December 31, 2011

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.

December 30, 2011

Scarcity as a driver for innovation

Frugality and affordability are very much in the news of late, what with the most recent essay on Change Observer and this post on Paul Polak’s new blog both highlighting similar concepts but from the point of view of very different markets. It seems to imply the trend towards frugal design or extremely affordable yet relevant and useful products is emerging to the forefront of the mainstream, regardless of whether its the sophisticated mainstream consumer culture or the challenging markets of the lower income demographic. In which case, this is a timely moment in which to give a brief introduction to the conditions of scarcity within which we looked at informal manufacture, fabrication and innovation during our recent trip to Kenya and how these conditions drive innovation. Necessity, after all, has always been the mother of invention.


Infrastructure

Infrastructure availability or systems that we take for granted such as running water, stable electricity supply without voltage fluctuation or blackouts is an ongoing challenge in this operating environment (the majority of the unevenly developed world). This need not necessarily imply “poverty” so much as scarcity or uncertainty – for example, the latest Economist has a great article that underlines this point with regard to India’s chaos having little to do with its economic growth potential and ability. The variability of infrastructure not only influences product development for these markets but as we recently noticed, drives innovation in sometimes surprising directions that we may not always perceive of as an “unmet need” immediately.

Tap (Faucet) lock, Nakuru, Kenya 30th August 2010

These are locks for your water tap, available in the jua kali market in Nakuru, Kenya. They not only prevent the unauthorized use of your water (particularly if its from a tank of finite capacity that you may have paid good money to get filled) but also protects your tap itself from theft (the metal can be sold as scrap to be melted down and reused).

Fuel and energy

While much of the drivers for renewable energy solutions in the developed world are concerned with environmental and energy security issues, (valid in themselves yet still considered a luxury, imho, in the mindset of the customer due to premiums), product development and invention in the emerging markets is based more fundamentally on scarcity and need for affordable reliable power and fuel supply. Does this change the way the problem is framed for the inventors/makers and how does this shift in perspective influence the solution development? As Paul Polak points out:

If you don’t design to realistic customer-derived price points from the very beginning, any tool you design for a poor customer will never be adopted at scale.

Aluminium smelter's workshop, Nairobi, Kenya September 2010

And it doesn’t necessarily have to be a solar lantern for a poor customer per se – it can be the micro-entrepreneur who wants to lower his costs to the minimum in order to maximize his daily profits. Here is an aluminium smelter’s workshop, the can on the left contains used motor oil which he burns to melt the scrap metal down into ingots for reuse. On the other hand, he is dependent on electricity supply to power his air blower that vaporizes the heavy oil enough for it to burn and loses income if the power is out.

Transportation and distribution

If you’re in the informal economy, you don’t have access to the far flung top of the line logistics and distribution networks that other businesses do, or at least not at scope and scale available. Furthermore, due to the variance in infrastructure and operating environment, this is a challenge even for the biggest companies if you’re in a market like India’s much less the less developed nations. I’ve touched upon this further in this article but here I’m bringing this forth as one more element of scarcity that acts upon the operating environment, and so can lead to some ingenious and/or innovative solutions. Developed in context, they are often very affordable and relevant as they seek to solve locally observed problems.

Modified boda boda bicycle, Maker Faire, Nairobi Kenya 27th August 2010

Boda bodas are bicycle taxis popular in Africa, particularly East Africa, originating in Kenya. Here, these two makers from a smaller town outside of Kisumu came to display their specially modified boda boda. The back carrier has not only been elongated to increase the carrying capacity of the vehicle (which is what this is) but the gentlemen had also figured out that 250 kgs was the average load therefore they had calculated the necessary size of the modification accordingly. In addition, since their local area was both hilly and had uneven paths, they added shock absorbers to help the driver and improved the braking mechanism. Of course, they’d also added the facility to both charge your mobile front at the front of the bike while charging a car battery at the back from the dynamo. There is fodder for an entire article on the bicycle as the platform for innovation in emerging markets but that’s for another day.

Materials and Tools

Far more than in India but I can’t recall the situation in the Philippines at this moment, was the obvious scarcity of appropriate and affordable hand tools, small machine tools and raw material in Kenya.And certainly, there’s no Home Depot or some such there. And Kenya is supposed to be the most advanced in this sphere in the East African region. I would really like more information in this area so please write in or comment if you have knowledge.

