Janus: Digitalizing MSMEs

Nicolas Maffey is originally from Buenos Aires,  Argentina. After graduating from Harvard College in 2013, Nicolas returned home to join Animana, a small social enterprise making  sustainable textiles. There, he worked as Director of Strategy and oversaw the company’s incredible  growth. For the past three years, Nicolas has served as Director of Economic Development for the government of Buenos Aires, where he coordinates the design and implementation of public policies aimed at helping small businesses with issues including accessible financing, export growth, and innovation. Nicolas is passionate about working at the intersection of international development, innovation, and entrepreneurship. In 2020, Nicolas founded Janus in order to assist the many Argentine MSMEs struggling with digitalization. 

MSMEs are key players in Latin American economies, particularly given their contribution to job creation. The sudden onset of the COVID-19 pandemic has placed on them a heavy burden, as many struggle to adapt to a rapid process of digitalisation. 

Janus is a 360 degree approach to going digital.  We seek to equip micro-sized and small businesses with the skills they need to compete in a digital economy. This includes developing tools in e-marketing, social media, web content creation, and e-delivery platforms, among others.

The current situation for MSMEs in Latin America is dire. Accessing  relief funds simply won’t be enough unless they can pivot their business models and adapt to a post-COVID-19 world. Given the absolute need for digital transformation at an accelerated rate, only with adequate support will vulnerable businesses get through this crisis.

Digital is now integral to business. Yet, the degree of absorption of digital applications in Latin America is alarmingly low. It is estimated that only 30% of small businesses accept online payments, 43% use online delivery apps, and 12% are present in social media platforms. The smaller the enterprise, the weaker the digital confidence and strategy. Unsurprisingly, the problem is multidimensional. However, a few main have been identified.  

Firstly, adopting new behaviours based around digital skills and activities is often dependent on what support individual owners are able to access. In emerging economies, programs that target micro and small business owners with limited digital experience are scarce, and most focus on growing medium enterprises. The challenges, limitations, and needs of these three segments are radically different and thus programs should be tailored accordingly, which is rarely the case. 

 Secondly, in many cases take-up is low. Online banking, financing, and retail have exploded in the past five years but in many communities they still represent a radical cultural leap, which might deter business owners who are reluctant to shift their usual practices and do not perceive that the costs of already limited resources can be compensated with tangible gains in profitability. 

Janus is a social enterprise that helps MSMEs in Latin America build a digital identity. 

Firstly, through a series of interviews and analyses, we start by diagnosing the strengths and weaknesses of each business, their products, prices, and customer base. 

Using that input, we design a tailored and specific roadmap for digitalisation for each business. We look at what their critical needs are for their own unique goals, focusing primarily on accessible and low-maintenance digital interventions. These might range from building a website, to incorporating an electronic payment platform, to increasing visibility to online customers, to devising a social media strategy.

Janus  also provides assistance and training with integrating their plan, working side-by-side business owners to ensure that they can autonomously operate, customize and benefit from the digital intervention.

Finally, Janus tracks how those digitization solutions lead to improvements or benefits on each business, helping businesses identify trends, potential new sources of revenue, or new customer segments. 

Janus focuses primarily on micro and small businesses in emerging economies that have a bleak or nonexistent business identity. Primarily, we focus on on-premise food service venues (restaurants, bars, and cafes) and traditional-trade stores (corner stores, bodegas, and mom-and-pop shops). These businesses are an integral part of Latin American economies—traditional channels account for more than 95% of outlets and more than 50% of food and beverage sales. 

Janus works side by side these businesses to understand their unique and specific needs and limitations. No two businesses are the same and neither are the products that Janus can offer them. Each package is tailored to each client’s skills, resources, and willingness to change. 

Janus began during my time as Director for Economic Development at the City of Buenos Aires, where I spent most of my day trying to design solutions to the various challenges that affect growing businesses in an emerging economy. There, I witnessed two major shortcomings in the programs that we were launching.

Firstly, most efforts to assist MSMEs are targeted to financing, where survival and expansion are conceived as largely dependent on securing cheap financing, thus perpetuating the concept of borrowing money as a prerequisite to grow. This prevents small businesses from taking a more comprehensive approach to rethinking their practices towards a more efficient use of their resources. Changing client-engagement practices, locations, and/or distribution channels, can be more cost-effective yet are often disregarded as potential profit levers. 

Secondly, technological interventions developed by governments in developing nations have very low rates of adoption. Businesses in general have historically not been interested in learning about, utilizing or engaging with the various digital resources that are offered, even when these are free. Primarily, they do not understand how these services can specifically benefit them and do not have the resources (time, human capital) to guide their transition.

