick the phones or dis-able app installs on unlicensed android devices. Will PWAs be your savior?

So you are still un sure, then see the second part of the clip from above, just watch for 10 seconds or so.

Moral of the story, stop building for the NOW, start building for the future and the future is closer than you think. The thing is, for all its advances in AMP and PWA the next level of growth or client engagement will be voice driven and AI based, OK Google to Alexa to Siri perhaps. But there are still ways to go before native support for URDU arrives, Google is hard at work(or maybe not), perhaps not really realizing how big the offset will be the minute the focus is on Urdu. But till we can communicate with AI in Urdu, AI wont be able to communicate back. Localization and discovery are 2 aspects every one must start working on today.

A third of the local mobile smart phone users, only play games and don’t consume text content, they do consume video, but cant search, so they rely on links forwarded to them, they operate the device on visual cues because they can neither read nor write. But they click links sent to them. Now imagine if they can originate the links if they had access to a discovery service?

So imagine the power of combining visual cues + discovery platform + AI. Or even starting point, Visual Cues + Discovery Platform + Fast Loading + No App install. The possibilities are endless. You have to start building for the future, the future is showing us that video will be all the rage. So you must get every thing in order, to manage that reality and to capitalize on it. It also shows the convenience will be all the rage. It shows us that we will offset our tasks, needs, action items to a voice in the cloud. Are you building for that challenge? or you still stuck in appeasing your boss, your client, your company and yourself. You need to be working on Google Actions and Alexa Skills and what ever else shows up in this space relevant to the ecosystem. The time is now. Stop wasting your time, re calibrate and do your self a favor.

Pro tip: If you are a young freelancer and work on android or ios, your work is typically a commodity at 25-30$/h if you are half decent, the average free lancer specializing in AMP/PWA/Google Actions/Alexa Skills is over 50$/h. The choice is yours.

Does your startup have a plan to indulge Google, FB, Uber, AliBaba and the likes – at scale?

There is no simple plan or check list, if I had one, I’d be using it my self. Clearly one doesn’t exist, in its entirety, yet . If you read either or both of my last posts you know that these guys generally don’t need to be on the ground to launch a viable product or service.

But to make money consistently and at scale where it matters, sooner rather than later they will need to be on the ground. That or they  will need access to some one who is. Park the advertising side for a moment, there is more to all these corps besides ads/ad content either as spenders or consumers or both.

If you have any thing going for you or your company at the moment, I hope it’s large scale of localized data or the aspiration to get copious amounts of data based on the products and services you are building or deploying; be it in any industry or vertical so long as the only way to obtain is to be on the ground and that some one had to be locally collecting or building that data. It could be

1) Points of interest data (mosques, cinemas, schools , salons, grocers, butchers, tuition centers, thanas)
2) Housing Data (address data)
3) Shortest urban routes data
4) Time of day temperature data
5) Contextual data about road accidents
6) Delivery data on urban food deliveries
7) Consumer data on a multitude of CPI basket goods
8) CPG-FMCG Spend data
9) Product distribution data
10) Map or GIS data
11) Localized data on  atms, hours of service of shops, contact info (at scale)
12) Reviews data(product & services both)
13) Shopping comparison data (Physical and Virtual Goods and services)
14) Service Industry data
15) Power outage data
16) Voice overlay data
17) ID Card verification data(probably a government domain)
18) Financial services data
19) Goods and Services data
20) Human interaction data

This is not a comprehensive list but a starting point, the race to the top is about data, the race to the bottom is about still building apps. App strategies are good if they get you to the end goal of data. But if you are still building an app in 2017 to book movie tickets or to get discount coupons, just do your self a favor and don’t do it. You need to be working on Machine learning, AI, Health Care some thing meaningful at this stage. Lets pause this thought till we deal with the next one.

