Obinna Obienu, Chairman and CEO of IT World took a gamble on setting up technology business in Computer Village. The risk has paid off for Obienu who discusses the inflection points of the dynamic technology business. His exclusive interview that made the cover of this debut issue of Komputer Village Magazine is an insider’s survival guide inside Nigeria’s largest technology market that also offers useful tips for entrepreneurs.
Why did you decide to invest in the technology sector?
I wanted a business that had a barrier and at that time the barrier technology had to everybody coming in was knowledge. I didn’t want a business like I import cars, anybody can import cars, anybody can import eggs. I wanted a business that required some amount of knowledge.
If you want to be a painter for example, you are backed by talent. If you want to participate in software, you are backed by training or skill. So, I wanted a business that I could use my brains for. That was the first thing, profit, barriers and then also I wanted a business that I did not have to know the Secretary to the Government. I didn’t have to know Governor. I didn’t have to know any bank Managing Director. I wanted a business that if I started, I was good at it, it won’t matter whether I was a red Indian or black Indian. If you have all the fantastic software in this country, they don’t know Buhari, they don’t know anybody.
Even within Nigeria, people are buying products based on the quality of the product and not who is showcasing them. You do things in which you have an advantage. I felt I had an advantage by training, education and exposure, and I didn’t want to genuflect.
In many successful businesses in Nigeria, you really have to genuflect. It is either connection or being with the right people and oiling those kind of things. So that will be the motivation.
[quote font=”helvetica” font_size=”18″ font_style=”italic” bgcolor=”#” color=”#” bcolor=”#” arrow=”yes”]Even within Nigeria, people are buying products based on the quality of the product and not who is showcasing them. You do things in which you have an advantage. I felt I had an advantage by training, education and exposure, and I didn’t want to genuflect.[/quote]
Thanks for giving us insight into what motivated you. Before then, what were you doing?
I went to school, if I could start from there. I went to Federal Government College, Warri after which I proceeded to University of Benin and also University of Lagos. I worked in PriceWaterHouse as far back as 1986, and I joined First City Monument Bank (FCMB). I had a wonderful career exposure, foreign training, local training in FCMB. I worked across Corporate Treasury, Marketing, Foreign Exchange and then in 1992, I joined Federal Savings Bank (FSB) as the head of energy department, which later became (FSB) International Bank Plc in 1993.
I started a small company and started doing travelling agency business. I had always wanted to be on my own. So wherever I worked and whatever opportunity I had, I knew one day I will work for myself. I didn’t see myself as a career banker at anytime. I felt it was a vehicle to develop skills in running organisations, develop contacts because I was marketing a good product and I worked in a strong institution. So once I felt I had gotten the foundational contacts and I had gotten the requisite training and I had contributed my quota. I had won award for the Best Staff of the Year in the two institutions I worked for. I worked for FCMB and I was Best Staff of the Year in 1989. I worked for FSB and I was Best Staff of the Year in December 1992.
I went to FSB from FCMB despite a very good and encouraging career because I was part of a turnaround team and once that assignment was completed, I felt it was time that I used those kind of skills for myself.
The banks are filled with battalion of skilled people, so I wanted a place where with those skills, I would test myself. In a bank, something happens and there are 10 people, there are layers of authority, there are layers of skills. I worked with some people that had PHDs. Almost everybody in the banks in those days had First Class. I worked in a merchant bank where I was never a cashier. I was never an Operations Officer. So by the age of 24, I was involved in decision making at the highest levels of those banks and I left the bank as a management staff. I was in the first most senior management at FSB under thirty years, so I felt I had acquired enough experience and energy to do things for myself.
[quote font=”helvetica” font_size=”18″ font_style=”italic” bgcolor=”#” color=”#” bcolor=”#” arrow=”yes”]I spent four years,`94 to ’98, paying off the debts and liability of that company. That taught me a lesson to be more circumspect, to marry my enthusiasm with detailed skepticism of anything I am presented to.[/quote]
It has been a rocky road and I thank God that some of the challenges I met early in life and I learnt from them. My first investments were in finance. I invested in a communal combine finance and art foundation trust and we started by importing generators. We imported generators from a company called Forest City in the United Kingdom. We also imported vehicles, we finance trade generally and we made the error at the time in 1992 of investing heavily in various finance houses.
