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An Entrepreneur's Journey in Africa

 
12/6/2004
HBS MBA Monique Maddy, who started and then closed a telecommunications business in Africa, has interesting insights into the challenges of entrepreneurship in developing countries.

When Liberia-born Monique Maddy (HBS MBA '93) started Adesemi to offer users throughout Africa a wireless system of pagers and public pay phones, she believed that tremendous pent-up demand would launch her company to success. But in fact, the company eventually had to be liquidated, a casualty not only of internal miscalculations but also of the bureaucracy, corruption, and environmental factors faced by start-ups in Africa and other developing countries.

But not all was lost. Maddy told her story in the memoir Learning to Love Africa: My Journey from Africa to Harvard Business School and Back, published earlier this year. And now she is working with global corporations to overcome the environmental obstacles she faced and to create a business development that will bring a wide range of consumer products and services to middle and lower income segments of the African population.

From her Cambridge, MA, home, Maddy shares her thoughts via e-mail about bureaucracies, challenges, and opportunities presented by Africa.

Cynthia Churchwell: How did you learn to love Africa? Did you not love it in the beginning?

Monique Maddy: I have certainly loved Africa since the very beginning, so what the title of my book is really meant to convey is that I grew to appreciate Africa more, after viewing it through eyes, and as a professional, trying to help the continent achieve economic development. In the process, I have come to realize and better appreciate that the African people face overwhelming odds, sometimes brought about by natural disasters, but more often than not, by failures of their own governments and other ostensible agents of economic progress.

The fact that they persevere, in the face of such overwhelming odds, and with such dignity, is indeed a feat to be admired, particularly for those like me who are fortunate to live in a country where so many of the advantages that we have to improve our lot in life—education, healthcare, political stability—are so often taken for granted. I also have grown to admire the civility of the African people, especially how they care for and about one another, their resilience, and their eternal optimism. All of these traits as well as the continent's physical beauty make Africa irresistible.

Q: What prompted you to write about your entrepreneurial experiences and what can managers and other business professionals learn from your story?

A: I wrote about my entrepreneurial experience in part because I found it therapeutic. When one goes through seven years from a start-up to a growing company, there are a lot of enlightening experiences that one does not really have time to reflect upon and to learn from because everything moves so quickly. In assessing what happened to Adesemi, I realized that there were many valuable lessons to be learned, both from things that went well and those that didn't turn out as hoped. Even today, four years after we liquidated the company, I am still learning and applying those lessons to my current undertakings.

Furthermore, I have always found it to be immensely instructive and rewarding to learn from other people's successes and failures, which is why I felt that those planning to travel along a similar entrepreneurial path, whether in a developing country or a developed one, would find a lot of valuable insights by reading my story. It is as much a universal entrepreneurial story as it is an African entrepreneurial story.

I think that the most important lesson that other business professionals can learn from my experience is the importance of persistence and perseverance to the success of a business or any major undertaking, even in the face of overwhelming odds and countless naysayers. There were many times when it would have just been easy for my management team and me to throw in the towel, but we learned that by simply hanging on for another day we could often change things dramatically, often for the better. Such is the nature of a start-up, no matter how much one plans. These twists and turns and wild fluctuations are also a part of what makes the entire experience so exciting.

Q: Knowing first hand about volatile environments in African countries, why did you decide to pursue operations in Tanzania?

A: Well, actually, Tanzania was and still is one of the most stable countries in all of Africa. This was a major factor in its selection as our first country of operations. Moreover, we needed to identify a country with a tremendous market need for telecommunications services. Tanzania, with about 26 million people at the time, had fewer than 100,000 phones, with long waiting lists for phones to be installed. The government's telecommunications company, the monopoly operator at the time, could not keep up with the demand; hence we knew that there was an immediate need for what we had to offer: reliable and affordable telecommunications services.

Q: You encountered various management issues early on such as limited resources and low morale. How would you coach others in similar situations who are new to management?

