Disruptive business models shake-up existing markets

14th August, 2014 by Duncan Jefferies

A number of innovative projects around the world are improving people's lives by replacing inefficient products with simple, effective technologies and services.

Electric vehicles, 3D printers, nanomaterials and the Internet of Things are all poised to reshape the world, just as the steam engine, telephone and car did before them. Although it’s hard to predict exactly what kind of impact these potentially disruptive technologies could have on today’s products and services, they are likely to be driven forward by small, innovative companies that have spotted a window of opportunity in an existing market and prised it open – a quality that marks out several of this year’s Ashden Award winners.

Thanks to the rapidly falling cost of solar panels and improvements in energy storage, the energy sector, for example, is primed for an upheaval that could shift power away from the energy giants and spark a revolution in the way energy is produced, distributed and consumed, while giving millions of people in the developing world access to a reliable source of electricity. It’s a revolution that Off Grid Electric is spearheading in Tanzania. The company is supplying solar-as-a-service in a country where 85% of households have no access to the grid, and it’s doing it with the help of another disruptive technology: the mobile phone.

For Jonathon Porritt, Founder-Director of Forum for the Future, this encapsulates “what’s really exciting about today’s sustainable energy innovations: the degree to which they are simultaneously giving rise to new business models, seriously weakening the stranglehold that today’s incumbent players in the world of energy have had around our throats for decades”.

Whereas it could cost a household around $700 to connect to the national grid, a basic Off Grid Electric plan costs $6 to install and $1.25 a week for two lights and a mobile phone charger, with customers able to top-up their system through their phone. The service has already helped more than 15,000 homes do away with inefficient, dangerous and environmentally damaging kerosene lamps, and the company hopes to raise this figure to 10 million within a decade. “Our value proposition is simple: switch to solar and get far better service for less than you are already spending to light your home”, says Raphael Robert, Head of Expansion at Off Grid Electric.

An all-day customer care telephone line and ongoing support from local agents has helped to allay the fears of customers who have previously had reliability issues with their own solar energy system or who are reluctant to switch from kerosene. “People can use our product without the risk”, says Robert. “They can just call our customer care number and say ‘our light is broken’, and an agent will go and change it for a new one. And those are the customers who go out and spread the word.”

Word of mouth has also played a vital part in the success of Greenway Grameen’s biomass cookstove, which has been designed to replace the traditional mud stoves used by 87% of rural Indian households. The World Health Organization recently reported that 4.3 million people die from the results of indoor air pollution each year, the majority of which comes from cooking smoke. As well as reducing this smoke by 70%, Greenway Grameen’s Smart Stove cuts cooking times by around 30 minutes and household wood use by around 1.1 tonnes per year.

According to David Bent, Director of Sustainable Business at Forum for the Future, “seeking feedback and quickly improving” plays a key part in the success of many disruptive technologies – something Neha Juneja, co-founder and CEO of Greenway Grameen, knows only too well. “We did about 10 different designs with feedback for each”, she explains, “and for every different design we would do about 15-20 prototypes”.

Having trialled some of them in stores to see which designs customers were most happy to pay for, the company established an aspirational marketing campaign for the final design. “It makes your kitchen look modern, you’re a modern woman, hence this is the product for you” is the message that Greenway Grameen aims to communicate to potential customers. It seems to be working: more than 120,000 stoves, which retail for $23, have now been sold. Over two thirds of these sales have been through partnerships, particularly with microfinance institutions – another recent disruptive innovation.

Greenway Grameem’s approach illustrates that sustainability focused technologies with disruptive potential are most likely to gain mass appeal by offering something new, desirable or cost-effective. As Bent says: “There is potential for examples like ZipCar to shake up existing markets, but not because they are sustainability focused. They’ll be successful because they deliver better value for customers. In ZipCar’s case, that’s providing flexible urban travel without the hassle and heartache of owning a car. The sustainability outcomes will be a result of uptake, rather than a reason.”

Sustainable Green Fuel Enterprise (SGFE) charbriquettes also illustrate this point. This pioneering Cambodian business turns coconut shells and other waste

organic matter into clean-burning briquettes, which are used as cooking fuel in Phnom Penh’s homes and restaurants. Around 80% of Cambodians cook on wood charcoal, despite the fact that the country has one of the worst rates of deforestation in the world. SGFE charbriquettes are produced in low-emission kilns, and have saved an estimated 6,500 mature trees to date.

However, the success of the business relies upon the fact that charbriquettes retail at a similar price to charcoal, yet burn for longer, are sturdier (allowing street food vendors to transfer them between stoves) and produce fewer sparks and less mess. As Carlo Figà Talamanca, CEO of SGFE, says, for a new market entrant to win over sceptical consumers and retailers “you have to have a better product than the conventional one. People won’t bother to change their habits otherwise”.

Like Greenway Grameen, SGFE has modified its product in response to customer demands, tweaking the amount of binder in its charbriquettes to get the perfect mix of hardness and heat. During the process through which biomass is turned into char, the greenhouse gases that are produced are burned off using technology devised from clean cookstove designs, rather than vented into the atmosphere, and the heat used to dry the charbriquettes – an innovation that helped the company to win an Ashden Award. “I would say the biggest design element in our case was not just the end product … but also the production process”, says Talamanca.

Technologies that are well established in Western countries, or have even been surpassed, can still prove disruptive in developing economies. Proximity Designs, for example, is working to introduce treadle pumps and other sustainable agriculture technologies to Myanmar (Burma), one of the hardest places in the world to start a business, according to the World Bank. There is very little access to electricity in the country, and until now farmers have irrigated their crops by lifting water in buckets from wells and carrying it in watering cans to their fields.

Proximity’s foot-operated treadle pumps, drip irrigation systems and water-storage tanks, refined through extensive farmer feedback, are now helping to dramatically increase crop yields and incomes across the country, which has suffered from decades of technological isolation. Using one of the social enterprise’s pumps, people can achieve the same water outputs in half or even a third of the time. They’re designed to be affordable to someone earning $2 a day, costing between $25 and $38 each. Around 90,000 people in 5,000 villages now use the pumps, and farm incomes are increasing by an average of $250 per season.

“Farmers were already looking for alternatives to backbreaking, time-consuming work”, says Jim Taylor, co-founder of Proximity Designs. “One of the priorities was affordability, since farmers knew they could use diesel pumps, but these were totally of reach financially. It was then our mission to design something that truly presented a better way to lift water from wells that was also affordable.”

Proximity is always trying to improve on existing solutions, hence its next project: a low-cost solar water-pumping system. Looking even further ahead, advanced 3D printing could also have a huge impact on global industry, allowing anyone to quickly ‘print’ replacement parts for existing products or assemble new ones from designs available online. Although 3D printers are dropping in price (you can pick one up in the UK for £700) they are still largely the preserve of hobbyists, rather like the microcomputer was in the late 1970s and early 1980s. But once the range of ‘printable’ materials increases and 3D printers move into the mainstream, innovative organisations the world over will be able to harness yet another disruptive technology for sustainable ends.

Duncan Jefferies is a freelance writer and Assistant Editor, Green Futures.

Ashden is a Forum for the Future Partner. www.ashden.org

Photo credit: Martin Wright

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