Scrap from aluminium casting ready for re melting into ingots

Hammerheads made from old car axles

This earlier post compares two simple manual machines, the local variant of which uses far less energy and material to effect the same purpose and this one takes a look at the prototype of an affordable coffee grinding machine.

Working capital, cash flow and insurance (Risk and uncertainty)

A natural but challenging side effect of operating in the informal economy is access to financial tools and support systems available to small businessmen everywhere else. Bank rates are very very high (the risk of Africa!) and so access to capital for investing in new machines or growth is hobbled by the owner/entreprenuers insistence and preference on saving up and using cash instead. This takes time, slowing down economic development at the grassroots. Microfinance tends to favour consumer behaviour rather than investments or micro-enterprises and regardless, does not tend to take irregular income streams into account.Interestingly enough, mPesa is making a difference in this sphere but again, as a workaround rather than a product targeted at this need. This aspect of products designed to support micro-entreprise was the biggest challenge in the Philippines as well as my colleagues at the Philippine Business for Social Progress have informed me. These very same lacks, one could call it a systemic mistrust, drive creative solutions of a sort perhaps that may not always be preferred as much as the more positive ones mentioned above.

Backpanel of inverter, Nakuru, Kenya 30 August 2010

For example, the gentleman who makes these inverters is forced to put Japan components on his products so that customers will take the risk to purchase his product. He also offers a 1 year warranty and installs what would be an off the shelf, plug and play comp0nent anywhere else himself on the premises. The display and control shown here has inspired a lot of insight on contextual knowledge of technology – “Up for on”, issues of trust and commitment as well as the risk aversion already seen among BoP consumers.

While this has been wholly focused on Kenya, the conditions of scarcity are only variations on the themes that can be seen around the world. In the meantime, they offer much food for thought on the operating environment.

First published October 7th 2010 at Aalto Design Factory, Finland

December 24, 2011

How do you compete in a market where charity distorts pricing?


Strategy guru Michael Porter's 5 forces framework is quite well known to anyone attempting to assess or analyze the landscape of an operating environment for an industry or organization. Increasingly, since I've begun working out of Sub Sahara I've been sensing the challenge of a 6th force - one that is overlooked when consumer markets are considered particularly in the mass majority demographic. It is insidious however and hinders the sustainable practice of commerce. It is the dominant logic of charity and aid which leads to free give aways by so many seeking to help a poor African out.

Lets take the example of solar power as given in this recent BBC article:

The end result is DIY solar kits that can recharge phones and batteries. They look makeshift but they have the potential to make a huge difference to people thousands of miles away in Kenya.

As the director of KnowYourPlanet, Mark Kragh's day job is to resell solar panels to small businesses and hobbyists. But in February he will travel to Kenya to distribute specially-made kits he is giving away as charity, and to show local people how to make more.

What if someone decided to give away solar panels for free to the small businesses and hobbyists who make up Mr Kragh's customer base? How do you suppose that generous act of charity would impact his business?

Similarly, whether its the jua kali inventor/maker customizing solar power installations for each of his clients or the many social enterprise ventures that dot the landscape, each in their own way are trying to earn a living even while the work that they do helps improve the quality of life for their customers.

On one hand we talk about growing sustainable businesses and nurturing entrepreneurs as a critical means of social and economic development - 'development through enterprise' we say- yet on the other, these very same fledgling ventures will be blindsided by a market force that has the power to distort pricing and disable competition.

Where will the support come from for these companies to establish and grow marketing channels, distribution networks and a win win profitable solution for all stakeholders? The majority are local establishments who employ local people and thus add value to their communities.

Well meaning enthusiasts who come in with hand outs are going to have the same effect on the market as any competitor who practices 'dumping' - it will undercut the market and cripple any sales or marketing strategy if the alternate to purchasing a local product in a shop is a free giveaway from a charitable individual or organization. Furthermore, they are not a business to provide any after sales service or maintenance or customer support, their goal is to be in and out having done 'good' during a flying visit.But the aftermath will create enough ripples in the market creation process that companies will have to deal with for a long time afterwards.

Interestingly, Mr Kragh intends to visit Kenya - one of Sub Sahara's most mature solar power markets instead of Senegal where he'd originally gotten his inspiration from. If I was part of the solar mobile charger and lantern manufacturers association in Kenya or even Nakumatt or the electrical supply shop cooperative or whichever relevant body, I'd say they should petition to put a stop to activities of this sort or send them along to a location who needs it more than they. After all, it is the season of giving rather than receiving and one must always help one's neighbours.