Posts Tagged ‘off grid’

Why have I been getting so grumpy about well meaning social enterprise?

Yesterday’s post deconstructing The Economist article on the promise of solar lighting for the millions of poor living without electricity made me question my strongly worded response. Another recent one is from well meaning Guardian, whose first of the 15 innovations they claim will change lives in Africa is the now forgotten Hippo Roller. Even the designer behind that project prefers not to talk about it, but trust the media to dig it up in order to flesh out their content. Theirs is the third Africa specific section to be launched in the recent weeks and yes, there’s a dearth of information for the armchair journalist.

Why do articles like this make me cranky?

Because they do more harm than they help. By inaccurately portraying the market and its opportunities – whether its the lower income demographic in Africa or India – they inspire well meaning but fundamentally unsound business plans and social entrepreneurs to sink valuable time and effort into ineffectual social goodness. It is irresponsible journalism.

Writing such slapdash articles only serve to create a rosy view, blurring into fuzzy altruistic goodness, which overlooks the hardcore realities of establishing profitable business enterprises in these challenging markets in order to serve the most demanding customers successfully. They leave you with the impression that all you have to do is ensure your product reaches every supermarket shelf and it’ll simply sell like hotcakes.

If it were still only the beginning of the “fortune seeking at the bottom of the pyramid” era, when companies and startups had to be encouraged to look at this market, then this overblown hype and hoopla might be understandable. Today, some half a decade or more later, it simply serves to underline the ignorant arrogance with which these populations are viewed.

Deconstructing the solar lighting market hype

Nairobi solar lantern shop, July 12th 2012

The Economist’s Q3 2012 Technology Quarterly has a paean on the promise of solar lanterns replacing nasty, stinky kerosene once and for all. Of note is the careful mention of MKopa, a Nairobi based startup founded by Nick Hughes of MPesa fame, until now conducting pilot tests in stealth mode. But the rest of the article is still the usual rehash of the immense promise of solar lighting to finally get rid of that incumbent fossil fuel, something social enterprises like d.light have been attempting to fulfill for some 4 or 5 years now.

Why isn’t anyone asking what’s taking so long for this mythical promise to bear fruit? I’d like to start by deconstructing the article and identifying the implicit underlying assumptions that tend to trip the promise keepers.

As previously happened with mobile phones, solar lighting is falling in price, improving in quality and benefiting from new business models that make it more accessible and affordable to those at the bottom of the pyramid. And its spread is sustainable because it is being driven by market forces, not charity.

Show me the case study of a successful example of this product becoming a sustainable business proposition. Every company mentioned in the article is either in pilot testing new business models or talking about their performance and brightness, even while distributing via NGOs. If this is a consumer product business for patient capital then why aren’t the Chinese brands waiting (or mentioned, for that matter)?

Phones spread quickly because they provided a substitute for travel and poor infrastructure, helped traders find better prices and boosted entrepreneurship. For a fisherman or a farmer, buying a mobile phone made sense because it paid for itself within a few months. The economic case for solar lighting is even clearer: buying a lamp that charges in the sun during the day, and then produces light at night, can eliminate spending on the kerosene that fuels conventional lamps.

 The economic case might be clearer but the reality is far more complex than that. Lets compare the market entry strategies of mobile manufacturers in their pioneering heydays and the solar lantern makers. Where is the user research and consumer insight on existing household energy usage and purchasing patterns that might shed a light on this ongoing multi-year promise?

The mobile phone is a personal asset. Most people put aside bits and bobs of cash towards their purchase of their phone. It belongs to them and there is prideful ownership and status involved with models and brands.

The solar lantern is not a personal asset. It belongs to and will be used by the entire household. There may be more than one adult earning member of such households. The decision making involved is one of group dynamics, never as simple or easy as that of an individual purchase.

Eliminating spending on kerosene is not the same as generating income by the way of the phone.

Additionally, the phone has become a ‘must have’ and is aspirational, in addition to connecting you instantly to your social network. Small and portable solar lanterns are not yet status symbols nor aspirational in anyway, given that much of the marketing communication places emphasis on saving money on kerosene. Whooptydoo, says the subsistence farmer whose dreams might include TV sets and radios, to be added over time, in modular fashion, to the solar home system.

In an informal test of solar lights carried out by The Economist in Africa, users grumbled about the soapy quality of light and lantern-style design. But the company has won plaudits for its other models: its largest lamp, the S250, was included by the British Museum in its “History of the World in 100 Objects” exhibition as the 100th object. .

I mean, really, The Economist? That is weaselling out of accurate consumer feedback isn’t it, if you state that users (the people who are going to sustain the businesses remember by purchasing the devices) don’t like the lanterns but hey, look, the British Museum likes it. Remember the design awards granted to the LifeStraw? Look at what happens to them:

 Carefully hidden away in case someone comes to check up on the beneficiaries of generous charity. When asked why it wasn’t in daily use, the response was that it was far too difficult and took too much time when it was easier to pour a 20 cent bottle of purifier into a bucket.

