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Monday, June 20, 2011

Hidden Profits: Get Terrified By The Fear of Failure

Safaricom’s hidden source of HUGE profits that business journalists missed

By Special Kumekucha make money correspondent

Note from Kumekucha Chris: It gives me great pleasure to introduce this brand new weekly column by a man who makes a living helping businesses find hidden profits. ENJOY!!

As I write this (20th June 2011) all signs are that we are headed for a serious recession in these shores, indeed yours truly agrees with Kumekucha Chris that it is going to be so serious that it will easily be unprecedented in terms of its effects on the country called Kenya. This makes the following question rather appropriate just now.

What really makes the difference between a really profitable business and one that never comes anywhere near its’ full potential? I will give you a clue; it is something that both Kenya’s Safaricom and the internationally acclaimed Google have in common.

It is simply this; both these enterprises are not frightened of trying out new things all the time. In my time I have met many entrepreneurs who are terrified of risk—any risk. Admittedly if you are reckless enough to keep on trying new things on your already profitable business you are bound to fail many times and naturally this is very embarrassing. Indeed if you carefully examine both Safaricom and Google, you will discover that both businesses have had very spectacular failures in their continued “reckless” efforts to always try out new things.

Remember Safaricom’s Simu ya Jamii? This was the scheme where people were supposed to make money running telephone kiosks. Some remember this much more painfully than others in that they invested cash into it and lost it. Former Safaricom CEO Michael Joseph himself acknowledged in an interview with The Star that the scheme was one of the company’s biggest failures.

But out of 100 reckless failures comes one spectacular success that cancels the failures and gives you untold wealth and profits. Oh yes, it happens all the time.

I am sure you’ve heard of a company called Google haven’t you? Google is a $US100billion company that was started from nothing barely 11 years ago. Here is what the founders Sergey Brin (37) and Larry Page (38) had to say in September 2003 in a talk they gave to hundreds of Israeli students at a high school in Israel.

“Have a healthy disregard for the impossible… You should try to do things that most people would not.” –Larry Page.

“The only way you are going to have success is to have lots of failures first.”
-Sergey Brin

Google is not a $US 100 billion company for nothing and they have done a lot of interesting “reckless” things. But today I will focus closer to home and on Safaricom. Safaricom is a Kshs 200 billion company that is easily the most profitable enterprise in the history of East and Central Africa. The company also has some very humble beginnings.

Many of the reckless things the company has done (many others remain a secret) have failed but amongst the few reckless things that worked are the Mpesa money transfer service and the Okoa Jahazi scheme where subscribers can borrow airtime.

Think about it for a minute and be very honest. What would you have thought if somebody came up to you and suggested that you dish out cash loans to all and sundry. In fact small amounts of cash (Kshs 50/-) meaning that you have no way of recovering it incase they default. I mean I can always borrow airtime and then change my sim card and get a new line the next day. Of course the fact that they found a way to make it work is because somebody entertained the ridiculously reckless idea and gave it some deep thought. Get my drift?

The wild okoa jahazi idea has not only earned Safaricom billions in extra profits since it was launched in 2009 but it has also greatly shielded the company from fierce emerging competition and price wars that would easily have wiped out a “less reckless” company.

Let’s look at some numbers so that we put this Okoa Jahazi thing into proper perspective. We are told that the day the service was launched on 15th April 2009, it got 1.7 million users. Multiply that by Kshs 50 and you get Kshs 75 million. The 10% charged for the service gave the company Kshs 7.5 million on a single day. Hidden profits that came from nowhere. And remember that the company did not have to put any money down. It just offered its’ services on credit (and at that time the service only served online calls and did not work with calls outside the Safaricom network). Another blogger estimated at the time of launch that this service was going to give Safaricom a minimum of Kshs 1.83 billion a year. Some reckless profits from some recklessness don’t you think?

Interestingly nobody has analyzed the contribution Okoa jahazi made to Safaricom’s current profits? Our business journalists all missed it in their detailed analysis of the company’s profits.

Now that is what I call hidden profits.

This week’s lesson: The thing you should fear most is the fear of failure. You should be terrified of it. Absolutely terrified.

Get tips of how you can apply the contents of this post and other current business news to dig out hidden profits from your own business. Get my FREE special report How to find Hidden Profits in your enterprise.


Anonymous said...

Just wonderful, you are doing a great job Chris.


Anonymous said...

snake oil... a something for nothing mentality...Create real wealth and stop peddling this nonesense....

Anonymous said...

anon@ 3:52

I want to be sure that I understand you. You r saying that Safaricom and it's billions of profits is snake oil and nonsense?

M. Pesa said...

I love talking about business once in a while away from our murky world of Siasa duni. One very local person I admire most when it comes to business is a down to earth "village" chap called Stanley Kinyanjui about 45 years old.

