INNOVATION

Technology is constantly evolving, and new technological capabilities are regularly changing what can be done and how it can be done. Every company needs to innovate and keep abreast of technological developments and disruptions, but, as a technology-based company, we run an even greater risk of not keeping up with the needs of our customers and ahead of our competitors if we are not constantly innovating. Many of our customers are quick to embrace new technologies, becoming ever more sophisticated and demanding, and each generation expects to accomplish more. If we do not keep up with the needs of our customers, we run the risk of being impacted by decreased market share and revenue.

As part of our ongoing commitment to the SDGs, we know that our ongoing innovation is key to broadening and deepening the impact that we have on all of our stakeholders. For this reason, we have continued to align our focus on innovation with three of the goals this year: promising to create innovative products and services (SDG9) that transform and empower the lives of our customers (SDG8); and partnering with other organisations to avoid duplication of effort and ensure our innovations are aligned with the ambitions set out in the goals (SDG17).

Innovation is central to achieving our strategic objectives, retaining our competitive edge and ensuring that we continue to grow.

KEY FOCUS AREAS DURING THE YEAR

• Brand trust
(billing transparency, balance notifi cations and campaigns to increase trust)
• Safaricom Alpha
(establishing of new innovation hub)
• Technology for Development (T4D)
(renaming of social innovation and transitioning of successful pilots to the business for scaling)
• Masoko
(launch of the portal to stimulate the nascent e-commerce market in Kenya)
• M-PESA
(improving security and convenience, while deepening financial inclusion)
• Mobile data
(campaigns to stimulate use of 4G, expansion of 4G network and 4G-enabled
devices)

MONITORING AND MANAGING INNOVATION

Innovation is a multi-dimensional material topic. At a strategic level, we manage and monitor this aspect of our business using several sets of indicators, including:

Net Promoter Score (NPS) and Brand Consideration (BC) score
(tracking customer satisfaction with, among other things, our new products and services)
• Mobile data usage and revenue
(tracking how well data-related product & service innovations are being adopted and used)

• M-PESA usage and revenue
(tracking whether new products and services are helping to deepen fi nancial
inclusion)
• Technology for development users/subscribers
(gauging the impact and success of social innovations through active users/
subscribers)

PREEXISTING ISSUES DEFLATE CUSTOMER SATISFACTION

Customer Satisfaction

As the preceding graphics (bottom left) show, our NPS score for overall consumer customer satisfaction was 72 per cent in March 2018 (the end of the reporting period). It peaked at 80 per cent earlier in the year, prior to the elections, but dropped afterwards and only recovered to 72 per cent by March 2018. Our Brand Consideration (BC) score also decreased signifi cantly from 80 in FY17 to 60 during the year.

Overall, the protracted electioneering period and subdued economic environment did exert some downward pressure on both our NPS and BC scores. Our NPS recovered quicker and to higher levels, which we attribute to the introduction of several successful new products and services, as well as the positive infl uence of established services like M-PESA. The reduction in our Brand Consideration score can be partly attributed to the weighting given to certain questions asked in the research, such as the question ‘which SIM card would you buy for a second line?’. The reduction can also be attributed to the perception that Safaricom products and services are expensive, as well as a decrease in consumer trust. When faster data transfer speeds were introduced, some customers were surprised by how much quicker data bundles were consumed and distrusted the balances on their accounts as a result.

We acknowledge the feedback given by our customers in regard to our data products. During the period under review, we introduced My Data Manager as a first step in helping customers take control of their data usage and data spend. My Data Manager allows customers to choose to only access data when on a data bundle, which means that their airtime will not be consumed once they exhaust their data bundle. There are also plans to roll out more data management tools in the coming financial year, with a goal of empowering our customers to fine tune what services have access to their data and how much data these services can consume.

Successful innovations

New products and services launched during the year include the following:

NameDescriptionDownloads / Users
Safaricom PlatinumLaunched in February, this lifestyle service offers tailored plans/bundles and exclusive discount offers with partners like EatOut Kenya, Shell and Ticketsasa to high value customers through the mySafaricom app.6,402 downloads/users
Songa by SafaricomAlso launched in February, this music streaming app offers subscribers access to more than 2.5 million songs, with a strong emphasis on supporting local artists that ensures content providers receive 65% of revenues generated through royalty payments.76,000 downloads/users
TunukiwaThis service uses data-driven insights to offer customers individualised value-for-money bundles based on their consumption patterns.11,685,764 customers
FLEXA fl exible, token-based option that allows subscribers to purchase units and then choose whether to convert the units into airtime, data or SMS, according to their changing needs. Flex gives users 35% more value compared to using their top up as loaded.Over 279,307 subscribers

Safaricom Platinum offers high-value subscribers exclusive lifestyle bundles and discounts.

