Yusuf: Start-ups with Purpose-driven Approach Scale Faster

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Niyi Yusuf

Managing Partner, Verraki Partners, a business solutions firm, Mr. Niyi Yusuf, in this interview on Arise Television, speaks on the nexus between innovation and technology, and highlighted the barriers to innovation in Nigeria. He equally calls on the federal government to create access to markets for indigenous companies so as to boost creativity and innovation. Emma Okonji brings the excerpts:

 

What does innovation with technology really mean?

 Innovation with technology simply means newer ways of doing things that add value to someone. Innovation is commonly juxtaposed with invention, but innovation is not about invention. Invention is when you create something new that doesn’t exist while innovation is when you improve what you used to do in a better, cheaper and faster way to meet new and hitherto unknown requirements. In today’s world, advances in technology have enabled major innovations to the extent that technology is now not only an enabler of innovation, but a major driver and source of innovation.  To give some examples, let’s talk about mobility. In the past as it’s raining in Lagos now, if I need to go to the Lagos Mainland, I would call someone to ask if there’s traffic but today, you can check traffic conditions on your preferred routes on Google maps, and see where there is traffic and the fastest route to go, and even get specific directions on the route map. So, that’s technology in terms of journey management. Previously, if I wanted to flag a taxi, I would need to go out and stand in the rain or in some cases, make a phone call but today, you can order an Uber pickup right from the comfort of your house with real price transparency. Let’s use an example of banking. Banking used to be done in the banking hall in the 1970s using teller numbers and so on. From banking halls, we moved to ATMs, from ATMs, we moved to online banking and from online banking, we moved to mobile banking and now USSD banking. Today, banking is 24/7; anywhere, anytime and from any device. Take for instance the medical field. In Rwanda, there is a company called Zipline that delivers blood to hospitals in remote locations using drones. In Nigeria, we use drones for entertainment; to take pictures and do video recordings. So, really it’s around how we use technology to do better, cheaper, faster; the things we used to do and for me, that’s what you call innovation.

 

Are technology hubs emerging in Nigeria or is this wishful thinking?

 The right word is emerging. We are seeing green shoots that looks promising. If you take the Yaba area or district of Lagos, we have over 60 companies or start-up ventures in Yaba. Last year, Nigeria recorded about $178 million worth of investment in to start-ups. So, we are talking N64 billion going into about 148 start-ups, and more than 97 per cent of that funds came from outside the country and less than three per cent came from the country. So, if you measure it based on the number of start-ups, based on the capital going into these entities, even based on number of employees, I think we are at the beginning of something that is promising.

 

 

What is unique about successful innovations and what makes them successful?

 Start-ups and companies that are successful are typically those that start with why, that is, they adopt a purpose-driven approach in their business to solving real problems. We see that these companies usually achieve better outcomes, outperform their peers and create more successful innovations. Why am I doing this and what problems do I really want to solve? To give an example, in the early 2000s, whilst I was still in Accenture, we worked with Telnet and FirstBank to create Interswitch working with other banks. And what problems were we trying to solve? It was connectivity. Connecting the banks together and allowing for online and real-time switching of transactions. Because back then, we only had two banks that had ATMs. First Bank and Societe General Bank. Between the two, they had less than 20 ATMs and these ATMs were offline. Fast-track to today, we have more than 20,000 Automated Teller Machines (ATMs) in the country and they are all connected. So, that for me is a good example – solving and providing ability to switch transactions online across various channels.

Another product with a purposeful ‘why’ is Remita. Remita has been solving the problem of how do I pay and make transfers across my accounts in different banks. Most of these examples are FinTech based because FinTech started the journey well ahead of other sectors. So, companies like Flutterwave and Paystack have been very successful, have addressed the issue of how SMEs could be able to accept payments online. So, if you then use an Application of Programming Interface (API) from Flutterwave or Paystack, you just click and drop, and the SME is able to accept payment, cards, Unstructured Supplementary Service Data (USSD) in a secured manner online.

 

What are the factors driving innovations in Nigeria?

 I think there are a number of reasons why we have seen innovation boom in Nigeria. First, every problem is an opportunity. One of the factors driving innovation is technology, as technology is now more pervasive, especially mobile technology. With over 150 million phone subscribers in Nigeria with access to mobile phones with huge computing power, phones more powerful than the computers I used in school. Technology is now more affordable, accessible and available. The second factor is the demographic shift; Nigeria has a youthful demography and population of young people who are quite aggressive in terms of their entrepreneurship and what they would like to do; and who are also more social and mobile. A third reason driving innovation in Nigeria is the linkage with Nigerians in the Diaspora. Several Nigerians who schooled or lived offshore have now returned home with the knowledge, insight and experience that they’ve gained. They’ve seen what is good and so they’re here and are not settling for less. To create the sort of environments they are used to, they are tapping into linkages with investors offshore to bring about required technology transfers and supporting capital.  And finally, there is capital; looking for great ideas and looking for great returns. So, I think a number of these factors have driven innovation.