Growing up in Argentina, I witnessed the effects of the 2001 economic debacle on small businesses as dozens of them shut down permanently every single week. I realized that the impact of shutting down a business, no matter how small or new, goes beyond the financial implications and takes a huge toll on owners’ psychological well-being.

Many years later, working for the Buenos Aires City government, I am still witnessing that same reality across multiple sectors. Small businesses that fail to innovate and adapt are sooner or later quashed by the periodic economic recessions predominant in Argentina and most Latin American countries. Over the past few years, I have seen my favorite barber shop, restaurant, and bar, either close or relocate because of an unbearable economic context.

It is evident that permanent change will only stem from significant shifts in macroeconomic policy. However, I hope that with Janus I can help business owners with their most immediate and urgent challenges. I am confident that the public sector can only do part of the job, and that generalized behavioral changes will only occur if businesses which are already pressed for time, money, and people, can be assisted throughout the process.

My time in the public, private, and nonprofit sectors has shown me the most critical challenges affecting growing businesses in emerging markets. 

As Director of Strategy at the social enterprise Animana, I learned how to operate in an environment of limited resources, constant uncertainty, and financial volatility. 

Later, as Director of Economic Development in the Buenos Aires City Government, I was exposed to a more general and holistic perspective on the challenges faced by MSMEs across several industries. In the past two years, the city has been struck by three economic recessions, inflation rates of 40%, and rampant unemployment. I witnessed how adaptation to a constantly changing environment is critical for the survival of any business. 

Armed with the experiences of contributing to their growth both directly and indirectly, I realized that the majority of micro and small businesses in South America are missing out on the tremendous benefits of the digital world. And although there are multiple programs  to assist them in their digitalisation, uptake remains low. My time monitoring businesses development from the outside has shown me that unless owners are provided with the resources to navigate the complex process of building a digital identity while coping with their daily struggles, efforts will be in vain. 

The strength of my project lies in that I have had first-hand exposure to various other attempts to do what Janus intends to do, and thus have already learned from their mistakes.  

As I finished Janus´pilot phase in March, it was clear that as the COVID-19 pandemic unravelled, the business model that I had initially envisioned would not work as we would not be able to deliver the service in the way we had intended. Essentially, the stay-at-home order prevented us from helping businesses go digital, because paradoxically, it required them already having a robust online presence. 

As we were ready to expand, the pandemic strained businesses even more, forcing them to cope with their immediate demands to stay afloat. Only in the past two weeks, it is estimated that about 36% of metropolitan businesses in Buenos Aires have shut down permanently. Further, according to the IMF, Argentina will be the second most affected economy in the world, experiencing a GDP recession of 2.5%. 

This has forced us to rethink our business model. Ultimately, we adapted to rethinking our priority to reaching new clients and expanding, even if it means sacrificing revenues. This will allow us to continue understanding how we can best deliver our services and how this pandemic will shift consumers´ behaviors, thus preparing for a more benign economic context. 

Over the past six years, I have learned to work cooperatively, communicate effectively, and plan strategically in order to affect change. At the Buenos Aires City Government, I successfully tackled some of the most complex public-sector problems facing the City during a period of significant financial crisis. 

One of the most challenging projects of the past two years has been the development of the City’s 2023 Housing Plan. This initiative required me to work closely with the Ministry of Urban Planning, the Department of Infrastructure, and the Housing Institute, among others. After six months of hard work on issues ranging from regulatory barriers in the lease market to mortgage plans for vulnerable communities, our success in integrating multiple inputs translated into a robust and detailed program. Through debate, negotiation, and compromise, I led discussions which significantly enhanced the quality of our product, and unlike previous housing programs, resulted in specific and accurate impact measures, cost projections, and recommendations for implementation. This experience taught me that the difficulty of involving multiple stakeholders – many of whom possessed divergent viewpoints – in complicated conversations and programs is more than made up for by their often revealing insights. 

Janus is innovative in that it is specifically targeted to micro and small businesses in emerging economies with limited resources and potential to develop their business identity. Unlike other programs, we offer low-cost, short-term and easy-to-implement solutions that can significantly benefit businesses. Unlike other companies or organizations aimed at providing solutions we do not offer a canned, automatic approach but rather train business owners and employees as they adopt new technologies.  

Further, we are disruptive in how our business model is set up. Because going digital also involves endorsing other virtual platforms and services, generating valuable business data, and ultimately feeding information to other companies, we intend to monetize those interactions as other sources of revenue. This will allow Janus to charge an accessible fee and access a segment which is traditionally perceived as commercially unattractive.  

