This post was originally produced for Forbes.
Each year the Hult Prize committee sets what Jim Collins would call a big, hairy, audacious goal or BHAG for student teams of social entrepreneurs. This year, the challenge was to double the income of 1 million people in the developing world. The winning team created a texting system that optimizes the inefficient public transportation market in Kenya.
The $1 million prize was announced at the Clinton Global Initiative last month. The Clinton Foundation has announced that this will be the last such event and most of the employees have been given notice that that they will be laid off at the end of the year. The CGI was founded in 2005 to help find solutions to the world’s biggest problems. Being recognized at the final CGI is a historic footnote.
Karim Samra, Chief Operating Officer of the Hult Prize Foundation, was closely involved with the judging process. He explains why the Magic Bus Ticketing team won. “Magic Bus Ticketing launched a startup that clearly meets a number of critical success factors including raising income levels for local drivers and conductors, a focus on significantly improving outcomes for millions through more efficient and effective transportation options, demonstrable financial and technical feasibility, a novel and unique approach that leverages technology appropriately for the market (sms-based), and embedded mechanisms for fast scale (financial rewards).”
Ted Wiley judged the Boston regional Hult Prize competition where the team competed. He was so impressed, he offered to mentor the team. He agrees that the team was deserving. “In addition to being the entrant with the highest likelihood of delivering on the goal of the competition of doubling 1 million salaries, Magic Bus has the potential to do something much bigger: provide dignified, reliable public transportation to the billion people in the world with the lowest income. Their ingenious approach is simple, scalable and rapidly profitable at prices their target customers can afford.”
Iman Cooper, part of the winning team, is the co-founder and Chief Marketing Officer of Magic Bus Ticketing. She explains the public transportation problem. ”We are working with informal transportation systems in Africa, where the whole system revolves around lots of uncertainty. First, commuters simply don’t know when the bus will come, or how often, or how much they will pay before entering the bus. As a result, they can lose up to half of their daily income on inconsistent bus prices.”
The problem doesn’t stop there. The bus drivers are not much better off, she says. ”Buses are unsure about the demand along the route, therefore, they prefer to wait at the main terminal before starting their route. This means that the people waiting along the route spend even more time waiting, because the bus drives by when it’s already full of passengers.”
The system is a mess. Given that the majority of Kenyans rely on public transportation, this is a significant social problem that also presents a significant opportunity for social entrepreneurs.
The four co-founders are from Kenya, India, Congo and the U.S., providing the team with a global perspective.
Cooper explains their Magic Bus system. “With an easy to use SMS platform, Magic Bus connects the bus to the commuter. Our solution is two-fold, first we allow the bus to know the demand along the route, reducing their waiting time and increasing their productivity by allowing them to move faster and make more trips. Second, commuters can now text to find a bus, text to pay with mobile money, and text to book a ticket, allowing them to compare fares and find the best price before entering a bus–enabling them to save up to half of their income each day.’
Steven Covey would be proud of this win-win solution. It is a dramatic example of commerce finding a way to make a process more efficient in a way that will benefit both the providers and the consumers of a service.
Using just $10,000 to pilot their program in Kenya, Cooper reports, “we piloted extensively in Nairobi, developing our technology and beta testing with 10 buses over the past nine weeks. During this time period, we had more than 2,000 unique users, 73% of whom used Magic Bus more than three times. As a result, we have had more than 5,000 tickets booked through our system.”
Samra says the judges were impressed. “They also convinced a number of highly selective judging panels that they can execute on their plans on account of being intimately familiar with their target market and highly skilled at simplifying and distilling their message. The amount of traction (repeat and single users) they were able to register during their pilot was also a critical advantage – nothing speaks louder than satisfied and paying customers.”
A pilot program, however, is just a test run. Entrepreneurs face all kinds of problems in scaling up good ideas into profitable businesses. Cooper, recognizes that she and her team will face some unique challenges. “The largest challenge we face is that there are multiple stakeholders in every new market and each market doesn’t work the exact same way in terms of rules, regulations, and cultural norms. Each new market will require the right local connections, getting the agreement of multiple stakeholders, and identifying people to work with us who are just as committed to the mission as we are.”
She says, dealing with this challenge will require a large team, which they are prepared to build.
Samra says, “Magic Bus will now have to shift into execution mode. They will have to develop a more robust tech platform that can sustain high volumes of users, aggressively partner with bus cooperatives in Kenya to gain market share, identify corporate partners who can accelerate their path to profitability, hire a set of key staff that can institutionalize their processes, and iron out any kinks they discovered in their pilot in preparation for scale. In tandem, they will have to define and measure how they will choose to track their outcomes on target customers and communities.”
Cooper also recognizes that there are limits to what Magic Bus can do. Only people with cell phones who ride public transportation benefit from the system. “Luckily the majority of Africans, especially Kenyans, fall under this category,” she adds.
She also notes that it will be easier to make inroads in markets where there is some organizational structure, such as bus cooperatives. This will give Magic Bus a way to bring more buses into the system more quickly.
Of course, the startup is not yet profitable, but Cooper projects reaching break even in 2018.
Like all good social entrepreneurs, Cooper says the team is driven by purpose and mission.
We are driven by the belief that every person deserves access to economic opportunities, and are passionate about seeing that become a reality through efficient public transportation. Magic Bus improves the lives of commuters by adding certainty to their day, allowing them to compare fares before entering a bus, saving them up to half of their daily income and enabling them to pay through the convenience of their phones. On the other hand, the company enables bus drivers to better serve their community and earn a better daily wage by aggregating the demand for bus rides and increasing the drivers’ daily productivity by up to 5 hours.
Samra shares the conviction that transportation is critical to increasing economic development in Africa. He says, “During the final judge deliberations it’s interesting to note that both African judges (Safaricom CEO Bob Collymore and ADB President Dr. Adesina) thought transportation was one of the most critical challenges facing Africans today due to its impact on so many on a daily basis.”
“I always say competing against more than 5,000 of the world’s top entrepreneurs and winning the Hult Prize is basically just the first step – then comes the real challenge,” Samra adds.
On Thursday, October 6, 2016, Cooper and her co-founder and CFO, Wyclife Omondi, will join me here for a live discussion about winning the prize and what they will do with the proceeds to meet the Hult Prize BHAG. Tune in here then to watch the interview live. Post questions in the comments below or tweet questions before the interview to @devindthorpe.