 

Asian countries such as China and South Korea have become leaders in innovation and patents filing. How were they able to do this?

Historically, the United States and European countries used to lead in terms of patents and Research and Development (R & D) but as at 2011, China became the highest filing nation, that is, in terms of people filing for patents. In 2017, out of the three million patents that were filed worldwide, 40 per cent were filed in China, which is significant. So, how did this come about? I think one is deliberate efforts from the government in terms of supporting R & D and providing grants to drive it. For instance, South Korea, in 2016 or thereabout, spent about 4.3 per cent of its GDP on R & D. US spent 2.5 per cent Israel spent about 4.1 per cent. Japan was the third at 3.9 per cent. So, we see a correlation between spend on R & D and the output of innovation and patent granting.

In addition, the South Korea government has invested a lot in research parks. There is the Pangyo Techno Valley, which is an equivalent of Silicon Valley, with about 66 hectares of land outside Seoul. The South Korean government spent over a hundred million dollars in providing infrastructure that makes the place worth living. Today, eight of the 10 biggest corporations in South Korea have offices in that valley and you also have over1030 technology companies in that area. When companies can cohabit in a convenient environment, they are able to do collaborate and do research that leads to patents. The quality of Science, Technology, Engineering and Mathematics (STEM) education is also a factor. Lastly is around the ease of doing business – Government makes it easy for those companies to thrive in those areas, and to also test their products.

 

What are the barriers to innovation in Nigeria?

The lack of a structured process to innovation is a barrier. Innovation is a deliberate process, never accidental. Unfortunately, most companies do not dedicate enough time and resources to support innovation. Secondly, Nigerians generally want quick solutions within a short time; we want results like yesterday but innovation takes a while. Again, some Nigerians have a morbid fear of failure, which usually stops people from moving forward or trying anything and hardly will you succeed at the first, second or third attempt. You just need to keep at it before you succeed. So, all these have led to the non-provision of resources; whether it’s time, money or people, to innovation.

A fundamental barrier we still face in Nigeria is the lack of investments in STEM education, which is in the areas of Science, Technology, Engineering and Mathematics. Technology innovation will be driven by technology and STEM education plays a major role in achieving this. With proper STEM education at the basic levels, we can begin to lay the foundation for pervasive innovation. In South Korea, kids learn software programming in kindergarten; but for most Nigerians, kindergarten is where we learn “A for apple” and “B for ball” apart from the 13 million of our youths that are not in school. So, if South Korean kids, from kindergarten already start programming, you can imagine what they will be doing at 18 years of age. So, we need to invest in STEM education, we need to provide the resources and then the government should provide access to markets. When we do all these things, we will remove some of those barriers to innovation.

What should the government do to foster innovation, and what more can be done?

One of the most important is the government policy on ‘Ease of Doing Business.’ To give you an example, we launched Verraki Partners in April this year as a new company. While registering with clients, the government MDAs were asking for a three-year financials/audited report, for a new entity. So, part of the ease of doing business is  understanding that there are established business corporations and there are start-ups. And for start-ups, we should have different criteria for assessment.  Second is access to market, which for me is more interesting than providing subsidies. There’s an Executive Order, EO 5 that speaks to local content and buying national but beyond national, we should create another that focuses on buying from SMEs. For instance, in South Africa, 16 per cent of all federal procurement goes to SMEs. In USA, 22.5 per cent of all federal procurement goes to SMEs via the Small Business Administration. In Nigeria, we have 37 million companies categorised as MSMEs, so, if we create a deliberate policy where 15 per cent to 20 per cent of our procurement goes to our SMEs, this will create access to markets for our small businesses and enable them to expand, get credit and grow.

Again, talent development, especially from a STEM standpoint and developing students or graduates who have deep roots in STEM, supported by their industry experience garnered during their Student Industrial Work Experience Scheme (SIWES) programme. Fourth is Internet Protocol (IP) protection. We see what happens in the entertainment industry where people steal intellectual work and deprive the owners of the benefits. We need to find ways to protect the output of research works. Lastly is how to assist to commercialise the output of the innovators. So, a linkage between the research team, the technology companies, the IP granting institutions and the market to ensure there is a way to easily commercialise IP. Take South Korea for instance, they have global giants like Hyundai, LG and Samsung, or even in China, where global corporates like Huawei, ZTE, AliBaba operates, and these are companies with operations in several countries of the world and they support research – they give grants to institutions, universities who carry out research. With the output of these research, they can easily commercialise the outcomes of this research via products that they launch on a yearly basis. Again, it’s about how we help to commercialise and increase the linkage between industry commerce, innovators and our research institutions – and I think the government has a role to play in midwifing that linkage.