I spent four years,`94 to ’98, paying off the debts and liability of that company. That taught me a lesson to be more circumspect, to marry my enthusiasm with detailed skepticism of anything I am presented to.
In spite of all my training,in spite of all my exposure, I didn’t invest enough time in scrutinizing things before I did things. I didn’t invest enough time in the structure of the organisation and strategic thinking because looking back now, most of the banks have automatic credibility. The Central Bank of Nigeria (CBN) more or less ensures that you hear things like this bank is too big to fail, but when you are outside the commercial banks or the merchant banks, you can fail. Nobody gives a hoot. There are no big arms waiting to rescue you. There is nothing like share recapitalisation. You fail, you fail and you exit and whoever are the unfortunate depositors that have invested in you will just have to carry their cross.
So by ’98 when I had paid off virtually all the debts of the company single-handedly by doing contracts, by doing Local Purchase Order (LPO) and what you describe as “general hustling”, I decided that I didn’t want to do finance because I had seen the organised structure with proper share capital, Price Waterhouse on the system and I had gone through the structure, the other side has CBN support, the other side has clearing house and floating money.
[quote font=”helvetica” font_size=”18″ font_style=”italic” arrow=”yes”]The problem in Nigeria is that once you do something very well, everybody on the street joins you. I wanted something that prevents the whole world from joining because computer business had its strategic barrier, which is knowledge. And then, you also have to have innate marketing skills because it is the only business in which a product is obsolete in six months.[/quote]
I didn’t engage myself in complete strategic thinking. So it was a painful lesson but it taught me to be more circumspect. So that is the lesson I took from that challenging journey and one aspect I did well at, in which we made money that enabled us to pay all these money about 24 years ago, was in the aspect of trading. Throughout the time, we did some trading and we traded with generators, spare parts and that aspect was successful and I felt I had skills in turning a good product and buy and sell it, and turn it into profit.
So the idea was now taking those skills to computer. If I continued doing products like cars, there is no barrier. The problem in Nigeria is that once you do something very well, everybody on the street joins you. I wanted something that prevents the whole world from joining because computer business had its strategic barrier, which is knowledge. And then, you also have to have innate marketing skills because it is the only business in which a product is obsolete in six months. It is the only business in which whatever you are buying today, the price will only come down. If a model of Apple comes out now, until it leaves the market, maybe twelve months, it is only coming down. So even the buying decisions, the stocking decisions, you have to be smart, even though it looks like just shifting boxes.
Let me take you on a journey. People came into Computer Village to challenge us. Some of our competitors had loads of capital we couldn’t dream of. They would buy things like processors, because that was the structure of the business then. You see, each business has its dynamics and in those days it was clones because full systems were costing N200,000. We would make between N60,000 and N100,000. So the biggest business in Computer Village then was investing in components and for the customer to select which components we bring out in a system. Not quite a Compaq or HP or a Dell, but was close to it.
Talking about when the market was growing, you took a decision to invest in the tech sector. But why the decision to come to Computer Village?
Oh that is simple. This was where everybody came to get the value for money. The likes of Gafunk, Wiztek and others had grown to maybe just a hundred people when we came early 1999. So the big players here were Wiztek, our self, Gafunk and I didn’t feel that the competition will be as intense as going to Victoria Island. I also didn’t believe I should spend my money on fancy office. I spent my money instead on stock. I will spend my money on what I will call the presentation of the business. So, in Computer Village then, our first office was a N60,000 a year rent. Nobody was running after Computer Village then. People did not take it very seriously.
I once went to a company in Ikoyi, they asked me to fill a form whether I am suitable to sell their products and they were the big players. I didn’t think that it was wise to spend up, like I told you, I just came from a situation where I came out of a business, I won’t call it success, of a business challenge. Then I will now take the little balance money I had to do what? To pay big Victoria Island office? No! Many people who were from West African Coast were already coming here.