In short, a few groundbreaking changes will happen whilst these companies are still not here or fully committed to being on the ground. All of a sudden the balance of power will change in the mobile hardware space when the Chinese variant phones in Pakistan who are not Google/Android compliant in terms of not having the play store installed (as a benchmark). When, not if Google decides to force (it’s a growing trend in China, soon to come every where else) these companies to complying seemingly over night it could brick all those devices running side loaded play store or Google Play Services or stop select apps from working. Whilst it could be a potential dooms day scenario for the mobile guys operating locally it allows others, if played out, smartly; to get a huge competitive edge. It could give rise to an alternate android play store market “made for Pakistan” provided the phones not bricked entirely.

This doesn’t just apply to Mobile phones, it applies to all the so called smart Tvs and after market car head units and TV boxes or even IoT devices and gadgets running android. Not that any one expects Google to be in the enforcement business over night, its not good for business but this whole device strategy/licensing will either hurt you as startup if you rely on cheap unlicensed hardware or make you super competitive if you have a play for when there are millions of bricked devices in the country or partially working devices that you can build services for or using.

So now look at what it does to the ecosystem. Think about the mobile carriers and their data plans and voice minutes if supposedly millions of devices get bricked or aps rendered useless or un-installable. What about all the after market Chinese Navigation systems and other head units used all over. What if your smart TVs are no longer smart? Or for that matter phone or any other device running android. Time to pause, re think and calibrate. Perhaps if the devices aren’t bricked then a manufacturer specific store? Some thing to think about, all it does is isolate us in the grand scheme of things and limit the ecosystem.

Now we revisit our friends fondly viewed as the opposite of the Do No Evil guys of MTV, our friends in Menlo Park aka, Facebook. Its very difficult to judge Facebook but at the same time its very easy to judge what they are up to.

You take 2 leading carriers, you bundle free data(Zero Rated + free basics) , you give free WhatsApp + FB + you potentially have access to location data via your app, you have all the phone numbers and voila you have a living breathing data set. Here are some of the things that could be interesting when you have that information.

You come home, FB most likely knows, home, work , other places of interest, based on app location settings or phone GPS or carrier data. How and why is this scary from a privacy stand point? Google also supposedly has this info, not really. What they don’t have is your contact book/relationships ala WhatsApp and further segmentation data based on groups its Members their FB profiles and their demographic data etc. Even though for the record FB says it doesn’t do any of this stuff.

So if 5 friends go to lunch, all have WhatsApp, all have FB, all are at the same location at the same time. FB has that point of interest, info on those 5 people. FB now also knows the demographic info on the people, it also knows hypothetically all the others that frequent that restaurant. It also knows times of day pictures are uploaded. If you are a cheapskate and using the restaurant WiFi, it also knows start and end time of your session to let them estimate how much time you and others spent data that you consumed, activities that you did, status updates or pictures or both, did you tag people? it is building up FBs reference library on you and your ecosystem of relationships. You just handed over your personal data, by just hanging out with friends and now every one in your circle of relevance is exposed to this potential data harvest.

It can build dense relationship and thus decision trees (for later marketing/re marketing to you) of people place, interactions, usage, connections and pretty much every thing else you can choose to mathematically co relate. (Hypothetically speaking). Speaking of co relation take a look at this and be inspired to do some thing interesting with it

What its missing is an equally deeper level of localized data. Not to encourage some one from building a data layer that helps FB or any one else violate privacy, but if there was a Shopify style local plugin of all restaurant menus, and online orders and payment info, that added to the stream of FB info would drive a large scale suggestions business model for FB then perhaps ordering, delivering, via partners of course, or resell that info.

With payments being launched inside of WhatsApp in India already, what if FB/WhatsApp already knew, or was location aware and offered you deals and discounts and in-platform shopping? There go all the coupon, discounting folks, along with bank cards and their offers.

It already knows who your friends are, who you spend time with where you eat together, so with 10 phones present in a room with WhatsApp or FB on them , how difficult is it for FB to figure out; frequency of connections and time spent + activities and locations where people meet and were together. Plus the gold standard of every interaction, “repeat behavior”. If any one can mine that, they are sitting on gold.