A: First of all I would tell those who go to business school to listen when the professor tells them that human resource management will be the most challenging aspect of managing a business. Even though we were dealing with new and relatively complex technologies in a developing market, the technical challenges paled in comparison to the personnel issues that we had to contend with.

We learned that by simply hanging on for another day we could often change things dramatically.

In a start-up, especially where financial resources are limited, there is not much room for error and hiring mistakes can be the most costly. Every new hire can affect in a positive or negative way the entire dynamic of the team. Therefore, it is extremely crucial that those people brought into the company early on not only have technical and business skills, but people skills as well, and the temperament to deal with the extreme uncertainty of a start-up. It is not a path for everyone, and it is also a factor of where one is in one's life. Some of the people that we initially hired would have been perfect in a big company environment, where their jobs were clearly defined and predictability was the rule rather than the exception. Unfortunately for them and for us, in a start-up environment it is "all hands on deck," and often the chef has to be ready to temporarily take over the duties of the captain if that is what it takes to keep the ship afloat. Likewise, the captain has to be ready to roll up his or her sleeves and become the chef, if that is what is necessary.

We had the additional challenge of dealing with a very international workforce. Each nationality brought his or her preconceived notions of what it should be like to be managed. Not everyone is in favor of inclusion when it comes to decision making. Some people just want to be told what to do because they are looking to you, as the manager, for guidance and they expect you, as the president of the company, to know what is best. It is more of a parental relationship. If the parents look lost or ask the children what to do, there is confusion and uncertainty. A good manager has to understand these and other cultural nuances, and make the necessary adjustments in his or her management style.

Q: You describe the ineffectiveness of organizations such as the World Bank and the United Nations. Do you recommend any strategies for companies to navigate governmental and nongovernmental bureaucracies?

A: When working in developing countries, particularly in Africa, it is very difficult to avoid government and nongovernmental bureaucracies. Unfortunately, and despite heaps of evidence, many of them still do not understand that the private sector, not public bureaucracy, is the engine of economic growth.

I would advise any private company working with these agencies to limit their engagement with bureaucracies to only that which is absolutely essential. Governments should be concerned with creating the type of investment climate (rule of law, healthy and well-educated people, good physical infrastructure, favorable tax structure, respect for private property, and so on), that leads to private investment. Organizations such as the World Bank and the United Nations should limit their activities to assisting governments in this area, rather than attempt to become economic players themselves. When they do intervene in the economy as players, all they really succeed in doing is "crowding out" other, more efficient and more qualified investors and economic agents.

Q: What do you see as the greatest challenges managers face in pursuing business ventures in developing economies, in particular, Africa?

A: The biggest challenges are the deficiencies in the economic or competitive context. Businesses prefer to invest in countries where factor conditions (i.e., human resources, capital resources, physical resources, administrative, information, and scientific and technological infrastructure) are reliable, the legal elements (i.e., rule of law, property protection, open competition, absence of corruption) are in place and enforced, and there are related and supporting industries (i.e., potential suppliers of inputs to their products and services). The lack of all or any of these creates a huge disincentive to private investment. In developed economies, all of these factors are typically present, as well as the demand conditions (i.e., the market), so the best companies, or those best capable of meeting customer needs, will thrive and others will be weeded out through the competitive process. In developing countries, by contrast, often there are many distortions and deliberate government interventions interfering with the market or competitive process essential to capitalism. Unfortunately, under these circumstances it is not so much the companies that know "how" that survive, but those that know "who."

Q: What structural changes do you think would have the most impact in eliminating these obstacles?

A: The adoption and enforcement of the right regulatory reforms and investment policies can go a long way towards improving the investment climate in developing countries. There are successful examples all over the world that have proven this already, and the most successful cases have been in countries where democracy prevails and governments can be voted in and out, based on performance.