[quote font=”helvetica” font_size=”18″ font_style=”italic” arrow=”yes”]I didn’t feel that the competition will be as intense as going to Victoria Island. I also didn’t believe I should spend my money on fancy office. I spent my money instead on stock. I will spend my money on what I will call the presentation of the business. So, in Computer Village then, our first office was a N60,000 a year rent. Nobody was running after Computer Village then. People did not take it very seriously.[/quote]
First of all, I want to acknowledge the MD of Palette Computers. I like to acknowledge people who support people. The MD of Palette Computers encouraged me to come to Computer Village that this was where he was selling most of the Palette computers. Palette Computers was one of the major computer companies at the time. Charles Mezu and he encouraged me to come here that this was the booming area.
I came here, I think I sold a few printers, they gave me the money quickly. Nobody had capital to stock anything but there was vitality. I could see the business booming. I didn’t perceive myself as not being able to make a mark. This whole area was in its infancy. So quite a few people had been here before me, like I said Gafunk was the biggest company at that time.
I believe that there was far more profit at the time to be made selling components because I followed to build a mass market. I think that will suffice on why we came to Computer Village.
How has Computer Village market evolved in terms of consumer trends?
Yes! The portability has taken over everything. When the phone first started, there used to be Z53, I think there was Motorola then with some of the cameras. Now it was a very big deal. Technology and Innovation have made those things.
Every business has an inflection point. Every business has the life cycle and in each life cycle, there is an inflection point. Once upon a time, there was the typewriter. It was a very big deal to be a confidential secretary. Then after a time it was a very big deal to wash pictures. A photographer will tell you he has his own studio. Then came instant photography. Once upon a time was a very big deal to own a camera. Now we have Instagram. Nobody is making albums. Once upon a time it was one very mighty deal to read newspapers. Now, it is only my age mates that buy newspapers. So every business has an inflection point.
The phone is the inflection point of the old computer. If you have any child under 17 years of age, they don’t read newspapers. They do not read novels, everything is online. So the phone, whether it is Android, whether it’s hand-held, whether it is portable, people want the thing on their fingertips. We are moving into cars too. One day it will be the electric car. Once upon a time, it was a very big deal to travel by bus, now people are traveling by computer.
It is just a natural shift that has happened all over the world. We are now having things like fingerprint recognition. Everything is on the personal computer. We are now having Apple with 256 Gig. The first computers we gave, people were grateful to have 16 Gig. Now the tiny phone is having 256 Gig in their memory. Tecno has solved a lot of problems. They are not Apple but they are quite close. So Nigerians now have things that are ten times the computing power of the computers we sold to even banks in 2001.
[quote font=”helvetica” font_size=”18″ font_style=”italic” arrow=”yes”]Computer Village boomed because it was at the inflection point. It was ready when the phone revolution came. So it took advantage of the phone revolution. So every business has its own inflection point. There is a new inflection point now. The customers that used to come to Computer Village are now going to Jumia. There is a massive upsurge in the traffic to online stores.[/quote]
The bulky computers you know gave way slowly to the laptop and the laptop had just reached an inflection point giving way to the tablet. The tablet had given way to the smartphone. So these are all inflection points.
So if you decide to live in the time of the gramophone, the gramophone gave way to cartridge, though you think cassette. You are younger than me, so you think cassette, there was cartridge before cassette. Do you remember the fat cartridge? sunny Ade and co. Then we now have cassette. Then I was very proud of myself when I bought laser vision, LaserDisc. It was this big. Then after that, we now had CDs, then we now had DVD. Nobody does DVD again now. There is flash. Isn’t it? And apps. So each business for its own evolution reasons has inflection point and the beauty of business and success is at what point of the curve are you on the inflection point. Are you in the growth curve, then you form a niche.
