With a background in financial management and business valuations, I have always been intrigued by ‘strategy’, the thing that ultimately sets a company apart from the next and probably, together with strong leadership, the main driver behind sustained value creation. In a series of interviews, I will be exploring the different approaches of different business leaders (all chartered accountants) to strategy.
I had a virtual interview with Yolanda Cuba, Group Chief Digital and Fintech Officer at MTN. What set out to be an interview on strategy soon became a masterclass in strategy as Yolanda shared her insights gained from past and present executive positions responsible for business strategy
Strategy gives direction
‘The biggest travesty is having the people and all the resources but no direction,’ Yolanda responded to a question relating to the importance of a structured strategy development process. She expanded by quoting one of her previous colleagues, a pilot: ‘Your strategy determines where you are going to land − when you start five degrees off to where your destination is, by the time you land you are landing very far away from your intended goal.’
The direction needs to be determined by your strategy. ‘Determine where you are going to play, how you are going to play, and how you are going to win.’
Yolanda emphasised two aspects in setting the initial direction, having an unconstrained thought process to find ‘where you want to land’ coupled with an aspirational element so that ‘you wake up every day and pursue the overall vision’.
‘Strategy is not a one-day affair, it is something you live with every day, being very systematic about it to ensure you succeed.’
Yolanda’s strategic toolkit
Yolanda stated that she does not have a specific methodology she applies but rather that she has been influenced by various thinking models. I did pick up three fundamental concepts:
Define your value pool – where are you going to play?
‘One of the first questions you need to ask is “Where are we going to play?” You must be clear which value pool you are going to go after – if you are not clear you are not going to get there, full stop!’ She references various influences in her thinking process relating to identifying your value pool. Among them is the structured SAB Miller model (where she was the Executive Director Strategy and Business Support from 2011 to 2014), in which you build in a guaranteed 70% success rate beforehand with a 30% delta for changing circumstances; the McKinsey strategic approach; and the Boston Consulting Group’s product portfolio matrix.
An example of this: Yolanda oversees the monetising of Ayoba, MTN’s instant messaging app for Africa. There are multiple potential value pools they can go after − e-commerce, advertising, being a payment enabler, to name a few.
The one that they ultimately choose becomes the value pool they will go after and the question then becomes, what is the market potential for that particular revenue stream. ‘If I look five years ahead, the financial services market in the digital ecosystem will grow from 1,4 billion dollars to 1,5 billion dollars to about 7,2–7,3 billion dollars in the sub-Saharan Africa region. So, is that the value pool we are going to go after or are we going to go after advertising, which will fundamentally change how we build our products and services?’
‘People who changed the game did the same by first identifying value pools − Apple started with the iPod, going after the music value pool instead of telecoms. Where are you going to get more bang for your buck – you need to articulate well where to play,’ she says.
‘On our financial services, fintech side, we think there is enough value to disrupt – we want our percentage of that value pool. In my mind, I am very clear I want to make sure 50% of the people that today are unbanked or financially excluded are part of the financial system in the next five years in sub-Saharan Africa. So, we need to address 100 million people that are unbanked; we need to come up with products and innovation that are relevant, specifically for those people. It is not saying when you innovate for a specific segment you are not addressing others, but you are focused.’
Define your execution approach – your ‘how to win’ must be granular
After defining your value pool (where to play) you have to ask, how do we win? ‘How to win is just as important as where to play, you need to define how to win your segment and your market and in a way that makes sense.’
Here Yolanda emphasises how input determines output. She gives an example: If you want a profit of R1 million you can sell 10 units for R100 000 or 100 000 units for R10, which will lead to a completely different approach to ‘how to win’. Your ‘how to win’ must be granular enough to be able to assure yourself some sort of success (that 70% referenced above).
She applies a value formula developed from a concept borrowed from a previous colleague revolving around users and usage − usage x frequency x intensity x value. ‘New users, current users, lapsed users, how do you bring them to your product? For example, someone who has never used a laptop before, how do you target that person differently from someone who uses laptops every day? What are your entry-level strategies and your medium-level strategies – the strategy should go deep into your users’ behaviour.’
Returning to MTN: ‘You will probably not see any outlandish products from us within financial services, but the simpler ones to make sure everybody is included. Everyone needs to make payments. Everyone has a need, especially in the lower ranks, for lending. Everyone has a need for investment, insurance and commerce. I have no doubt in my mind that by applying the value formula, our fintech business, MOMO, will become the number one fintech platform in sub-Saharan Africa.’
Value distribution – we shall be disrupted and we will disrupt
She goes on to reference Guy Kawasaki and his approach to value. In creating value to customers in the digital world where there is a lot of disruption and merging of industries, differentiation plays an enormous role.
