Nigerian startups will perish for lack of data

by | Jul 4, 2016

Before the Nigerian in you starts screaming “God forbid”, chill first. Question: How important is data in business? Answer: as important as growth is to that business. Can a business survive without data? Yes. Can it make progress without it? No. Survival isn’t the same thing with progress. And just because a business has been around for a long time doesn’t mean it has progressed.

“Where there is no data, the people perish.” When Chude Jideonwo said that during a panel session at the 2016 Social Change Summit, many of us laughed. In that context, it was funny. Earlier, Ory Okolloh highlighted the shortage of data-driven news reporting from African independent media. Another panelist, Chris Ihidero, said that the lack of data and empirical evidence is crippling innovation in Nigeria. Chris was talking about Nollywood, but I feel that statement applies to more than that. The popular thing in Nigeria is for people to work on speculation or intuition (like I just did with this statement). Making data-driven decisions is not common around here.

Here’s an example to buttress my point. In an ideal situation, I would underscore this article with figures that tell you how many internet startups have been founded so far in Nigeria since 2012. Then I would tell you how many of those startups have survived and how well or badly they are performing now. But this is not an ideal situation; I don’t have that data. Heck, it took a lot of calling and guessing to even write an article about how many startups are still active from 440ng’s first cohort. In an ideal situation, there’d be a readily accessible database with that information. You know, like Crunchbase. But there isn’t, so I have to make do with what I have. This dilemma I face everyday as a writer and reporter is what many startups and business entities in Nigeria have to deal with too.

Data management and the two types of data

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In research, there are two types of data: primary data and secondary data. Primary data is data that you get first-hand; that means you did a research and collated the results yourself. Secondary data is data gotten from someone else’s work. In business, data (and proper data analysis) is important because it helps you make decisions rooted in reality.

Now, data management requires many things, some of which include infrastructure and adequate skill. A company needs to have the facilities required to store the data. They also need to have the manpower needed to manage and optimise it. Nigeria doesn’t have a significant possession of both infrastructure and skill. Data science isn’t a popular career path in this country. But if you’ve thought about it well, you would have noticed that the companies that have access to data and make data-driven decisions in Nigeria are usually banks, telcos and fast-moving consumer goods companies (FMCGs). They have the infrastructure and manpower. 

In a market where a customer can easily close an account or port to another line, you have to be careful when making decisions. You can’t just speculate. It’s so easy for a customer to go from one bank to another, or to throw one SIM card away and get another one from a different telco. There’s the need for banks and telcos to know all they can about their customers. For that to happen, they invest a lot in research and consulting. During my youth service year, I was told that an average Nigerian bank employs around 30 different types of consultants. Also, because much of what the banks and telcos do is digitized, customer data (e.g. spending habits and subtle preferences) can be easy to access. Plus, they have the financial resources to continue gathering this data and making decisions based on it.

The problem facing Startups and SMEs in Nigeria

Startups and SMEs also need data to improve their products and customer experience. By using data, they avoid making decisions based on hunches and speculation. Startups can get the data they need by growing it organically (primary data), or getting it from secondary sources. Both ways will consume resources, but one is more cost effective. Secondary data saves time and, often, it saves money too.

The Nigerian business environment is secretive. In fact, it’s a cultural problem. People on this side of the world would rather keep to themselves than share information. It’s difficult to find businesses that are willing to and comfortable with sharing their numbers. If you’re not one of the shareholders, you’re not welcome to find out how their business is doing. And we can’t blame them for that. Private companies are under no obligation to share such information with anybody they don’t have to. But still, the Nigerian culture of secrecy makes matters worse. So, big corporations could have large data and still not share with the startups and SMEs.

Another scenario is one where the startups in need of data have not made any attempt to approach the big companies (who have relevant data) for help. Perhaps, if they do, they could come to a mutually beneficial agreement.

What to do, what to do?

So far, some startups and SMEs in Nigeria have survived, some have thrived. They’ve been able to make do with what they have. But the world is changing faster than ever, and making data-driven decisions has become more vital to business than it has ever been. We have to find a way through or around this problem.

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Also, consider the fact that Nigerian startups are beginning to attract more investors than before. It’s not as if Nigeria is a cash cow for some of these investors, it’s just a very strategic place to start. Conquer Nigeria, and you can spread to other African countries (why does that sound like colonialism all over again?). Investors like to work with data. So to attract more of them, startups will need to have data, or at least be set up in a way that makes data easy to collect.

Like I said earlier, startups could approach big companies for data. If a big company is willing, then I figure that the transaction will require the startup to give up something. It goes without saying that you should be careful not to give up something that is too costly.

Another way of getting data is from data vendors. Startups could reach out to advertising, market research, consulting and consumer research firms for data. Some examples that come to mind are Insight Communications, 141 Worldwide, Alder Consulting, Nielsen Nigeria, and PwC. There are a host of others that a Google search or two could produce.

Another idea, this time for the big companies, is open data. For example, MTN Nigeria has data that shows how much people on its network spend on internet data every month. If this data is made open, an edtech startup could use it to determine what states or parts of Nigeria to focus their efforts on. That is just a rough sketch, but I’m sure you get the point.

In the long run, Nigerian startups must become more data-centric. Hotels.ng is one example of a Nigerian startup already moving in that direction. I reckon there are more. Your startup may not have enough customers and activity to draw data from right now, but this should be somewhere in your plans. By the time your customer base and operations have grown, you will already have a structure in place that allows you draw data. And that, my friends, is the way of the future.

Photo Credit: reynermedia via Compfight cc

David Adeleke
David Adeleke

I’m always open to feedback and new ideas.

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Olu
Olu(@woleo)
5 years ago

Your title is scary, but that it the truth. Businesses are going to die for lack of intelligent data. Thanks for sharing this insight and giving us something to ponder on.

Oluwasetemi
Oluwasetemi
5 years ago

Our journey to Data Driven Decision is still in the embryo considering the infrastructural demands and the likely manpower to drive this. Data scientist are rare gems. Analyst are not available moreover the startups must be willing to take this step. Thanks for the awareness.

Oluwasetemi
Oluwasetemi
Reply to  David Adeleke
5 years ago

We need to start by implementing data gathering mechanisms in all we do! Our system must have entry point to gather genuine information. The target of most startups would be fund to sustain and not means to gather data since in Nigeria you need formula a sustaining formula to be alive. We need guys like Wikipedia, google founders who will open whatever that they are implementing to accommodate free entry and functional processes. Then we can use the data to make decisions. *my view*

christianjombo
christianjombo
5 years ago

It’s a challenge my agency has faced countless times. Most times we come up with a brilliant idea but lack data to validate it. We thought we were alone. Thanks for sharing.

Christian Jombo
Christian Jombo
Reply to  David Adeleke
5 years ago

For me, I think the solution lies in a level of cooperation between our industry players. Granted, their data bank gives them competitive edge. But for the sake of the growth of our tech space, I think collaboration on their part will help the industry in no small way. Who knows, they may even come to rely on what other players build based on access to their data.

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