Summary:
- In his book Trust, Harvard Business School professor Tarun Khanna argues that entrepreneurs in growth economies must not just create, but create the conditions to create. The article asks which conditions they should take responsibility for and narrows that responsibility to the barriers between the solution and the customer.
- That gives entrepreneurs two jobs: creating a solution that works and creating a system through which people can afford, access, use and trust it. The second job begins by reframing barriers not as blockers, but as design constraints.
- Drawing on Mo Ibrahim’s expansion of Celtel across Africa, it shows what this looks like in practice, and suggests four responses depending on the constraint: partner with someone better equipped, build the capability yourself, design around the need, or organize what already exists.
- The central lesson is that entrepreneurs need not fix every weakness in the environment around them, but no solution reaches a customer until someone takes responsibility for the conditions that let it be consumed.
Learning to Create Markets, Part 2
In growth economies, a useful solution isn’t the whole challenge. The first part of this series, Where Market Creators Begin, examined how starting close to customers helps entrepreneurs uncover barriers, test responses and learn which can be repeated to reach more nonconsumers. That leaves another question: When the enabling environment a market needs is weak or missing, which gaps must entrepreneurs address, and how far should their responsibility extend?
In this second part, we examine what market creation may demand beyond the solution itself.
In growth economies, some solutions fail because they don’t work. Others fail because the environment in which they’re built doesn’t work.
Harvard Business School professor Tarun Khanna explains why in his book Trust. Entrepreneurs in growth economies, he argues, can’t rely on the usual foundations: laws, regulators, reliable information and the confidence between strangers that makes transactions possible elsewhere. Where these foundations are missing, “the entrepreneur must not just create,” he writes. “She must create the conditions to create.”
In African markets, where the institutional and infrastructure gaps are enormous, the question is: Which conditions does the entrepreneur take responsibility for? It doesn’t mean fixing every broken road, unreliable power grid or absent institution. It does, however, mean taking responsibility for consumption.
Entrepreneurs therefore have two jobs. The first is creating a product or service that works. The second is creating a system people can depend on to afford, access, use and trust it. A solution that works but can’t be consumed has solved only half the problem. Planning to get to the airport and only getting halfway there doesn’t do you much good.
The second job begins with a shift in perspective: reframing barriers to consumption not as blockers, but as design constraints. Treated as a blocker, progress appears to depend on the environment changing. Treated as a design constraint, it raises a different challenge:
How might the product or business model work within the environment as it exists?
Celtel’s expansion across Africa, led by founder Mo Ibrahim, demonstrates this in practice and suggests four ways entrepreneurs can respond, depending on the constraint:
- Partner with someone better equipped
- Build the capability yourself
- Design around the need
- Organize what already exists
Partner with someone better equipped
Before Celtel could operate a mobile network in any country, it first had to secure the government’s permission. In 1998 it was a company almost nobody had heard of, asking to serve an entire country. It had money and technical skill, but lacked licences, local knowledge and standing, none of which an outsider could acquire quickly.
So Celtel entered markets with partners that possessed these capabilities. In Malawi, the state-owned Malawi Development Corporation and a local development bank became shareholders. In Tanzania, Celtel joined a consortium that took a minority stake in the state telecommunications operator and assumed management control, while the government kept the majority.
Celtel brought capital and network expertise. Its partners brought the local standing and institutional access needed to enter each market.
Build the capability yourself
Where grids were absent or too unreliable to power its towers, Celtel generated its own electricity, refuelled generators and replenished tower batteries while coordinating the maintenance and logistics needed to keep its network running. At the start, the company had only five employees and possessed network-design capabilities, but lacked the operating capability this system demanded.
Mo Ibrahim closed that gap by recruiting experienced leaders, investing in training and offering competitive salaries to attract qualified African professionals home. By 2003, Celtel employed more than 1,400 people, only about 50 of them non-Africans.
Celtel built the network and developed the local expertise required to operate it.
Design around the need
Western telecommunications relied on monthly contracts, which assumed regular incomes and reliable systems for collecting unpaid bills. Many of Celtel’s prospective African customers lacked both. Rather than wait for incomes to rise or build the required credit systems, Celtel redesigned payment around customers’ lives with prepaid scratch cards sold in denominations worth only a few dollars.
Customers bought as much airtime as they could afford, when they could afford it, and Celtel was paid before providing service.
Celtel didn’t solve the absence of consumer credit. It redesigned mobile service so that credit was no longer required.
Organize what already exists
Prepaid cards made airtime affordable, but Celtel still needed to put them within reach of customers. Rather than rely only on company-owned stores, it sold them through informal retailers: small shops, kiosks, market traders and roadside sellers embedded in local communities. They already had the locations, relationships and customer traffic Celtel needed.
Instead of building an entirely new last-mile distribution from scratch, Celtel organized the existing one and introduced a new product for people to sell.
How far does the entrepreneur’s responsibility go?
Some constraints are beyond any one company to change. That doesn’t release the entrepreneur from responsibility for consumption. It narrows the question: What can still be done while the constraint stands?
In Sierra Leone, civil war threatened Celtel’s ability to operate. When rebels captured the capital, the company evacuated employees, then returned alongside British troops on a UN peacekeeping mission, whom Celtel supplied with phones and service. Celtel declared its neutrality, and because government forces and rebels both needed the network, neither sabotaged its towers. The company soon became the country’s market leader.
Celtel didn’t end the war, build a private security force or wait for conditions to improve. It worked alongside those equipped to operate in the conflict and found a way to keep its network available.
Insecurity remained, but Celtel turned it from a reason not to operate into a constraint it could work around. It took responsibility not for the conflict itself, but for what the conflict threatened: the availability of its service.
Responsibility doesn’t mean building everything yourself. It means ensuring that each barrier between the product and the customer is addressed. Capital helped Celtel build towers and develop operating expertise, but money alone couldn’t provide local standing, eliminate the need for credit or create last-mile reach. Each constraint required Celtel to think differently about the problem it was solving.
This is what it means not only to create, but to create the conditions to create. An entrepreneur’s first job is to build a solution. The second is to make its consumption possible.
