A BUSINESS MODEL TO EMULATE

Last week I found out what it means to be “sick as a dog”. A combined bacterial infection and Malaria had me more or less bed ridden the whole week, wondering what it feels like to be healthy.

During that enforced leave I lay on my bed with little else than the TV to keep me company. My attention span was so short I never read a word other than the newspapers, hence my tight relationship with the remote.

I watched everything and anything. Drifted in and out of sleep, waking up to find the TV watching me.

In between bouts of self pity and perfunctory introspection, I wondered at the marvel of pay television DSTV. DSTV is the digital satellite television service of South African multi-national Multichoice. Multichoice in turn is a subsidiary of multimedia company Naspers.

In less than 15 years, employing a combination of improving content, ever cheaper technology and an aggressive and a farsighted expansion plan, for all intents and purposes DSTV now has a near monopoly hold on the pay television market south of the Sahara.

With an estimated 2 million plus subscribers in South Africa and -- I am only guessing, maybe another million on the continent, DSTV has a significant head start on any new entrant to the market – as GTV learnt.

But beyond the details one has to marvel at the textbook execution of their strategy.

It all begun in 1986 with a single channel analogue service, which expanded its programming offering gradually before DSTV was opened nine years later.

The natural tendency for our local pioneering businessmen is to curve out a part of a potential market and then seat back and rest on their laurels – in between buying four wheel drives, making trips to exotic destinations and generally making every effort to announce they have “arrived”.

But not DSTV’s parent company. One can discern a greater vision by the founders that went beyond subsistence to maybe even world domination. When your vision is bigger by default you become a bigger man.

In pursuit of the vision they have had to co-opt partners and even part with a share of the company. Our businessmen because their vision is very generally parochial they want to hold their business tightly around them and maintain total control. That has the inevitable consequence of frustrating growth and innovation.

Proof DSTV’s larger agenda is that the set up cost of the service has been coming down year after year.

In the lead up to the Evander Hollyfied-Mike Tyson bout in 1997, DSTV run a $1500 (about sh3m now) promotion, now one can sign on for less than sh300,000 for the same service. And this is with little prompting from direct competition, the intention of course is to lock down the market.

And despite the price cuts there has been a dramatic increase in content in ensuing years, which has provided more value for money.

In my other life I am an arm chair investor. I use a simple criteria to determine where I put my money. I like companies with dominant market positions which are leveraging their positions to record ever increasing returns on investment. The theory being I will benefit through dividend payouts and share appreciation.

The point is, the DSTV model can be emulated by our businessmen – though with the East African common market knocking that window of opportunity is fast closing. Our businessmen need to have bigger ambitions than feeding their families, buying flashy cars and being seen with little brown girls.

Our businessmen need to ditch the He-owns-a-shop-I-will-own-a-shop mentality. They need to choose niches where they can establish a dominant position nationally, regionally and even continentally, set aside their egos to forge partnerships that can propel the dream and develop an iron willed discipline to see the mission through.

There is hope.

There is a plant in Masaka that cans Obushera (millet porridge). It has seen its volumes increase steadily as the urban elite shift away from the roadside variety they find on their travels upcountry.

This is a competitive advantage that can be built up because there is a ready local market for the product and Uganda can act as a springboard into the region and beyond.

The question is does the proprietor’s ambition go beyond his immediate needs and wants? Is market domination in his plans? Only time will tell.


Published February 2010, New Vision