Start-ups with creative business models are beating multinationals to the punch in powering lights for the global 1 billion living off-grid, according to Lux Research
BOSTON, MA – June 19, 2013 – Off-grid solar power, LED lighting, and energy storage technologies throughout the world’s developing nations have grown from zero to over 4 million installations in the past decade. Despite low average income, lighting systems for residential consumers throughout India, Pakistan, Thailand, Indonesia, and Sub-Saharan Africa are becoming big business, says Lux Research.
“Most national utilities throughout the developing world are both uninterested in and incapable of expanding electricity service to the off-grid population,” said Steve Minnihan, Lux Research Senior Analyst and lead author of the report titled, “Lighting the Developing World: Business Model Innovation in the Face of Unique Risks in Rural Lighting and Electrification.”
“There’s an opportunity for small and large suppliers to sell systems and services directly to the end customer – a growing number of innovative start-ups are developing electricity-as-a-service models that resonate strongly with eager customers,” he added.
Lux Research analysts combined risk analysis on a wide range of business models with primary research from local ventures, national experts, utilities, and government agencies to determine strategies for lighting in the developing world. Among their findings:
- Small ventures lack technological differentiation. The most noteworthy small ventures are competing by offering unique services, pay-as-you-go electricity offerings, and highly localized sales, marketing, and client management channels – not novel technology.
- Start-ups mitigate risk with open or closed partnership model. The open model, exemplified by Simpa Networks, seeks to mitigate risk by leveraging existing market channels in the region. Conversely, a closed model such as Mera Gao Power assumes every partner simply increases the likelihood of failure, and therefore all activities should be internalized.
- Multinationals can capitalize by acting as matchmaker. Large companies can boost growth in the rural lighting and electrification sector by integrating foreign and domestic start-ups with existing sales, marketing, and client management channels. This activity eases the process of partner selection and integration, and warrants a profit margin for the multinational.
The report, titled “Lighting the Developing World: Business Model Innovation in the Face of Unique Risks in Rural Lighting and Electrification,” is part of the Lux Research Grid Storage Intelligence service.