Computer Village boomed because it was at the inflection point. It was ready when the phone revolution came. So it took advantage of the phone revolution. So every business has its own inflection point. There is a new inflection point now. The customers that used to come to Computer Village are now going to Jumia. There is a massive upsurge in the traffic to online stores. There are probably thousands of online stores now in Nigeria. Some of them are fraudulent but eventually we are going to have our own Amazons and the rest. So there is an inflection point even in the retail business.
There have been few indications that government has decided to relocate Computer Village. What is your opinion on this?
It will be difficult now. Government can do anything. Government is in charge of land but contrary to this 5000 shops, there are many reasons that made Ikeja successful. One of such is its nearness to airport. The second reason here is nearness to all the bus terminals. Most of the bus terminals, from Jibowu to Masa Masa, all of them are close to Ikeja and another thing is centrality of location of Computer Village. So, over the years, while it is an environmental nightmare at times, it has been convenient.
The current location in Katangoa, I am not sure everybody participated in making it realistic because today the economic dynamics have changed and this is a phone market now. And if you are relocating Computer Village, there is no law in Lagos State that says X, Y businesses cannot locate in X, Y street. So, that is one.
The challenges are more. The government’s attempt to create a purpose-built market is fine, but I am not sure kotangoa has all those facilities or the cost is probably as feasible as it were and the government has to allow for people that are traders to participate.
Let me give you an example. One of the biggest reasons why beautiful Tejuosho Market is a failure is that it was planned by people who have not even been in a market and are not business people. There is no business man that is in retail trade that relocate on the third floor and it is a six-storey building. So all they have is a basement which is a car park and first floor. And you can’t pay the cost of building six floors with only the income of one floor. So as a consequence, they have made a shop of seven square metres for seven million. No trader will buy because they are not selling the second, third, fourth and fifth shop and even if they eventually sell it, ten years after its completion, nobody is going to buy them. Can you imagine yourself staying at the third floor, then the people will come visit the ground floor, visit the first floor, the second floor then look for you on the seventh floor and buy something and you are in retail business? Even the Shoprite, how many times have you climbed to the second floor? But the government went in its wisdom and built a market on the third, fourth and fifth floors. Go there, it is completely empty. It is ten years old. Every time I reach First Bank, I see the loans has risen to N4 billion to bankroll the project because it wasn’t conceived by the users.
Now third, fourth and fifth floor, who is ever going to take it to sell? Where have you seen a successful business located at the fourth floor? Where have you seen Nigerians entering lift to go and buy clothes at boutiques on the fifth floor of a building? So traders will not buy. So that same lesson should be applied. There are many things in a market that is only known by the operators. So when you hear people that are wonderful architects, Tejuosho is a wonderful technological piece but is a complete failure and it will never succeed because it was not built by traders, wasn’t built for traders. So if the government wants to build any market,it must co-opt the people on ground that know what they want and make sure they work out even an architectural plan.
If you go opposite this building now, there is a new building. That building has been paid for because every shop there is a front shop. They created a shopping complex that everybody looks into, so the traders rushed it. There are still buildings in Computer Village that are empty for three years because they were built by developers who don’t understand that people don’t rent the third floor. So eventually it becomes a store that nobody wants to pay for. Many third floors in Computer Village are empty. So you can’t build a market and call it billions, borrow money from the banks and hope to recover money without participation. So when we hear the government is doing Katangoa, we don’t know if it had to be successful, there are risk factors that have to be mitigated. You must take in the confidence even in choosing the contractors.
Computer Village to me is occupying a space of about maybe six hectares to eight hectares all together. An appropriate size for Computer Village with technological village with all the possibilities for expansion will be up to 30 hectares.
You took a risk, way back, to set up TechPark. Tell us why you decided to take that risk?
The dynamics of 2005 is not the same as the dynamics of today. We did not have the Internet we have now back then. We didn’t have the ease of buying. Computer Village at that time did not have a preponderance of its big investors as commercial property owners in Lagos. So the amount of commercially-owned property in Computer Village and in Lagos by computer people here is not up to 10 percent of what it currently is. Now we have a situation where dynamic companies like Slot, they have 60 to 70 branches. How do you convince between Slot and Tecno and maybe three other people, they control 60 to 70 percent of the retail trade in phone. If they don’t move there, the business doesn’t. That is for the phone. Now, all over Lagos, because there is no serious player in IT hardware that I don’t know, all over Lagos, almost everybody I know that is a serious player owns his own commercial property or is about to or is building one. So the dynamics have changed.