Imagine the privacy implications of snooping or knowing where you were, who you were with and how frequently and at what intervals ☺

You have 2 choices as developers & as companies, get in the data game, every ones looking for locally relevant data, if you can find, organize, structure and setup data, these companies will come and buy you or you data or license it, it’s a cheaper option for them. Again not saying you should help build anti privacy companies, but you get the idea of the possibilities data has in both realms. You have the tool and the means to deploy them. You have a loaded gun so to say, know how to nurture it, till the day you need to use it. Unlike what I saw this morning on my drive to work.

Loaded Gun In Pocket

Imagine the impact of in(platform) FB-WhatsApp payments and shopping, if you could or you already have the biggest mobile financial wallet, wouldn’t it be easier to just piggy back off you. If Google’s Lense project is any indication of what is to come in AI, soon I wouldn’t need to know the name of any thing I wanted info on or shop. But what about local items, their local availability? I couldn’t just point towards a Peshawri Chappal or a Qorma plate and expect Google to spit out relevant info.

It will spit out some info, but you need to be in the business of making that info relevant so when they come and open the flood gates in our market for shopping, retail, e commerce, it is your data that powers their stack. If not you have wasted your biggest competitive advantage, i.e being local yet doing nothing with it.

Uber is here, arguably Ali Baba and all are coming too, but where is the urban addressing data and orders delivered data for Uber eats to launch for instance. Are you working on it?

Not like the Uber launch has been any thing but a series of mis-steps from the launch press conference to how they are setup in this country, but their loss is your gain.

Ali Baba is supposedly in state level negotiations, instead of waiting and hoping Ali Express products come to you cheaply flip the coin and see what information resources they will need when they come to play here, look at and investigate what their history has been.

If you paid attention to Jack Mas Davos interview, he said that the Ali pay financial services card or a persons credit standing on Ali Baba is sort of a secondary financial services system in the absence of a credit score, and in rural and urban settings where families don’t know each other they use the score to determine suitability for marriage based on credit worthiness and character. Can you think of sub applications of data in this context? What that means is, if Ali Baba wanted they could launch the largest digital marriage service or credit check service. If they wanted that is. They already have the data.

I started with a list because I want you to go and reflect on what you could be doing vs what you are doing and what the big boys are doing. Now think of Google Assistant and Google Home, Also think of FB & Chat Bots and Augmented Reality and think of what you could be doing in the realm of AI, NLO, Communication and Data to help make profound difference in the cities, communities and areas you live in – at a national and regional level and ultimately globally.

That should be your starting point. Look around you, see what the global guys are doing, if they aren’t doing any thing, then again, you are the product because you haven’t figured it out yet. A lot of wholesale changes are going to come to the ecosystem. Be ready, be agile and make some money at it. But first please be self aware, no one is going to buy an other me2 product or service, very unlikely, unless it has a treasure trove of data.

38 Ceos? The Interesting case of our very own Alternate Facts

For the last three days roughly, there has been a positive sentiment around a lot of foreign Ceo interest in Pakistan. I for one actually missed the news item initially but later saw variants on official FB Pages, Media outlet sites, TV and last but not lease a frenzy of “fwds, via  Whatsapp”. Most interestingly there was a list of 38 CEOs floating all over the Pakistani Internet ecosystem.

Whilst there is, will be and continues to be long and short term FDI into Pakistan the way this story was laid out or en cashed by the powers be, did not make sense.  For one, there weren’t 38 CEOs. There were 13 Chief Executives/MD/Heads representing 12 Different organizations.

