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5 innovation lessons from Kenyan family owned businesses

Nakumatt Blue Label/CFM

Nakumatt Blue Label/CFM

A family business is a privately owned business where a member or several members of the family are involved in the running of the business. Research (National Base Survey 1999) has shown that FOBs account for up to 80 percent of all employment in Kenya. These businesses remain critical for our economic growth and have lessons about innovation we can all learn.

1. Innovation must address a need

The Kenyan banking industry had been dominated by banks that had profiled the ideal consumer that can operate a bank account and borrow money. This profiling was the norm and was acceptable until Equity became a bank. For many years Equity bank existed as a private business. Its ability to challenge the industry practice made Equity a game changer in the financial sector. Equity saw how the local mwananchi had struggled for many years without a bank account and access to financial facilities such as loans.

Equity filled this gap that existed helping it grow to be the biggest bank in terms of customer base in Africa (9 million account holders). Family businesses exploit the advantage of local know how to identify growth opportunities, a lesson that other non family businesses must look at. New ideas must address a need, must be understood and owned by the consumers and ultimately deliver commercial value to the business.

2. Our resources and assets are an ignored source of innovation

Many family businesses tend to look at what they have because of the constraints they face especially at start up level. Their limited choices force them to innovate. They adapt and make the best decisions they can as they go along. Established businesses on the other hand focus on what they do or their specialty, then new ideas are built on new resources that do not already exist within the business. There is an opportunity for any business to look at its unique capabilities and assets that already exist and leverage on them as a source of innovation. This means that businesses must constantly ask themselves what they can do with what they have.

A good example would be Nakumatt Blue label brands. As a retail business, Nakumatt looked within and saw an opportunity to use what they already have (shelf space and the network of stores) to develop a brand that will deliver value to both the customer and the business. Savings made through contract manufacturing and trade margins has helped the retail store price its products cheaper and grow its sales by an additional 5% (Ksh. 2 billion in 2014).

3. Trends cannot be ignored

Trends are key opportunity areas that point towards the general direction in which markets are developing or changing. By looking at lifestyle changes, a business can establish emerging patterns such as need for convenience & healthy living, patterns usually ignored or underestimated by the competitors. The advantage family owned businesses have is their ability to ride the emerging trends. According to Atul Shah, the Nakumatt MD, the basket value for shoppers is higher at night than during the day. This is attributed to the convenience of 24 hours shopping by busy customers who can spare time only after work.

4. Innovation requires an entrepreneurial mindset

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Family owned businesses are established by entrepreneurs. The founders created or innovated something that they later developed to realize commercial value. Keroche Breweries is a good example of a family business that was driven by an entrepreneurial mindset. Tabitha Karanja, the founder and CEO, saw an opportunity in a market dominated by a single player for over 80 years. She also saw a growing segment of the market that wanted a sugar free and affordable beer. Summit Larger delivered this unique product offering with a promise of 100 percent natural and sugar free beer. Keroche’s market share is about 5 percent but forecast to grow to about 20 percent in the next 5 years. Non family entities need their own intrapreneurs to help in driving innovative thinking at all levels within the organization.

5. Learning more from success than from failure

With only 20 percent of all innovation projects resulting to new product introductions, non family businesses remain cautious about disruptive innovation that may be costly with no guaranteed profits. It is true that not everything you try when innovating is going to work, but the probability to fail should not make failure acceptable as good lessons for future. Family businesses have only one option, to succeed. They take calculated risks and leave no room for failure. They understand that just because you must fail sometimes, it doesn’t mean that you should accept failure. They prefer to learn from success more than from failure.

By Senorine Wasike, Innovation Leader & Scholar 

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