Songa by Safaricom is a music streaming app that helps artists earn extra revenue from their music and, at the same time, gives our customers easy access to, and control of, the music they like from their mobile devices.

Artwork from the Shinda Mamili campaign that incentivised customers to purchase Tunukiwa offers (bundles) by entering them into regional prize draws.

FLEX allows users to convert prepaid units into airtime, SMS or data as needed.

Voice biometrics introduced

In December 2017, we launched a new voice biometric authentication service, known as Jitambulishe. An industry fi rst in Kenya, the innovative service allows customers to record a ‘voiceprint’ that can be used to identify them in the future. Once their voiceprint has been captured, customers can identify themselves by saying “at Safaricom, my voice is my password” when they call our customer service lines.

As well as cutting down the authentication steps required before customers can be assisted with services like resetting M-PESA PINs and PUK requests, Jitambulishe is expected to help us reduce fraud and identity theft because voiceprints are extremely hard to falsify, and customers will no longer need to divulge sensitive security information to third parties.

Over 463,000 customers have successfully enrolled on Jitambulishe and it has also increased the scope and effi ciency of our Interactive Voice Recognition (IVR) service, allowing us to introduce eight additional self-service options and serve a daily average of 52,000 customers.

MOBILE DATA CONTINUES TO GROW

We are satisfi ed with the growth in mobile data revenue and customers during the year, given the challenging political and economic environment. We increased our mobile data customers (who have been active within the last 30 days) from 16.6 to 17.7 million. Likewise, our revenue from mobile data grew from KES 29.3 to KES 36.4 million, and now accounts for 16.2% of our total service revenue. While year-on-year growth was less than that achieved in FY17, we increased mobile data usage per customer by 56.3%, exceeding our target for FY18 by 10.2%.

Among the campaigns we ran during the year were the Funtastic 4Gs web series (pictured is one of the characters, Gina), which highlighted the reliability, speed and coverage of our network, and the Swift Squad, which offers customers advice on how to manage their apps and settings to ensure they get the most out of their bundles and airtime.

New hub for innovation

An exciting change during the year was the creation of the Safaricom Alpha (Innovation Hub) in April 2017. The new hub was created to build platforms, products and services within various verticals like Health, Education, Agriculture and Payments.

The purpose of Safaricom Alpha is to explore long-term opportunities and challenges. The team is innovating for the future and designing and developing products that may only be relevant in three to fi ve years’ time — or even 20 years’ time. Key to note is that in June 2017, Safaricom Alpha supported the Kenya start- up ecosystem.

The Spark Fund (our innovation investment fund) closed an investment in iProcure. iProcure is a Nairobi-based start-up working to optimise the agriculture input supply chain in rural Kenya. iProcure’s web and mobile technology solution improves agriculture retailers’ operations. It enables them to manage ordering based on inventory, point of sale activities, and client profiles along with geo-located purchasing patterns, real-time agent performance and transaction analysis, and built-in mobile payments.

M-PESA MAKES HEADWAY

As the preceding table shows, there was a significant amount of activity and movement through the M-PESA mobile money platform during the year, despite the subdued economic conditions. Revenue from the service grew from KES 55.1 million in FY17 to KES 62.9 million during the year and the number of users (active in the last 30 days) increased from 19 to 20.5 million by March 2018.

It appears that the political uncertainty may have counteracted the challenging economic conditions to an extent and that the elections may have stimulated a considerable amount of entrepreneurial activity, as well as prompting people to travel, to purchase certain goods and foodstuffs, and even to stockpile funds on the platform itself.

Deepening financial inclusion

Aside from the important fi nancially-enabling role M-PESA plays in the lives of more than 20 million Kenyans, two of the specifi c ways we monitor its impact on deepening fi nancial inclusion are through the M-Shwari micro-fi nance savings and loans service, which helps underserved Kenyans access banking facilities and credit, and the Lipa Na M-PESA merchant service, which supports and enables entrepreneurial and SME activity across the economy.

The reduction in M-Shwari customers during the year is a refl ection of the increasingly competitive nature of the micro-fi nance market. The market has entered a natural period of volatility and growth as it matures, with companies that have larger appetites for risk entering the market and customers evaluating different products to suit their needs. The significant growth of deposits can be attributed to more M-PESA users moving money between their M-PESA and M-Shwari accounts in order to maximise the benefits of each.

Our Lipa Na M-PESA merchant service enjoyed solid growth this year, which we attribute to the 50% reduction on all merchant fees and the extension of the M-PESA Kadogo (no charges on transactions under KES 100) rate to customers as well as merchants.