Further there were 19 Additional people from one organization only, so unless they operate in 19 countries and each had an independent CEO & P&L, just a cursory glance shows that the optics of the media releases did not align with the data on the ground. No body is taking away the fact that whom ever brought these various leaders and senior executives is truly doing us a service. No less had any one only, more than glossed over, it would be evidently clear, that in affect 38 companies were not represented, they are not coming to open shop here, at least not all of them. We continue to mis guide our selves by presenting our “alternate facts”. There were and are 38 people who came..

One of them already has large scale operations in Pakistan in the tech space. Further, excluding Pakistan these 38 people were from 15 countries or markets.

Had the news focused around the fact that we had arguably 2 billionaires + a few Multi 100m$ folks in town along with an even more interesting mix of individuals, minus the fact that not all were CEOs. There were guests of the visitors + embassy staff + other friends of friends in the list. Goes to show proof reading is a dying art form.

I took some time to put a list together of all the Public Domain data available on the foreign non Pakistani origin visitors. You can get a snap shot here Who was A Ceo?? . Some of the highlights were Mr Alessandro Benetton of  Bn$ Fame most easily recognizable because of the Benetton Group . When you look beneath the surface you quickly figure out where their business interests lie beyond private  equity. On closer inspection “The family’s other interests run from Atlantia, the company which operates the majority of Italy’s motorway toll roads, to airports in Rome, Florence and Turin and a share in 13 of the country’s main railway stations. They also control Autogrill, the roads and airports caterer”. So its befitting that they met the Pakistani motorway moguls too. (https://goo.gl/2TPHPh)

Sadly we were busy talking about quantity over quality. There was some interesting visitors, like the son of the EX Prime Minister of Spain, whose father is on the Board of a Pakistani origin company along with being on the board of News Corp that owns 21st Century FOX and other news and programming assets. He is listed in the documents as a “Silent Programme Manager, Spain” . Ive frankly never heard of a silent program manager before and couldn’t lookup a reference from google or the Project Management Institute , I suspect when your dad is an ex PM , his  connections came in handy  to craft such a curated title. No less 10 points for trekking it across even if it was for the ride or the adventure trip on the side as per the press releases earlier. The best part of all this, is that we had 38 people show up, who will take some thing positive back with them. If we only had an equally sensible government apparatus to capitalize on this visit as was needed vs for their own data trolling before election year.

We have the ex Banker turned Chairperson of the Aussie Billionaires  Gaming and Entertainment holding company. Rob Rankin, who works for the Billionaire James Packer. Packer, who has a net worth of about $5.2 billion according to the Bloomberg Billionaires Index. He was born into an Australian media dynasty started by his grandfather Frank Packer and expanded by his father Kerry Packer.

Since inheriting the family business at 38, James Packer has quit most of the media investments inherited from his father and expanded into casinos in an attempt to capitalize on Asian consumer spending. So a Casino bosses point man in Pakistan? Now that makes for an interesting cover story. Perhaps he came to meet his usual high rollers in Pakistan:) I guess our tax payer money will be adequately  utilized for more roulette.

Then we have the CEO of Huawei, not a surprise because of our CPEC items, but clearly big news. Global head of Huawei making the time to come across clearly means business engagement at some level + his family to come along, I guess to meet with our first family. Almost looks like a family outing to scope out the sites for what ever future industrial complex/housing etc is to come. There is a fairly dynastic feel to what they might be out to accomplish here.

On the subject of housing we the Sinolink World Wide developers son in the mix. With almost billionaire genes he also makes for a perfect candidate for the trip. Ceo of Snam from Italy from the energy sector also a hard hitter and heavy roller. So the focus is fairly evident, transport, construction, energy, high tech and if we include Kolon group of Korea we bring in heavy manufacturing too (Plus they will fit right in , they settled with Dupont over industrial espionage of the Kevlar technology and paid over $250m+ in a $900m+ award ( https://goo.gl/GbWicT ). Minus a few under whelming investor types, like the adventure tour operator from UK Mr Cookson or the Ninja Van Ceo from Singapore who I think came along for the sight seeing trip which the larger group went on earlier. There was a banker from Italy too. Who at a closer look is fairly connected to all the Italians on the list so seems like “friend of a friend” who came for the ride. No less in his own right comes from money/wealth and a fair bit of board positions back home.

