Kenya's largest mobile network provider may shutter its innovation incubator

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Safaricom, Kenya’s largest mobile network provider by subscribers, may shut down its innovation incubator due to diminished internal support, according to TechCrunch. Safaricom created Alpha in 2017 to create new revenue streams for the telecom, with a focus on building out applications that would utilize mobile networks.

In establishing Alpha, Safaricom has attempted to develop new revenue streams through innovation, just as US telecoms have done in recent years. For instance, both AT&T and Sprint operate foundries, which are intended to attract enterprise customers by helping them develop solutions that utilize core networking services.

Innovation initiatives have become a key part of winning over new business, particularly for new connectivity offerings, because enterprise clients may be less knowledgeable about potential use cases. AT&T generates new business through its foundry by helping enterprise clients ideate, go through proof of concept, and eventually roll out IoT solutions, according to Chris Penrose, president of IoT solutions. 

By contrast, because it operates in less developed technology markets, Safaricom aimed to build business segments from the ground up rather than supplement operations of existing enterprises. Alpha tried to build on the success of M-Pesa, a payments platform launched by Safaricom in 2007, which boasts over 22.6 million active users and contributed around 31% of revenue for Safaricom’s fiscal year 2019 (ended March 31, 2019). But striking gold twice has proved difficult.

In 2016, Alpha produced Little Cab, an attempt to compete in Kenya’s ride-hailing market. In 2018, Alpha produced a social networking platform called Bonga, which aimed to supplement M-Pesa by focusing on “pay, play, and purchase,” Alpha’s head of product told TechCrunch.

But neither venture was mentioned in Safaricom’s most recent annual filing — though they may have fallen within the “other services” revenue, which made up around 5% of total revenue. And following the departure of several internal champions of the incubator, continued support for such ambitious projects appears to be tenuous. 

Telecoms need to shift their approaches to innovation according to the maturity of enterprises in their target market. Safaricom’s innovation approach worked well in the beginning with M-Pesa, because it was one of the first movers in digital payments targeting the Kenyan market.

But that same approach didn’t work 10 years later, at which point Kenya’s tech economy — heralded as the “Silicon Savannah” — had matured, attracting a burgeoning startup scene and big tech firms such as IBM, Intel, and Microsoft.

Safaricom’s innovation model doesn’t seem to have kept pace with its evolving market, as it has yet to transition from its ground-up innovation model to one based on partnering with mature companies.

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