Janus recently completed a pilot phase where it assisted 47 micro and small businesses and approximately 150 workers. 

In one year we hope to target approximately 400 businesses and 12000 workers.

In five years, we hope to have assisted approximately 5000 businesses and 17000 workers.

Our goal for the next year is to escalate Janus and be able to reach as many businesses as possible. We intend to do this by optimizing our business model so that we can generate new sources of income. This will allow us to grow internally, hire new resources, and reach a growing number of businesses. 

Our goal for the next five years is to build strategic partnerships with some of the services that we would be promoting. For example, in Argentina, Mercado Pago is a clear leader in electronic payments. Their commission represents less than a third of what most debit and credit card companies charge, offering a much cheaper solution to businesses than card payments. If we are promoting Mercado Pago to business owners we hope that we can charge them an according commission. There are other companies around the world operating under this system, and it is ultimately beneficial for both businesses-- since they pay a lower commission-- and fintech companies--since their rate of adoption can increase dramatically. 

Further, our short-term goal is to refine our approach of tailoring and delivering specific, accessible and feasible digital integration packages. In other words, after taking their first step, business owners could benefit from developments in fintech, logistics, traceability, and many others.

The first barrier we anticipate is financial. Janus intends to be a for-profit model and finding the right balance between the price-point charged, service provided, and other revenues from partnerships will also depend on reaching a critical mass and achieving a healthy growth rate.

The second barrier we anticipate is cultural. Our target population does not necessarily understand the benefits of going digital and can be inclined to maintain their usual business practices.  

For the financial barrier, we understand that it might take time for Janus to become profitable and that this will largely depend on its rate of growth and strategic partnerships that can be developed. For this reason, we are seeking seed funding to set ourselves on the path to growth.  

For the cultural barrier, we firmly believe that that is exactly where the strength of our approach lies. We intend to develop a specific digital solution that is unique to each business while assisting them with the integration to ensure its successful adoption. Further, the transition to digital is being accelerated by the global pandemic and we intend to use that momentum to maximize our reach.

As previously mentioned, our business model intends to rely primarily on selling business support for a minimal, one-time fee. Further, revenues would include a commission from our strategic partners, whose services would be incorporated in our packages thus transitively increasing their client base. 

The key beneficiaries will be primarily micro and small businesses (defined according to number of employees, revenue, and business type) in Latin America who could benefit from digitalising. 

The service offered is designing and assisting business owners with the incorporation of a specific digital package that is accessible, feasible, useful and sustainable. The specific services will vary significantly on a case-by-case basis, from simply indexing basic business information on search engines, to building a website, to incorporating online payment methods, to creating a profile on delivery apps. 

The rapid process of digitalisation that is happening worldwide is offering small businesses great opportunities but also great threats. It gives the smallest companies unprecedented reach into new markets, a level playing field in sectors once dominated by major enterprises, and the ability to change the shape of how business is done. At Janus we believe that especially after the effects of COVID-19, small businesses in emerging economies will have to adapt to survive. Now more than ever, it is vital that they are supported as they navigate the process of building a digital identity.

We believe that our model will comprise two strategies. For our initial phase, we hope to raise investment capital to set up our operations and reach a critical mass of businesses as we build strategic alliances with other players in the technology and digital space. This will allow us to reach a subsequent phase, where we can be profitable by maintaining a healthy growth rate as new businesses are incorporated. 

Due to the recent changes related to the COVID-19 pandemic we are still finalizing our fund-raising strategy. However, we estimate that we will need to raise approximately USD50,000 in the form of debt in order to escalate Janus. 

We firmly believe that Janus can have a transformative impact on micro and small businesses in emerging markets. We are certain that we can affect positive change in communities where, especially now, if businesses do not adapt, they run the risk of disappearing. 

The Elevate Prize would provide the necessary support for Janus to develop and grow in a context where conditions seem to favour our expansion, but at least not immediately, our financial stability. The funding provided through the Prize would prove vital to set Janus on the path to success. Further, the mentorship and coaching would allow us to learn from other entrepreneurs and industry leaders who could provide invaluable advice as we embark on the path of growing a social enterprise in an emerging economy.

We hope that as a Global Heroes, we can use our time to learn how to implement local, affordable, and systemic change from the ground up in economic development. With the support of the Elevate community, we hope to engage others working in complementary areas, and hone skills in social change, communication, and team management so that we can create collaborative solutions and inspire others to contribute to become leaders in their own communities.

We would like to partner with organizations that provide the services that we offer but that already have a presence and understand the challenges of operating in emerging economies.