I am often approached by people with fabulous ideas for on-line businesses in South Africa. Many of the ideas are great and the demand should be phenomenal because they solve the structural problems in both our Macro and Micro economy, but South Africa is a capricious mistress when creating successful online businesses.
As with off-line businesses, perhaps more so, you need to develop a strategy for the business. Setting up an on-line business goes beyond the idea and the development of an on-line application. You need to do some research; understand the technology opportunities, realise the investment implications, consider your revenue models, target markets, marketing, sales channels, creating competitive advantage, operations, scoping and application development etc.
Here is a check list for Innovators and Entrepreneurs when thinking about starting an on-line business in South Africa.
1. Understand the technology opportunities
Technologies are emerging every day, social media opportunities abound, mobile apps are prolific and any of these could contribute to the success or otherwise of your business. The use of technology may be determined by age, wealth levels, education or even the life-stage of your audience.
The cost of setting up an on-line business are minimal, for several thousand Rand a web developer can build you a website, a payment gateway will cost you some more, but the biggest cost in on-line businesses in South Africa is the cost of customer acquisition and service.
It’s easy in the US when you have ninety million Internet users to attain critical mass, why you could sell gold fish furniture on line and make a fortune.
3. Revenue Models
There are countless revenue models to choose from in South Africa, including the subscription model (which rarely works in SA), eCommerce, Advertising, Application Reseller, Data Aggregation and many more.
The revenue model depends on a variety of factors from your audience, your network, your product, geography etc.
It is also important to understand that while there have been some notable exceptions, most online businesses experience a very slow flat start, picking up incrementally until they reach a tipping point at which stage growth becomes exponential. This may take a number of years. Until you reach this growth phase, your investment will be bigger than your revenue, and so you had better be sure that you have alternative personal revenue streams
4. Target Markets
This includes market research into the current Internet psychographics and demographics in South Africa which are incredibly dynamic. Three years ago I started an on-line business for the township market. I threw everything at it and … nothing. All of a sudden, this year, after it is was all but forgotten, my market is sophisticated enough and has sufficient access to the web to start using it.
Business to Business markets react differently to Business to Consumer markets, niche audiences react differently to large generic audiences. How big are your target markets, where will you reach them, how networked are they, what does their risk profile look like?
Your biggest investment in an on-line business is marketing. The investment may take the form of money, resources, people or time. You need to decide how you are going to create awareness, educate audiences, drive them to your site, persuade them to buy etc.
In the past we used to say that “Content is King”, today we believe that “Search is King”. Unless your audience can find you on-line you are dead in the water. You need to ensure that customers reach your application when they are looking for what you have to offer.
In order to keep people coming back to your on-line business, it is often a good idea to provide them with value beyond their expectations. One way to do this is to create “communities of common interest” where you let users network with each other around subjects that are relevant to your industry. If you sell travel on-line, let them talk to each other about destinations they have visited.
Once again in South Africa, you are unlikely to get audience of a sufficient size to make these communities of interest self sustainable and dynamic enough to maintain your customers’ attention. You will need to manually manage these communities in order to ensure that there are sufficient members and that there is enough activity to keep it interesting. We often recommend the use of an Avatar whose job is to act as a “digital host” to your customers, creating blogs, starting discussion forums, and posting interesting articles etc.
6. Sales Channels
Sometimes, if you are lucky, the web is your only sales channel, but usually, when creating robust on-line businesses, you have to cross over into the real world. Sales channels can include online, high end strategic business development, direct face to face sales, partnership with complimentary services, channelling through organisational Intranets or sales through industry bodies, to name a few.
7. Creating Competitive Advantage
Strong branding is the key to online business success. Audiences must understand and relate to your value proposition. They must be willing and able to endorse you through their own (social or business) networks. They may need to interact directly with personality which is the brand through commenting, sharing, blogging etc.
Operational management goes beyond ensuring that the site is up and running, but could include product creation, storage and distribution networks or contract management etc. If your fulfilment doesn’t work in the real world, your on-line business is doomed to failure.
The modern web (web 2.0) requires that sites are dynamic, constantly evolving, changing and improving to meet customer requirements and to feature in the relevant search results. Content management is one of the most important ongoing operational considerations and a key factor in on-line business success.
People adopt and use technologies if they find them useful, easy to use and they make them look good. Considerable energy must be expended in identifying how and exactly why people are doing business on-line with you. User Requirement Specification and Functional Specifications must be drawn up in order to ensure that you don’t alienate customers as soon as they start interacting with your application.
I have deliberately left development to last. Development is like housekeeping, it is a hygiene factor. It will not make your site, but could very easily break your business. Choose your technology and your developer with care. I prefer to use local developers who are within “throttle range” so that I can actively monitor progress. I also like to have them on an SLA and a monthly retainer for the constant and inevitable improvements.
In conclusion, South Africa is ripe for Digital Entrepreneurs, we desperately need access to products and services which enable us to overcome infrastructure problems and to take advantage of the opportunities that the geographically and (almost) sociographically unfettered modern Internet provides.
It is not difficult to start a successful on-line business in South Africa, it is hard work which requires a lot of strategic thinking and investment, but it is well worth your while.
About Digital Bridges
Digital Bridges creates high performance organisations by unlocking the business value of the web. We create digital strategies, user requirement and functional specifications for Intranets, websites and web applications. We also develop and implement social media strategies and create powerful digital brands using eMarketing and Communication.
Digital Bridges is technology agnostic and partners with great technology companies in order to ensure that our solutions are fit for purpose and deliver on organisational strategy.
Digital Bridges approaches the web from a management consulting position and relies heavily on rigorous academic thinking as well as business experience. It is headed up by Kate Elphick who has a Law degree and an MBA from GIBS. Kate has spent the last fifteen years of her career on the business side of the IT industry with companies such as Datatec, Didata, Business ConneXion and Primedia. Her skills include innovation and growth through marketing, communication, collaboration, knowledge management, human capital, performance management, process engineering and BI.
Digital Bridges has a broad range of experience working with significant, successful clients in the Financial, Gaming, Tourism, Pharmaceutical, ICT, Legal, Airline, Professional Services, Media and Public Sectors.
To find out more about Digital Bridges, please visit www.digitalbridges.co.za or contact Kate Elphick on firstname.lastname@example.org.