“The essence of business strategy is choosing what not to do” Michael Porter, Economist, and founder of strategic management
Key facts:
- 2008 – Company launched
- Targeted device – Basic phone
- Market deployed: Zambia and Malawi
- Estimated number of end-users: 600,000+ as of august 2013
- Combined monthly average transaction volume: $ 25,000,000+ as of august 2013
- 2019 – company shifts strategy from being a “service provider” to “service enabler” and introduces a new financial technology spin-off called Tilt
The year 2008 in Zambia is best remembered on a political field as the year the country lost its sitting president the late Patrick Mwanawasa. Few would remember that 2008 brought about the easy way of transferring money from one part of the country to the other within seconds at a cheaper fee.
Prior 2008 money transfer was a struggle in Zambia. Post office dominated the sector however lack of presence in all corners of the country proved a struggle for end users.
Zoona changed the playbook. Agents were all over the country from Kaputa town to Solwezi town. Many youths were employed and everyone accepted the new concept. The company raised capital from reputable funders, raising capital within Zambia is always hard, but with the traction, Zoona was able to raise investment from impact investment funds. To fund the expansion roll out Zoona continued to invest in the company and started to expand outside of Zambia.
The Zoona story is one of the successful startup stories and a blueprint for both potential and existing startup companies. In an industry such as the financial sector creating a fan base for a new entrant is no easy task and the Zoona team did a job well done in this area.
The success of any business idea depends on value creation. What value are you building in the business ecosystem and how does it build service convenience for your target market are the two important questions any startup business should always ask themselves.
If the Zoona model was such a success, then what really went wrong? Why are there few consumers using their money transfer service today? Market dynamics, completion and business set up are some of the contributing factors.
- Change in market dynamics; Zoona solved the money transfer problem in the country. However, this was a short term need of the masses. The market dictated the need to bring onboard the unbanked population base beyond money transfer services. A store of value (wallet) was needed. Customers needed alternatives to bill payments and savings among other services. Product diversity is key for business survival in any sector. You cannot compete with one product only. Vodafone Zambia tried and ended up closing shop when the telecom companies reduced internet data package prices. What other product did Vodafone offer apart from internet data bundles? The former post newspaper is a good example of the need for product diversity. Apart from the mainstream business, the company runs a courier business and internet service provision.
- Market competition; in the beginning, direct competition came from Shoprite (Shoprite money) and Post office. Zoona won the battle as it had one competitive advantage-presence in all corners of the country. In came Airtel and MTN and Zoona was in big problems keeping its clients on its books. The two telecoms playbook was simple, go after Zoona’s strategic component in its ecosystem-the agents and be aggressive on consumer In the financial sector the key is controlling distribution and in this case ground agents are critical. In addition, the two telecom companies offered money transfer services at a cheaper rate in a complete mobile money wallet product with other built-in services. Competing against established multi-national companies is no easy target. The competitors could, for example, afford to run a loss as they injected more capital to penetrate Zoona market base. On the other hand, Zoona had no such luxury as a startup. As a startup business you need to always remember that once you have created value the larger better-funded business will look to capitalize on the value you have extracted. You need to ensure you are either growing at a rate they cannot catch you, that you have a true differentiator or you should be looking to actively sell to extract the value the startup has created.
- Business setup; Zoona as a business always had two customers. Consumers using the money transfer and Agents providing the service. The customer unit was the most known and had the highest volume of the above two factors i.e. market dynamics and market competition are both on the customer unit. As a company, the goal was to provide a money transfer in a convenient and secure platform to these On the consumer side the business had the choice to try and compete with better-funded Pan African companies or shift focus back onto its agents while pivoting to focus on the business sector. Most startups fail as a result of not knowing the difference between a business suicide mission and re-strategizing. Through the pivot into focusing on the business customer Zoona is very much alive and has launched a new brand called Tilt and it’s agents are now providing an interoperable service to banks and mobile wallet providers having successfully transitioned from a service provider to a service enabler. Zoona provides a platform for other service providers to better serve their clients. Talk of Atlas mara Tenga product partnership, Kazang, Mukuru, Zamtel and MTN mobile money partnerships. Zoona is also one of the players in the ministry of agriculture farmer’s FISP program with ZICB. Zoona is showing that pivots are possible, but what we still need to learn is can Zoona through Tilt create the systemic change in how enterprise payments are done in Zambia as they did for consumer money transfers.
Why are you in business and what market value are you building and can your capital base and structure retain this value once created, are the three startup questions that should always be remembered. As a startup once you create market value competition is a must and how you respond to that competition will determine your business survival. You may not use the Zoona money transfer product anymore but the next time you walk past a Zoona booth take note of the number of services they now offer and know when you pay or get paid by a company in Zambia this transaction could well be powered by Zoona.