It has to be their collective project, not an imposition for them to move because it will be assessed today on commercial terms. I own a property in Aswani. I am buying it as an investor, not that the government wants to move there. Let me give you an example, if you buy a house for N80 million in Lagos today or a hundred million, the best they will give you is N5-6 million rent. If you buy land for N40 million, it is not likely to generate more than N5-6 million rent. It is only in commercial property that you can buy a shop for five million and rent it for one million. So if you invest N80 million in commercial property, you probably can achieve N24 million rent versus the N5 million, if you rent a residential house. Try and cross check it.
If you buy a house in GRA or any of the high-rise property, you are looking from N80 to 150 million. What is the rental of the property? But today, you can buy a shop in a viable market for N5 million and achieve a N500,000 rent. Look at Ikota. So if I have a hundred million, I can buy today fifteen to twenty shops in Ikota and they will give me N8 million naira rental now and one thing about commercial property, nobody owes, because the landlord can become a nuisance to income generation. There are a lot of cases of eviction and the rest of it in a commercial property. In a market, in all the commercial property, if you get in early, for example in Ikota shopping mall, the income is 10 to 15 to 20 percent return. The income in a Lagos property is 4,5,6 percent. How much does your house rent cost? What is the rental if you move out of it? If you buy a house in any of these estates that are selling low cost houses, flats, a N30 million flat is unlikely to give you a rental of more than a million naira, that is three percent return. A N30 million investment in property in a marketplace in Lagos will give you a rental of N3 million. So, these are the issues.
The dynamics of 2005 are different from the dynamics of 2018. I am not saying a market can’t do well. A market can do well and will do well but you have to articulate a SWOT analysis. I don’t do anything without strategic thinking. You have to do a critical analysis and what will be the impact and projection of all these new dynamics and we are at an inflection point because you can not ignore the fact that the second most successful computer in the world, Dell is sold only online. Now you have to involve yourself and talk to the people in the business. Ask the operators here, some of the operators are registering 10,12 percent sales. That looks insignificant today but four years ago, it was less than one percent. What if next year it is about 16 percent? You can see the computer operators relocating to Ilupeju and if it is a commercial property, the state government can’t stop anybody from going there. So, yes it is a good idea. I don’t think you can have a failure in real estate in Lagos but the point is that market is going to have a lot of competition, not even necessarily by the operator. A lot of Nigerians today are making purchases in my line of business.
What can we learn from you in terms of taking business risks in the manner you have taken?
The first thing I studied all the time are trends, threats and strengths. What I studied most is trends and you know, to really study trends, you must know young people. So I study trends. I watch things even up to canvas shoes. I watch people move from the big Nike canvas and now they are wearing all these blue with something yellow. Watch everybody now wear a beard, so I know that shaving powder will not sell. Maybe scissors will sell but shaving powder won’t. So every person under 30 wants a beard today, so when you watch trends and you follow trends and you know how to interpret trends, you can’t go very wrong in business.
[quote font=”helvetica” font_size=”18″ font_style=”italic” arrow=”yes”]I am talking in terms of job, if I am investing in terms of business opportunity, it differs from age to age. It differs. When I was younger, I can take risks. My first reasoning is how high is the risk. How high is the reward. As I get older, how high is the risk but I hope it is not higher than that. I don’t want to risk my capital on this kind. So I now distinguish whether it is a gamble or a risk. I am over 50 now so I won’t gamble my retirement money. Nobody is going to pay me a pension. So my risk taking is more limited and I prefer to invest on knowledge that I have done the study.[/quote]
The other thing is timing. If you don’t get the right timing, the right investment can be faulty. If you don’t get the right timing, the right investment can turn out faulty. For example, if you were investing in Ikeja when it was Nigerian Airways selling all these assets, it is fine. If you invest in Ikeja GRA today where the lands have so skyrocketed because they have been so rationalised, you have to check if it is the wisest thing given other real estates opportunities in Lagos. So I like to compare and I like to do things I am suited for and I enjoy. There must be passion in business. If I take you now from being an Editor and I say you should become a seller, is that your calling?
