Innovating For Emerging Markets · Innovating For Emerging Markets Novel business models to supply...
Transcript of Innovating For Emerging Markets · Innovating For Emerging Markets Novel business models to supply...
Parth Vaishnav
Innovating For Emerging MarketsNovel business models to supply energy to the rural poor
Globally, 1.5 billion people do not have access to electricity• Investmentsof$30-40billionperyearareneededto
provideuniversalgridaccessby2030(TheEconomist2010)
• Traditionalalternativesareexpensive,hazardousandpolluting(Adkins etal.2010;Mills2005;Schultzetal.2008;Pecketal.2007)
• Moresustainablealternativescanbeeconomicallyviable• e.g.,cheaperthankerosene,dieselorgridextension
(Chakrabarti &Chakrabarti 2002;Miller2010)
Can entrepreneurs implement such alternative solutions? How?
How do organizations seek to deliver - in an environmentally and economically sustainable way - energy services to the poor, rural populations that do not have access to the electric grid?
Methods and Theory
• Casestudies (Yin1981;Yin2003)• Whenboundarybetween phenomenon andcontext isblurred• Multiple casestudies: analytical generalization• Centralquestions oftheresearch identified beforehand
• Marketingandmanagement strategyliterature(Prahalad2009)• MarketingtotheBoP:Product,Place,Price,Promotionà Product,
Accessibility, AffordabilityandAwareness• Socialandinstitutional entrepreneurship
• Creationofsocial andeconomicvalue:Sustainability (Dacin etal.2011)
• Collaboration (Spear2006;SánchezandRicart 2010;Seelos andMair2007)
• Multi-level institutional work:Macro,Meso,Micro(Traceyetal.2011)
The central questions
Forty seven organizations were studied…
…and their business models analysed
Over 500 news articles, 25 previous case studies, 4 interviews with founders
Marketing innovations
Product Affordability Accessibility Awareness Sustainability
Enabletheuseofmultipleenergy
sources(12of47)
Reduceupfrontcost:through
productmodularityand
CDM(29of47)
Createnetworkoflocal
entrepreneur-franchisees(16of 47)
Engage,anddemonstrateproductto,
communitiesandcustomers(4of47)
Ensurepayments(bypeerpressureorpre-payment)
(9of 13)
Ruggedize(8of47)
EnableaccesstofinancethoughMFIorotherloansorbychannellingsubsidies(whetherloansmakeproductsaffordableormerelyaccessible canbedebated)
(32of47)
Usecelebrities,sportand
entertainment(4of47)
Teach localstomanagetechnical&commercialaspectsofenterprise(7of47)
Tailorproducttospecifictasks(4of47)
Promoteincomegeneration(7of47)
Piggybackonexistingnetworks
(MFIs,postoffice,NGOs)(7of47)
Engageconsultants(3of 47)
Facilitatereplicationofthe
model(2of47)
Collaborations
Macro Meso Micro
Channeltocustomers,orcollect,subsidiesandfunding
fromgovernmentsandinternationalorganizations
(14of47)
Partnerwithorganizationstofinance(throughloansor
subsidies)customerpurchases(24of47)
Engagemicroentrepreneurstoproduce,promote,distributeormaintain
products.(10of47)
EarncreditsundertheCDMmechanism(11of47)
Partnerwithorganizationstopromoteordistribute
products(10of47)
Organizecustomerstogenerateincomefrom,or
operateproduct.(7of47)
Lobbyfor,identify,andexploitbeneficial
governmentregulationsorinternationalprogrammes
(8of47)
Partnerwithfirmsoruniversitiestogainaccessto
keytechnologies(10of47)
Buybiomassfuel,labourorproducefromcustomers.
(5of47)
How much do customers pay? • Allalternatives cheaper
thankerosene• TheSunKing solar
lanterncosts$17,andhasalifeof3years:families spend$2-4onkerosene permonth
• Previousresearch inothermarketshasshownthatthepoorpaymore• Caplovitz 1965• ChungandMeyers1999• Prahalad&Hammond
2002
Product WattsHoursperDay
LifeinYears
Totaloutpu
t(kWh)
Price($) $/kWh
TERI'sLightUpaBillionLives,India Solarlantern 3 6 0.02 0.1 3.69
SunKingsolarlantern Solarlantern 1.4 4 3 6.1 17 2.71NobleEnergy,AndhraPradeshandMaharashtra,India
Solarlanterns 3 6 5 26 35 1.18
ProkaushaliSangsad,Bangladesh
Solarhomesystem 20 6 10 438 280 0.75
Sunlabobmonthlyrental,Laos
Solarhomesystem 20 6 3.7 2.8 0.76
Unmeteredtariffforruralareasforsupplyupto1kW,Bihar,India
Gridpowertovillages 30 7 6.5 2 0.31
HuskPowerSystemsmonthlycharge,Bihar,India Powerfrom
biomass
30 7 6.5 1.8 0.27
SaranRenewableEnergy,Bihar,India
0.18-0.27
KutirJyotiScheme, Bihar,India
Gridpowertovillages 30 7 6.5 0.8 0.13
Meteredtariffinurbanareas,Bihar,India
Gridpowerincities 0.08
Contribution
• Intensedebateaboutdoingbusiness atthebaseofthepyramid(BoP)• Fortune (Prahalad 2004;Christensen etal2001)vs.mirage
(Karnani 2007;Warnholz 2007)• Munir etal.2010
• Datasupport the‘mirage’hypothesis• Noteadditionality requirement forCDM
Withoutthecontributionofcarboncredits,d.Light won’tbeabletosubstantiallypenetratetheverylargemarketopportunityforprovidinglightingtofamiliesearninglessthan$2perdaybecausethecostofmakinganddeliveringlightingtothosemarketsisjusttoohighotherwise.Withoutaccesstothatmarket,wecouldnotprojectareturnthatwouldmeetourthreshold.(d.Light Design2006)
• Notealsothatthese investorswouldbe“comfortablewith…returns of6-8%”(Karunakaran 2009).
Further research
• Whatdothelowestrungsoftheenergyladderlooklike?Howisenergyconsumed?“InourBlueprintsscenario,themostoptimistic scenariowepublishedin2007,wesawChina’scarbonintensity fallingbyover14%between2005and2020.Amorerecentassessment suggeststhatChinaisontracktoreacha32%reductionforthatperiod,despitestrongerGDPgrowthandhigheroverallenergy-usethanwehadassumed.”(Voser 2010)
• Impactonincomegenerationanddevelopment• Peoplecanworklongerà theyshouldearnmore(?)• Replicateethnographicworkdoneinmicrofinance