Companies like MTN find themselves in an interesting space, as they are the disruptors in the financial services space and they have disruptors in the telecoms and messaging space, so they see both sides of the coin. ‘That is the first thing that one has to except − we shall be disrupted and we will disrupt − but you have to make a choice where you want to play and how sustainable is it.’
There are things they partner on and things they do themselves. ‘The thing about digital is recognising you don’t have a monopoly on innovation and actually being an enabler for other people and then participating in their value pool, opens yourself up for a lot of opportunities. Through Ayoba we want to create the most engaged social platform with the ability for anybody to put a micro app on our platform and expose it to 10 million users.’ According to Yolanda, the vertical integration model (à la Adam Smith) has moved to distributive value chains within ecosystems, choosing where you will participate and where you are going to let other people participate with you being the facilitator of them making money, and collaborating widely, sometimes even with your competitors.
Her philosophy is that when you create value through disruption and innovation, the value created must be lower than the incumbent cost and that value deferential must be shared with the customer. ‘Airbnb took away the burden of a formalised process − the value is cheaper accommodation. They will still take their cut but not make it more expensive, in order to be comparable to hotels. So, the value creation gain gets split between them and the customer.’
On sustainability, shared value and corporate citizenship
‘We derive our license to trade from the community − it is a core part of any strategy,’ says Yolanda.
She highlights multiple examples of how this was achieved when she was CEO of Vodafone in Ghana. ‘The first thing I did when I joined Vodafone Ghana was to change our vision – we want to be a leading technology company igniting Ghana’s digital revolution, leaving no one behind.’ She ensured that addressing challenges and their responsibility to the community became part of the business model and were not seen as CSR projects which tend to lose momentum.
Through the ‘leaving no one behind’ mantra they became aware that speech- and hearing-impaired people were not able to interact with them properly, and also of high data usage constraints relating to the need to use video phones more frequently. As a result, they introduced reduced data tariffs to the specific communities, learned to communicate in sign language, and allowed certain community development organisations to sell these packages to make them more financially sustainable.
One of Ghana’s main challenges is youth unemployment. In response to this, they developed a ‘proposition of teaching’. When you acquire certain bundles, you receive free videos that teach you new skills as well as free developmental content that can lead towards obtaining a formal qualification.
Bundles for the small-scale farming community included becoming part of closed user groups where communication is free. This included receiving information about weather conditions and empowering users with, for instance, current market prices and mitigating potential exploitation by the middleman.
‘That is what I mean by putting our social responsibility as a core part of the business model. It is my consumer team that is developing and selling and not my corporate affairs people. Through the real-value proposition to the community, we still made money from these products.’
On the implications of COVID-19
‘When the pandemic struck, our first instinct was to be more humane − what do we have to do to help people, our people, our customers and the general public – that is a thing really appreciated about MTN.’
Recognising that people are going to struggle with family members who are not on medical aid or do not have funeral cover, MTN started an internal fund. Other initiatives included the zero-rating of peer-to-peer payment (people still needed to transact and did not want to carry money). In terms of their messaging platform, Ayoba, even though advertising revenue has dried up, customers still received their allocated communication for free (about 600 MB per month). They also helped government by giving them free SMSs for information distribution, donating data to health care workers, and a lot more.
On a macro level, Yolanda believes there is a lot to learn for corporates, firstly around the decoupling of communication from location, secondly around the decoupling around work and location, and thirdly around productivity and location. ‘The biggest move is not technology − that was always there − it is trust. If you have a common purpose and you are able to clearly articulate the common purpose, then you must trust that the output will happen. It is a material mind shift – technology is only an enabler.’
Yolanda’s closing thoughts
‘What worries me most in South Africa is the level of education. The statistics are frightening. How are we going to have a society that is not left behind, that is going to enjoy the benefit of modern connected life? This means that society at large must be impatient with educational outcomes that are not appropriately equitably and fairly distributed,’ she says.
‘We are moving into this new world called the digital economy and we all have to make sure we are ready for it. To be ready for it, each one of us have to play a part − be that regulators or society at large, whether it is you and me as individuals. To capture the value for ourselves, we need to be ready and able to participate in this.’
She continues: ‘I believe regulators should roll out the red carpet and not the red tape. We are in an environment where technology is ahead of regulators. South Africa still does not have a 4G spectrum that has been auctioned. Connectivity is a core part of business and society and business must be able and have the appetite to invest in new capabilities and opportunities rather than sit with cash balances on their balance sheets.’
Yolanda concludes: ‘We are not going to have a digital outcome with analogue thinking. When we start thinking more digitally, ecosystems and partnerships and all those things will start going towards the outcomes we want.’
AUTHOR │ Christiaan Vorster CA(SA), SAICA Regional Executive