The article ends with a product that’s a concept developed in a studio. Who is hoping and how that this designer device will magically obtain a viable business plan with effective distribution and sales? The Economist might have been better off focusing on MKopa and Eight19’s efforts to experiment with new pay as you go business models, though I can already see their solution’s limitations particularly in the Kenyan market’s context. They could have talked about Econet Solar or Angaza or MeraGao in India, in the same vein of experimental business models instead of defaulting to the hopeful batteries and museum pieces that will grace the dusty shelves of retail outlets.

Btw, that SunKing you bought in an African supermarket? How many rural low income BoP customers shop there, do you know? 

Where are the appliances designed to be used with renewable energy sources?

LPG powered fridge for sale in Eastern Cape, South Africa

Almost 2 years ago in early 2010 I wrote about the opportunities for disruptive innovation in the emerging markets of the then developing world. One of the 5 case studies was that of the following concept:

Re-imagined household appliances
Refrigerators have come to the forefront of the news with the launch of Godrej’s Chotu Kool—a top loading unit co-created with their target audience in rural India, it does not require electricity and has one tenth the number of parts required in a conventional fridge. The refrigerator weighs only 7.8 kg, runs on a cooling chip and a fan similar to those used to cool computers. Chotukool consumes half the power consumed by regular refrigerators and uses high-end insulation to stay cool for hours without power while costing only Rs 3250 (USD 69). It is being distributed and marketed through partnerships with micro-finance institutions.

As this clay based precursor, the Rs 3000 (USD 55) Mitti Cool demonstrates, there have been a plethora of alternative solutions to the needs defined by basic household appliances. In the searing heat of the Indian summer, illnesses can be prevented by keeping milk and cooked food too cool to spoil. What Godrej has done however is taken the basic concept of low cost solutions and applied it to a mass market consumer good, to be marketed, branded and sold just like any other home appliance. Less moving parts imply ease of repair and maintenance, lower cost of ownership and possibilities for eco-innovations, a trend that could permeate the way appliances are currently designed and built for more profitable markets.

Where are these products now in the market and more importantly, where are other such home appliances?

Granted, the original concept was that of extreme affordability and these products were targetting the (still mythical) volumes in the BoP market – although in Godrej’s case it was simply common sense given the proportion of the Indian population who either lives off the grid or cannot afford the paraphernalia required for back up electric power when the inadequate systems cannot keep up with the demand.

Today however I was forcibly reminded of this product development direction when I came across the results of a significant study by Prof Arne Jacobsen of Humboldt State University that looked at rural Kenyan adoption of household solar power and the demand drivers that created this unsubsidized market. While there is much that is of interest in his dissertation, particularly the focus on the ‘connectivity’ aspects of rural demand, it was this observation that made me think about the untapped potential demand for a range of home appliances designed to suit the constraints of the majority of renewable home energy systems :

The average solar module size for a household system in Kenya is approximately 25 W, and the most common size is 14 W. Televisions, radios, and lights are the three main electrical appliances used with solar PV systems, while cellular telephone charging is a rapidly emerging use. Many appliances that are often used around the world in grid-connected homes, such as refrigerators, electric irons, and electric cookers, are generally not used with solar PV in Kenya. This is true because these appliances consume far more energy than the small solar modules that most Kenyan users can afford are able to produce. In other words, the quantity of electrical energy supplied by the solar PV systems used in Kenya is very small compared to the quantities that are generally available to grid-connected households, and this limits the range of possible uses.~ Jacobson, Arne (2007) “Connective Power: Solar Electrification and Social Change in Kenya,” World Development, v35, n1, pp. 148

While one can argue that this data is not only a decade old but focuses only on rural Kenya, I’d say that the basic insight would apply nonetheless wherever there is increasing uptake of modern energy sources among rural and/or lower income households. When one adds the potential number of households globally where utility companies are deploying prepaid electricity meters – The Philippines, many Sub Sahara African nations and of course the pioneer, South Africa – there seems to be implications for greater demand for products that would not only consume far less power than even the EU’s greening laws require but also track energy consumption in units of cash or energy simultaneously.

Current day EUP requirements are still designed with ubiquitous legacy infrastructure of the electric grid, not a wholly different system for sourcing, installation and purchase. In fact, I also wonder whether the fact that most of these household solar PV systems are slowly added over time in modular chunks (reflecting purchasing patterns of those on irregular or seasonal income streams) may not also play a part in influencing future product design?

There is a market opportunity here for manufacturers of consumer durables seeking to grow entirely new markets in the frontier regions of the global economy.