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When elephants dance with hounds

May 06, 2007 Strategy, Sunday Nation

Sir Richard Branson was in town recently, and everywhere he went he was received like royalty. How come? Not too long ago, we would have viewed him as a neo-colonialist come to exploit us, to take our business away, to expropriate profits, to hurt our national carrier, to prevent us from developing our own skills and capacity. So what’s changed?

Undoubtedly, the man is something else. He is one of life’s rule breakers: dropping out of school to sell records by mail order; and, in the course of a decade or two, constructing a worldwide business empire spanning media, telephony, beverages, and air, rail and even space travel! Today, the Virgin brand is one of the best known in the world, and Sir Richard’s personal fortune is an estimated 3 billion pounds.

Undoubtedly, the man has charisma. Famous for his daredevil escapades in hot-air balloons and his megawatt smile, he charmed Kenyans wherever he went. An acknowledged public-relations master, Branson kept his speeches short and punchy, and had countless photos taken with people queuing up for the privilege – including many of our CEOs. And personally, I can only admire a man who showed up to see President Kibaki at State House dressed in an open-collared shirt and trousers!

But Kenyans’ delight in receiving Sir Richard is not, I suggest, just about the man: it’s more about his company, Virgin Airways. Pretty much anyone who travels frequently by air in East Africa and beyond is fed up with the lack of choice on offer: routes monopolised by one or two carriers (if we’re lucky); cosy pricing arrangements; and customer service that is at best indifferent and at worst unacceptable.

That’s why we were welcoming the Virgin man so enthusiastically: for his promise of smiles, punctuality and efficiency – all at attractive prices. And Virgin’s ‘April Fool’ cut-price ticket offer certainly set the cat amongst the pigeons. The established airlines have been forced to respond. You can bet your last shilling that everyone is frantically examining what makes them competitive (or not): their profit margins; their cost structures; their service delivery; their operational effectiveness; their relationship with their customers.

And that is precisely the point of competition, and why we should embrace it: it puts the fear of an imminent demise in even the steadiest, most long-standing players. It forces them to rethink, to re-examine, to reinvent. It forces wastage, unnecessary cost and abnormal profits out of the system. It creates new interest in customers and their needs. And that customer starts smiling again, sometimes after years of abuse.

In industry after industry, we have seen the sweeping benefits of competition. In banking, there has been a revolution in charges, opening hours, delivery channels and tailored loan products. In telephony, there has been an explosion of voice and data offerings at previously unheard-of prices. Did we ever imagine that we could bank on a Saturday afternoon, or by SMS? Or that we could call America for a few shillings per minute? Oh no, the old monopolists who had those industries in their paws in yesteryear would have told you none of those things are even possible.

The best thing that happened to East African Breweries was the arrival of South African Breweries. The pitch battle that took place then was the making of our own brewer: it reinvented its processes and reconnected with its customers, and came out of the war a hard and lean player ready to take on all comers.

The best thing that happened to the communications industry was the arrival of the mobile, local loop and internet-protocol players. Millions of ordinary Kenyans are now connected, talking and exchanging, at prices they can afford. The old Kenya Posts & Telecommunications monopoly would never have delivered those things in a hundred years. The reinvented Telkom Kenya, having been tossed into the cold bath of competition, could yet emerge as a serious player if it can establish a meaningful bond with its users.

And so it is everywhere. Competition benefits the consumer without any doubt; but it also benefits incumbent companies – if they can respond and raise their game. Many a lumbering elephant has been taught to dance by a pack of hounds nipping at its heels and threatening to topple it over.

Our government must embrace competition in all its forms. Free competition will delight the customer, strengthen producers and fill the exchequer wherever it is allowed to flourish. But, crucially, it must be fair. The forms of competition we sometimes encourage in this country are the worst kind. We let loose those who evade duty, who scoff at regulatory requirements, who feed political godfathers and are protected in turn. A few benefit; the country is short-changed.

We need competitors in every industry; but we need them to be professional, innovative and above board. The other kind will be more ruinous than the old monopolists ever were.

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