The first thing in life if you are investing in anything especially is to invest in yourself because you should discover your purpose, your calling, your gifting. I can do this work for free because I enjoy it. I enjoy the study. I enjoy the challenge. I enjoy discovering a new product, taking it to market, developing it, shipping it. That is my calling. I failed at some, I succeeded at many. The important thing is that the successes are more than the failures. There are some I misread. if you don’t have any passion for something where you have your downside, you will be tired. When I have my downside, I am energised.
I invest in areas that I have skill for. Whatever I invest in, I have skill for it. A lot of our current generation will do very well because the Internet is so addictive. There are children that sleep at 3 o’clock now because of the phone. Parents that see real skill in it, not just idleness, should develop it because it is very encouraging to see a child of ten concentrate from 8 o’clock to 3 am, seven hours, with no disturbance. If you tell the child to go to bed, he will cover himself with blanket, hide the phone and continue using it. There is a danger between that joy and addiction, yes! But the best business you do is what you thoroughly enjoy. We are here, it is 9:30 p.m., outside consideration for my status, I can stay here for as long. I am talking about what I enjoy, if you don’t enjoy something. You are a journalist but you if want to be a doctor, it is tedious.
I am talking in terms of job, if I am investing in terms of business opportunity, it differs from age to age. It differs. When I was younger, I can take risks. My first reasoning is how high is the risk. How high is the reward. As I get older, how high is the risk but I hope it is not higher than that. I don’t want to risk my capital on this kind. So I now distinguish whether it is a gamble or a risk. I am over 50 now so I won’t gamble my retirement money. Nobody is going to pay me a pension. So my risk taking is more limited and I prefer to invest on knowledge that I have done the study.
Then the most critical factor in the human element. A lot of businesses in Nigeria are killed by the owners. You spend profit before it comes. A lot of them are killed by lifestyle. I am a Chief Executive Officer (CEO), so I have to drive this car, this people are looking at me. Consideration by material, whether or not I can afford it, to have house in the village, children school in London, everybody’s child is in London and a house in Lagos. So the business is struggling. He needs investment capital. The investor doesn’t have delayed gratification, he wants it now. You have to choose whether you want to be seen as successful or whether you actually want to be successful. Many people especially young people eat their seed. When they start to do well, the business is to move from class 1 to class 2, to class 3, but by the time they get to class 2, they have Personal Assistant (PA), they have a battalion of staff they don’t need. Every Friday, they take fifty, hundred thousand naira from the business. Meanwhile the business is on rocky foundation. They borrow money when they travel, they carry their wives, they buy two tickets. When they get there, they buy jewel. So the guy has a hundred thousand dollars to invest. Some businessmen are actually responsible. So anybody building in business, in the first ten years, must have what is the principle of delayed gratification. If you don’t have it, you can’t succeed.
A corrupt civil servant can carry his money and spend, tomorrow another proceed of corruption will come his way. A businessman requires his profit to be reinvested so he had to also many times make a personal choice that he will not spend. So, the first thing in business and investment is financial discipline. Do you have a budget for yourself? Do you decide that this thing, I will postpone it till next year? Do you decide that, yes, I have the money but I can’t truly afford this now. Do you decide that I have this 10 million naira but let us invest in expanding the stock of my business.
We don’t seem to be able to satisfy the demand or do you buy a new Range Rover, because your next door neighbor has Range Rover? So at least let me have LR4. I think this is the main cause of why the Indians and foreigners do better than us.
All my staff are competent to do anything I ask them and I give kudos to them because they are committed. When we make profits, we share, they get a share of it. When we make losses, I won’t tell them to follow me and share loss but they know some of the goodies will not be available. So the most important thing is investment.