Unlike so many influential Kenyans in business today, this guy came from very humble roots in a tiny village deep in rural Kiambu County. His father was not a fat bellied politician who stole from the mouths of dying poor and he never went to one of the posh/snobbish/elitist schools in Kenya.

In simple words, he's a self made man who drinks in those washed out rural pubs you find in Kiambu selling Senator kegs at 50bob.

I know many people are scratching their heads wondering who this guy is. Let me tell you we have all seen the sweat from his brow since he's the man behind those hideous billboards you see along the streets and his company is called Magnate Ventures.

It's rumoured they have around 3,000 billboards in East and Central Africa but since Kenyans have big mouths and love to exaggerate stuff, why don't we put the number of those billboards at just a partly 1,000?

It's a well known fact that billboards charge around Ksh 110,000 per month (u can call any and ask) but let's be conservative yet again and say they charge at 70k each and rarely are those billboards empty.

So that works out at making Ksh 70M per month gross. Not only do they erect those "ugly" billboards but also do street lighting Ads, Road signs, bus shelter Ads, Branding, Electricals, printing, wall wraps etc. So add another "silly" Sh 30M on top of the previous 70M and some one is laughing all the way to the bank.

Hope someone will be inspired (instead of the usual hating) by this humble dude of this great company that in my opinion rakes in over Ksh 200M per month. And since elections are just around the corner, who knows, the cost of those billboards may just shoot up!

Mwarang'ethe said...

anon@ 3:52

I want to be sure that I understand you. You r saying that Safaricom and it's billions of profits is snake oil and nonsense?

6/20/11 4:31 AM


When the USA was a developing nation, it needed to out compete Old Europe.

To do so, they put NATURAL MONOPOLIES like Safaricom into what they called REGULATED MONOPOLIES.

By so doing, they were able to ensure that, EMPTY PRICING/PROFIT WITHOUT PRODUCTION like Safaricom did not make their economy uncompetitive in the world market. That way, the USA came on top. Umenyita hiyo?

Today, nations led by idiots, and and a lot of IVY LEAGUE educated FOOLS, let FOREIGN monopolies like Safaricom charge hell and Heaven and thereby, make our whole economy uncompetitive in the world market.

And, now, instead of analysing how these unregulated monopolies are retarding our whole economic development as part of the ongoing ECONOMIC WARFARE, we teach their models in so called business schools.

The question is, where and how shall these graduates create businesses when the same monopolies their idiotic and illiterate teachers teach about, have created a TOLL BOOTH economy?

The bigger question is, what is the purpose/aim of this education?

We ask:

(a) Do we go to school just to get jobs? Or,

(b) are schools part of training for war?

When Africans will be wise, they will re-organise their schooling so as to be part of the WAR we are in. Today, no one even has any idea what our schools are for.

When we shall wake up to the reality, we shall realise that, today, our education is education for SERVITUDE. Look around Africa and you will see a continent full of educated SERFS.

Anyway, as Bob would sing:

Build your penitentiary, we build your schools,


Anonymous said...

Aiseeei!! I hear you but what's your real problem?

Must you remind some of us about the bitter facts of life and the business world when one gets the that sinking feeling generated by a hounding voice from early childhood, school or college days -If you're a high achiever, the sky's the limit?

Why can't you just let the sleeping mbwa-mtu (canines) that we are lie so that we don't come out sniffing, tracking and vying for the blood of our competitors?

And why are you trying to turn the humble man, down to earth "village" chap, one in the nature of 45 year old Stanley Kinyanjui into a target for our vicious rivalry and the usual warped competition?

Don't you already know by now that we, Kenyans, are not only proficient at big mouthing everything in any which way, and 86% of us, yes Kenyans, suffer from from the exaggeration syndrome, while the others have a predisposition for it?

Anyway, hats off to the entrepreneurial skills and characteristics of smart Kenyans like Stanley Kinyanjui and other business men and women who have adapted to seeing things simply 50% and seeing things fully 50%.

Whether we like to admit it or not, it's hard for the majority of us to know what it takes to be like Stanley Kinyanjui among others as well as finding the ways and means for the sustainbility that goes with the territory.

Most people would rather prefer to work on some else's plantation than take the risk.

Case in point, corporate plantations, perks and alluring baits are too hard to resist.

Anonymous said...

Mpesa stop playing us, Stanley of Magnate has big business that is doing well but he's one of the most arrogant business person I know in this country.

Anonymous said...

Oh! Boy... Puiiiiiiii! Prrrrrrr!!! i just had to FART!!! after reading Mwarang'ethes post. Nothing doing really, as usual nothing NEW that we don't already know under the sun.

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