All in all the 13 key folks are on the money, what their motivation is or could be, is up for debate, the way this circus was orchestrated for optics, could have been done better. Here is to hoping that these alternate facts turn to real factual execution on the ground and these folks just didn’t come for a short R&R break to Pakistan. I, like many others, will be heart broken if this does not translate to some real deals resulting in some real economic benefit. Here is to hoping that the alternate fact machinery takes a hiatus and to thanking the people who continue to do good work for building Pakistans image across the world.

 

 

 

Anatomy of an FMCGs Marketing & Sales function

It has been a very enchanting learning experience to interact and analyze FMCGs and the people who work within. There are 2 basic types of FMCGs operating in Pakistan. The foreign & the local. Today we will look at the anatomy of the foreign one.

Pakistan is a country with over 120M potential clients , where; by being armed with Nielsen style ratings and data along with structures similar to the Vatican and the Pope   the old guard and the new are marching to conquer the largest pie of the bread basket in the country.

It simple, they dip into their roster of either Swiss, Dutch or American bag of goodies apply some content marketing & sales strategy tips from India, Bangladesh, Srilanka and/or UAE , mix it with some good old fashioned ego , lo and behold you have the starting point for strategic marketing managers, brand managers, digital advertising pundits and sales executives at the average Foreign owned Pakistani based FMCG.

For good measure you ensure you only hire from the top 5 Institutions of higher learning in the country, further for diversity you ensure you develop a process that is forced to select socially mobile and financially upward candidates in their early and mid twenties. The idea being that they maintain the image of the company as progressive. In most instances the salaries on offer don’t even come close to the fuel consumption in daddy’s SUV that these 20 some things use. These 20 some things are victims of their own success (family’s social financial success) its not their fault, they are being groomed because they fit a profile and a check box for NA 250.

With minimal exposure and the reinforced belief that they now work for a leading FMCG corporation a few things happen, they are on track, typically to develop a god complex directly proportionate to the brand and its total sales plus its total marketing spend. As if, it were directly proportional to their novice ego and attitude. In reality they get planted in to a decent global brand, with massive production marketing machinery at the helm, they are just put in the driving seat of an auto pilot jet. If they were marginally trained they wouldn’t need to do much more than keeping up appearances.

This was great and worked in the semi digital, print, tv age. In the age of the Internet, the only thing digital and sales strategists in Pakistan know or are aware of are Facebook and likes. Cursory analysis based on data shows, that the top 20 brand for the top 5 FMCG players pay to buy likes from non-authentic users. The quest in the early years was to have a Facebook page with a million likes. The question to ask is, does any one go to NYC and buy a shirt that says I LIKE NYC? or do they go to NYC and buy the shirt that says I love NYC?

So we went through the like phase and craze, now the talk is shifting to digital engagement, mobile engagement and second screen. If we were to get a genie that allowed us a glimpse of the network traffic from the marketing & sales departments of these FMCGs we could probably attribute these buzz words to the searches being conducted to look cool and aware of the situation. Since we don’t have a genie, we have to rely on interactions, market sentiment and the thought process of the people in charge of these brands and their sales strategies and funnily enough their LinkedIn profile and other social interactions scattered around the web. So how and on what terms do these folks operate?:

