Originally Posted May 7, 2015 - Content moved August 13, 2015
At its core, a company or business is a group of people collectively trying to solve a problem in society in return for money. The definition of “problem” is quite broad in this context. There is nothing that people have not built a business around in one way or another, but there are problems that have yet to be solved.
If this is true, then in order to start a business, you need to first find the problem you are going to solve. For LishaBora, it was a sudden realization that everyone I talked to about feed for dairy cows complained about it or was rich enough not to care. Beyond that, they spent a disproportionate amount of money (sometimes more than what they earned) to feed the cow each day. Upon having conversations with people, I found there to be three main problems that manifested into one:
1. Dairy meal is absurdly expensive in comparison to the benefit that it brings. Another point to all this is that, yes, if you solve a problem people will pay for it. However, if you do it in such a way that people only marginally benefit, you are really just trading one problem for another. A farmer uses around three to four kilos of Dairy Meal each day to feed one cow, depending on the type of container he uses to scoop it with. (That is how they do the nutrient measurements for cows in rural areas.). One kilo of the cheapest meal I have seen from a producer on the market is KES 28. That means the farmer spends KES 84-112 per day. Mind you that this is often 1 of 3 things the farmer feeds the cow, others often costing either time, money, or both. On average, smallholder farmers (70% of the dairy production in Kenya or 5% of the GDP) produce 4-6 liters of milk per day per cow, some less than two. This milk can be sold on the formal market for KES 35 or the informal market for KES 50. That means, if they get 6 liters of milk, using just 3 kilos of dairy meal and sell it on the informal market, they get KES 216 (2.30 USD) per day per cow. If they use expensive dairy meal, sell on the formal market and still make the same yields they get just KES 70 if they are lucky.
2. Current feeds are of inherently poor quality. It is an interesting thing, growth. When a company grows, its management gets higher and higher off the ground. For example, how many times do you think the CEO of McDonalds stands in line with the regular people and orders a burger? I don’t know him. He very well may do it every day, but it’s unlikely. The higher off the ground they get the more their decisions are governed by the business rather than the impact or what their customers feel and think about the product. Pembe is probably the largest dairy meal company in Kenya no matter how you measure it. I highly doubt they are going to get down to the smallholder farmer level to get feedback, let alone implement the feedback they receive to try and change what they do to cater to those wants and needs.
3. There is a lot of mistrust in the market. Ask any farmer who is not making their own feeds and they will tell you that what is for sale in the market is very poor quality. Ask any vet or nutritionist and they will tell you the same. Ask the manufacturer and they will tell you it’s the best. They can’t tell you why, or what’s in it that makes it the best or anything at all about the product, not even the nutritional information, but they know it’s the best. This leaves everyone who uses it in the dark, turning the choice of dairy meal from logic into trial and error. To exacerbate the problem, companies change their products, shifting the goal posts for farmers. Farmers often buy a new product on the market for a while, and then stop. They explain that businesses produce high quality products to get early customers then reduce the nutrients over time to grow margins. I talked with Martin Kinoy who runs Nutramix, a company that does nutritional analysis and builds recipes for companies to follow when making dairy meal. It was an interesting conversation because he knows that people don’t follow the recipes he provides because they order things in the wrong ratios, and he knows, because he works for KEBS (Kenya Bureau of Standards) that there is zero regulation or accountability in the market.
So the problem is three fold: Cost prohibitive, Poor quality, and Mistrust. So the question then becomes, can we bring a product to the market that is cost effective, high quality and something people can learn to trust? Well, yes, and we are. While the first seems to be a question of product-market fit, the trust issue is a more interesting thing that we are going to have to overcome. While we have ideas about how to make it work, starting with (this may hurt) a foreigner bringing the product, providing people with a test to see if it helps them before they buy, encouraging people to talk about it to their (trusting) friends and possibly, telling people what’s actually IN the stuff! We are very excited about this product and so are the customers. We have gotten good reviews and everything seems to be on track. It’s all just keeping your head down and remembering the problem that you are here to solve.