Lost in Market Translation

When Good Markets Reject Good Business Models

Happy 2025, everyone. Welcome to the many new subscribers reading for the first time. Enjoy!

The Copy-Paste Trap

In a glass-walled conference room in Lagos, an investor pulls up a familiar slide deck. "It's like Uber, but for..." they begin. Around the table, heads nod approvingly at the graphs showing exponential growth in San Francisco, London, Singapore. Ride-hailing in San Francisco? Let’s do it in Lagos. Subscription streaming in London? Surely, it should scale in Nairobi. The pattern is as predictable as it is problematic: spot what works in mature markets, assume universal appeal, and transplant it wholesale into emerging economies.

But market evolution isn't a copy-paste exercise. Time and again, I've watched promising startups wither as they discover that business models, like tropical plants, don't always survive transplantation. The metrics start strong, fueled by venture capital and early adopter enthusiasm. Then reality sets in. Customer acquisition costs spiral. Unit economics crumble. The promised hockey stick growth looks more like a flatline.

To me, this is less about execution and more a fundamental misreading of market machinations.

The models being copied were designed for post-middle class economies—markets where a sizable, stable middle class can sustain certain types of consumption. When these models are imposed on a pre-middle class economy, they meet friction, rejection, or worse, unsustainable subsidies that attempt to engineer demand where it doesn’t yet exist.

To build for real scale in emerging markets, we must first understand the distinction between pre-middle class and post-middle class business models.

The Market Mismatch: Understanding Pre-Middle Class vs. Post-Middle Class

Think of markets like geological strata. In post-middle class economies – think Singapore, South Korea, or Germany – you're building on bedrock. There's a stable, sizable middle class that can sustain certain types of consumption. Monthly subscriptions make sense because salaries arrive monthly. Digital payments flow naturally because banking infrastructure runs deep. Convenience has monetary value because time has a clear price tag.

But in pre-middle class economies, you're building on different terrain entirely. Here, trust is communal, not institutional. Income arrives daily or weekly, not monthly. Cash dominates because it's tangible, immediate, trusted. The ground rules are different because the ground itself is different.

That investor in Lagos, like so many others, was pitching a vision of 'scale' that ignored the economic soil it was meant to grow in. These pitches often rely on foreign templates, overlooking the very different ground rules of local economies. And yet, this disconnect continues to funnel resources into models destined for friction.

How’s this for irony —it's not just foreign companies making this mistake. Even local entrepreneurs and operators, inspired by tech crunch success stories, educated with foreign curricula taught locally, or educated abroad often return home and fall into the same trap. We pitch VC-backed businesses modeled after Silicon Valley unicorns, convinced so we can engineer the same demand in the hope that we promise the same returned. But we overlook that economic behavior is deeply embedded in local realities - no amount of brand awareness or growth hacking will convince someone earning a daily wage to commit to a monthly subscription. Locals aren’t entirely blind to these issues though - all hope is not lost - we just have to reconcile what we are taught with what we see working and it’s happening more and more. But ultimately, we need to get better at building in local context.

When Post-Middle Class Models Fail in Pre-Middle Class Markets

When businesses designed for post-middle class economies enter pre-middle class markets without adaptation, they encounter deep resistance. Consider subscription models. In a post-middle class economy, customers comfortably commit to monthly payments because salaries are structured around a predictable monthly cycle. In a pre-middle class economy, income is often daily or unpredictable, making monthly commitments feel like a gamble. The result? Low adoption, high churn, and a constant need for customer re-education.

Similarly, digital-first businesses struggle in cash-heavy markets. A food delivery app might assume users will pay with cards or digital wallets, but if 80% of transactions in the country happen in cash or airtime, the entire model needs to be rebuilt—not just tweaked—to accommodate the reality of cash logistics, trust-building, and distribution. Same legos, different build.

This mismatch is not just about individual businesses failing; it’s about capital inefficiency. When funding follows the wrong models, billions of dollars chase ideas that will never find traction, while the real opportunities—those built for the actual economic structure—go underserved.

How to Design for a Pre-Middle Class Market

To address these mismatches, businesses must go beyond surface-level adaptations and fundamentally rethink their models. What works is not a quick tweak but a full embrace of local realities. Here’s how companies can design for the unique challenges and opportunities of pre-middle class markets:

1. Pricing Must Mirror Income Patterns

   • When your customer earns daily, they think daily.

   • Accomodate / Shift from monthly subscriptions to configurable payments i.e. daily/weekly/weekend micropayments. Monthly and annually are limiting in some climes

   • Embed financial flexibility into the offering (e.g., micro-loans or installment options).

2. Trust Needs Local Roots

   • Leverage informal credit systems that already exist in local communities.

   • Build alternative-to-card (cash, airtime etc) collection networks rather than assuming digital payments.

   • Use social proof and community validation over corporate branding.

3. Distribution Must Meet Reality on the Ground

   • Prioritize physical presence or agent networks over purely digital acquisition.

   • Design for low-tech or feature-phone access alongside smartphone apps.

   • Work within existing retail structures instead of trying to displace them immediately.

4. Cost Structures Must Work Without Venture Capital Steroids

   • Avoid reliance on high-margin products if consumer purchasing power is low.

   • Engineer cost efficiency that doesn’t depend on venture capital subsidies.

   • Consider models that scale sustainably without requiring deep discounts.

Leapfrogging the Middle Class: Is It Possible?

Some argue markets can leapfrog (can we bin this word please?) these stages – pointing to how Africa jumped straight to mobile payments, skipping the card era entirely. While that’s true, what also happened is: M-Pesa succeeded because it digitized existing behaviors rather than imposing new ones. It built on the foundation of informal money transfer networks, making the leap feel natural, not forced.

For other industries, leapfrogging will only succeed if it meets the same criteria: solving a genuine problem in a way that feels natural to the consumer. This means starting with an understanding of what already works in pre-middle class economies and using that as the foundation for innovation.

Conclusion: Rethinking What It Means to Scale

True scale in emerging markets isn’t about copying models from the West or Asia; it’s about reading the economic terrain correctly and building accordingly. The real challenge isn’t lack of opportunity—it’s the misallocation of attention and capital toward models that don’t fit.

Building for a pre-middle class market requires rethinking everything from pricing and trust to distribution and cost structures. This shift doesn’t just mean adapting foreign models; it means building businesses that thrive on local realities. Indigenous innovation—solutions born from within—creates resilience in the face of unique market challenges and offers a competitive edge that imported templates simply can’t match. It means accepting that what works in one economy may not work in another, and that adaptation is not a minor tweak—it’s a fundamental redesign.

If we shift our focus from imposing post-middle class models to truly understanding pre-middle class realities, we unlock a different kind of scale—one built on deep market fit rather than hopeful transplantation. The businesses that succeed in these markets won’t be the ones that simply travel well; they’ll be the ones that are born from within, structured for resilience, and built for the realities of the consumers they serve.

I’m thinking of turning this into a series that dissects what when markets and models don’t mix, please leave a comment if there’s a particular direction you’d like to see me cover.