  • The belief that no one ever got fired for hiring the biggest baddest global agency (so lets play it safe always)
  • Most of these Brand/Sales people have spent some part of their careers at one of the agencies thus a natural disposition to lean a certain way. *(Ensure future employment or a referral to an agency’s customer in Dubai or Malaysia)
  • Every body knows some body who has a friend in an agency who knows some body whose really plugged in to digital. Plus they recently came back from ____________( insert country here). Truth be told they probably worked at agency as an intern in the Western hemisphere but clearly they know how to market them selves and they ran into the CEO/CFO/COO/MD of the firm some where and come highly recommended because the dads play golf or the moms belong to the same gardening club.. You get the picture. Not all employees were created equal.
  • In this business its about who you know and how well you know them(and if you are already past the embarrassing stage of agreeing to figure out what their share of the total marketing spend is going to be, for going your way). Once past that, the agency of record is at least guaranteed a tenure equal to the person on the receiving end of the transaction. Take the total number of FMCGs and then list their brands, then list the number of tier 1 and 2 agencies with foreign affiliations, you can roughly see that there is enough room for every agency to sponsor employees within brands to develop a pretty decent book of business.

The flip side of this coin has Audit, Governance, Corporate Excellence, Ethics etc that each of the FMCGs & their hand books provide an annual refresher on, whilst in the real world more than half of the work the way its awarded to agencies and consultants  would never make it past the RFP stage. If it was purely linked to merit as opposed to whom you know and how well you know them. Clearly not every one is playing this game but a vast majority of industry and particularly the FMCG Marketing and Sales functions who make large scale whole sale spend decisions are surely guilty of indulging. You say, but every one every where else is doing it, so what if the ego maniac brand managers get a few Dubai trips out of this? I say, we are being anti competitive and we are teaching these 20 some things that its ok to act carelessly with their shareholders money, in the end its not their money to spend, its fiduciary and moral responsibility to spend it correctly with the best intent.

Given the vast majority of the professional schooling is around them understanding how valuable they are in the ecosystem and what it means to be a large scale advertiser, they never end up learning the raw business tenants of marketing or sales, in both cases majority of their leg work is done by slaves at the respective agencies or consulting firms, who will gladly do this outsourced thinking for their clients against a guaranteed retainer. Seemingly a win win for all.

The CEOs of these organizations are generally happy as they came from a similar pedigree and background, they them selves are typically a few years short of retirement and they aren’t going to fix a system that’s generating billions of rupees of top line every year. They want to be remembered as the CEO that was a great leader not a reformer. Clearly it doesn’t matter.

With this vote of confidence every sales person and marketer then becomes a subject matter expert from packaging design, to consumption numbers, to activation data, to market segmentation to competitive analysis & go to market strategy. Wow that’s a mouth full, but its true, the ego translates to a serious know it all state. That’s where the ever-pleasing agencies and consultants and corporate finance yes men come in. They say yes, what is being preached is like a gospel from the Vatican so it must be pure. What every one fails to see that the reason for the success of these brands are the brands them selves and their global/regional heritage and recognition and presence in Pakistan for years. It most typically has nothing to do with any of these sales marketing types. Perhaps if you completely eliminated them you would arguably do better by placing an AI machine that took decisions based on historical data or some real data for a change. Once again not all sales and marketing folks are created equal, its because of those un-equal ones still being in the fold that some semblance of real work does get done.

Next comes the reward phase, constant in house recognition, foreign meet and greets and regional learning sessions. Eventually throw in a regional rotation, job function change, keep the employee over seas for a few years then bring them back , reintegrate as one with a successful tour of duty and now destined to eventually run the corporation/function.

Repeat the cycle enough times and you are ensure that you keep on churning out similar people for the leadership fraternity. No one person in any of these organizations can change this, but it is a travesty to see our brightest minds get sucked in to this game. The really smart ones will break through over time and use this to catapult into global roles with other true global multinationals, not their plagued local counter parts. For most of the ones who remain, they will go through a 15 – 20 year rotational cycles split in to a few boxes, first they will go to an agency, then to a competing FMCG, then to Industry and then eventually back to FMCG most likely a local one where they may end up as the outsider who can teach the local FMCGs to engineer breakthroughs. Hopefully local FMCGs don’t fall for this, they are doing a host of things better, smarter and more well thought out than their foreign cousins. Onward  and forward.