In Africa there are encouraging signs that African governments are ready to take action in this area. A case in point is the New Partnership for Africa's Development (NEPAD), launched by a number of African Heads of State in 2001. NEPAD is a commitment by Africa's most forward-looking leaders to the African people and the international community to put Africa on an irreversible path of sustainable growth through a combination of good economic, political, and corporate governance.

Q: What do you think are the greatest opportunities that firms have to enter markets in Africa and affect positive change?

A: I believe that there is a lot of potential for companies to make money by serving those customers at the bottom of the economic pyramid. By this, I mean the hundreds of millions of people in Africa and throughout the developing world who live on less than two dollars per day. These people have basic consumer needs and collectively they have a tremendous amount of disposable income. Those companies that can find the means to service these markets in innovative and profitable ways will not only have the opportunity to make money for their shareholders, but they will also be in a position to help these consumers move up the economic pyramid, expanding further the market for their products and services.

For a long time it has been my contention that global corporations and very poor consumers have far more in common than the latter and development aid agencies. This is because global corporations have a vested interest in their consumers becoming wealthier so that their purchasing power and market sophistication is increased. By contrast, such a trend on a worldwide scale signals the demise of the global aid business as we know it.

The technical challenges paled in comparison to the personnel issues.

For this to work, however, requires good governance as well as good policies. My company, Adesemi, was targeting this lower income market segment and demand for its telecommunications services was tremendous; however, the Tanzanian government's policies toward Adesemi and other private investors were not favorable. As a result, we could not see the economic justification, nor the value of expanding the company's operations across the country.

Finally, African governments must encourage entrepreneurship and bring it out of the official economic market into the mainstream. It is private businesses, both local and foreign, that generate the jobs that will lead to higher standards of living in these markets. Foreign corporations that partner with local entrepreneurs to extend their market penetration are best positioned to take advantage of such reforms.

Q: Tell us about a few of your biggest surprises, disappointments, and lessons.

A: My biggest surprise was learning that having a captive market for one's products and services is not enough if the other factors of the economic context are not present. In business school, we take a number of factors for granted, including the rule of law, the efficiency of the market, and the physical and institutional infrastructure that makes capitalism function smoothly. In launching a start-up in a developing country, I learned, much to my surprise, that no matter how much pent-up demand there is for a particular product or service, if the conditions to invest are not favorable, those products and services will not be able to reach the consumer, or if they do, the cost of getting it to them are too prohibitive and risky, no matter how high their willingness to pay.

Realizing that the technology exists to conquer many of the Third World's problems, but that the infrastructure and policy framework for resolving them are often lacking, is a particularly disappointing finding, especially in the twenty-first century. The cost in terms of missed opportunities and, in the worst cases, extreme human suffering, is prohibitive. Therefore, one major lesson that I have learned is to only target those markets where governments have made a serious commitment to uphold the rule of law, to ensure fair and honest competition, and to invest in their people (e.g., health and education) to create an attractive workforce.

Q: What are your current business interests and future goals?

A: I am currently attempting to bring together a number of major global corporations from a variety of industries to formulate, fund, and implement a business development that will allow us to target a wide range of consumer products and services to middle and lower income segments of the African population.

The lower income segment alone is about 600 million people strong in Africa with a combined annual purchasing power of $219 billion, much of which is channeled today in the unofficial or parallel economy, outside the official economic system, another reason why the official per capita income figures on the continent are so low and do not tell the real story of the market potential of the population. The initiative is called the Global Private Sector Initiative for Africa (GPSIA). GPSIA's goal is to enable participating global corporations to make money in Africa, but to do so in a way that supports local entrepreneurs, expands the markets for their products and services, and enables local consumers to move from the bottom to the middle of the economic pyramid, creating a virtuous economic growth and allowing the beneficiaries to become key contributors to a society that is built and sustained by the middle class, and more effectively integrated into the global economy.

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Cynthia Churchwell is a business information librarian at Baker Library, Harvard Business School, with a specialty in the international economy.