M-Shwari makes it possible for ordinary Kenyans to save, earn interest and borrow money using their mobile phones and the M-PESA platform.

M-Shwari

M-Shwari Customers (million)*
* 30-day active

Lipa Na M-PESA

New IVR service offers visually impaired customers independence and convenience

An expression of our commitment to the SDGs and Goal 10 – Reduced Inequalities, in particular, we launched a new Interactive Voice Recognition (IVR) M-PESA balance enquiry service for visually-impaired people in December 2017. Visually-impaired people are vulnerable to fraud when they transact on M-PESA because they must rely on third parties to handle their cash deposits and withdrawals. Moreover, the thefts are often only discovered much later, when the visually-impaired person shares their M-PESA PIN with a different third party and asks them to confirm their balance.

Our new service enables a visually-impaired person to check and hear their M-PESA balance by following oral prompts on our adapted customer service IVR system. The new service has been an instant success and already handles an average of 1,500 enquiries per day, which surges to 2,500 enquiries on average per day during the first and last weeks of the month.

NEW E-COMMERCE PORTAL TO OPEN UP NEW MARKETS

We launched our e-commerce portal, Masoko, in November 2017 to help stimulate the nascent e-commerce market in Kenya. The portal connects consumers, merchants and vendors to each other and allows them to trade a wide array of goods and services online. The portal launched with close to 200 vendors offering over 20,000 products. While it has been slow to gain traction, we have learnt much during the year and used this experience to improve the platform, such as enforcing much more stringent quality control measures to ensure the integrity of products on offer, which resulted in the number of vendors reducing to just over 100 high-quality suppliers. We have begun a process of improving the user experience and are looking at ways of growing the service in FY19, including an exciting collaboration with the DigiFarm app.

New IVR service offers visually impaired customers independence and convenience

During the year, we renamed our Social Innovation unit as Technology for Development (T4D) to refl ect the unit’s identity and portfolio of work better. We are delighted to be able to report that many of the innovations we have been incubating and piloting in recent years have been successful and, as a result, have transitioned into commercial operations that are managed and scaled by the business. Among our successful projects are the M-Tiba health payment ‘e-wallet’, the DigiFarm suite of fi nancial and informational services, and the Shupavu 291 USSD-based educational platform (please see the society segment in the stakeholders section of this report for further detail on these projects).

During the year, we continued to build on our work in areas such as agriculture, education and health, where technology is a critical tool that can make a significant difference to people’s lives. Not only are these areas aligned to our areas of infl uence, but they are key elements of both national and international development priorities. We use numbers of active users/subscribers as a primary gauge of the impact and success of the new ideas we develop, together with usage data. Among the applications and programmes we continued to develop during the year were the following:

• Fafanuka 215
An SMS-based information service that aims to provide support and information to patients suffering from non-communicable diseases — for example, cancer, epilepsy and diabetes — and their families. The service can be accessed by dialing *215#. During the year, focus groups were held in Embu and Nairobi and the insights gathered were used to re-evaluate the product value proposition and redesign the service. An enhanced version has since been piloted to 1,200 subscribers and we anticipate launching the product nationally in FY19.

• Instant Network Schools (INS)
The INS programme helps students in East African refugee camps receive an education by transforming the most basic of classrooms into a digital learning hub. Through the INS programme, each class of teachers and students in the refugee schools are provided with 25 tablets, a laptop, a projector and speaker; free internet connectivity and Wi-Fi; localised mobile content and a robust teacher training programme. During the year, the programme was expanded to more than 43,000 students in 14 camps.

INS students in Kakuma refugee camp accessing classroom content through the Safaricom network and using tablets supplied by the Vodafone Foundation.

• M-Salama

This disaster management service sends early warning information and natural disaster alerts to subscribers. A pilot was conducted in March 2018 with 800 subscribers to gain feedback and develop insights for improvement of the platform and, during the year, over 10 million messages were sent during the outbreaks of fl ooding and Rift Valley Fever. The service is run in partnership with the Kenya Red Cross Society (KRCS) and the platform also enables Kenyans to register as volunteers with the KRCS.

LOOKING AHEAD

FY19 Goals

• Actively build trust in the brand through billing transparency, balance
notifications and other enhancements
• Deepen financial inclusion by introducing overdraft facilities for M-PESA transactions and linked bank accounts

• Reevaluate the Masoko value proposition and strategy to gain traction in FY19
• Make M-PESA agent shops more accessible to visually impaired people using braille
• Grow the portfolio of products and services within Alpha