Worldwide
over
1.3
billion
people
live
without
any
access
to
electricity.
In
the
world’s
50
poorest
countries,
almost
80
percent
of
the
people
lack
access
to
electricity.
They
rely
on
firewood
and
kerosene
for
their
energy
supply,
which
adversely
affects
their
environment,
health
and
personal
safety
as
well
as
hinders
their
opportunities
for
economic
progress
(Legros
et
al,
2009).
The
Global
BrightLight
Foundation
was
established
as
a
not-­‐for-­‐profit
entity
to
provide
globally
accessible
and
affordable
energy
solutions
to
improve
the
education,
community
environment,
economic
opportunities,
and
resulting
quality
of
life
of
those
living
at
the
Base
of
the
Pyramid
(BoP)
in
emerging
and
third
world
countries
that
currently
lack
access
to
electricity
and
power.
While
in
its
early
stages
of
operation,
BrightLight
required
an
understanding
of
the
current
state
of
the
market,
a
review
of
current
market
actors,
an
analysis
of
BrightLight’s
current
capabilities,
and
a
strategic
analysis
to
position
BrightLight
to
be
successful
amidst
existing
and
future
market
dynamics.
Research
Objective
and
Methods.
The
objective
of
this
Masters
Opus
was
to
derive
a
comprehensive
understanding
of
the
market
for
provision
of
small-­‐scale
solar
PV
solutions
to
BoP
communities,
to
inform
strategic
conversations
among
BrightLight’s
leadership
with
a
focus
on
developing
a
distinct
business
model
and
a
detailed
business
plan
for
the
non-­‐
profit
to
achieve
their
mission.
A
mixed
methods
approach
for
research
was
used
to
answer
research
questions,
involving
literature
reviews,
pilot
report
reviews
(Rwanda
and
Argentinian
pilot
surveys
on
uptake
of
solar
lanterns),
and
expert
interviews.
The
project
was
also
divided
into
three
Phases
to
focus
our
research
and
deliverable
set:
Market
Assessment,
Alternative
Development,
and
Targeted
Business
Plan.
The
Market.
Four
billion
low-­‐income
people
comprise
the
BoP.
These
four
billion
have
incomes
less
than
$3,000
in
terms
of
local
purchasing
power
and
live
in
relative
poverty.
The
BoP
is
characterized
by
significant
unmet
needs,
dependence
on
informal
subsistence
livelihoods,
and
a
poverty
penalty.
Total
household
income
is
$5
trillion
a
year,
which
makes
the
BoP
a
potentially
important
global
market.
The
BoP
market
is
underserved
and
dominated
by
an
informal
and
relatively
inefficient
economy.
The
BoP
market
can
be
split
into
six
income
segments.
The
poorest
segment
earns
$500
or
less
annually
(less
than
$1.50
per
day).
The
next
poorest
earns
between
$500
and
$1,000
annually
(less
than
$3.00
per
day),
and
so
on,
up
to
the
highest
segment
which
earns
between
$2,500
and
$3,000
annually
(less
than
$9.00
per
day).
Spending
patterns
in
the
BoP
vary
by
country;
for
example
Rwanda
and
Djibouti
spend
approximately
1.9%
and
10.6%,
respectively,
of
their
household
income
on
energy.
Spending
on
energy
at
the
BoP
is
approximately
40%
urban
and
60%
rural,
but
rural
BoP
households
spend
on
average
44%
less
on
energy
than
do
urban
BoP
households.
These
income
and
spending
differences
show
that
each
region,
country,
and
city
is
a
unique
market
with
different
types
of
customer
segments
to
serve,
requiring
unique
marketing
and
distribution
strategies.
As
of
late
2012,
there
are
approximately
1.3
billion
people
without
electricity
access
worldwide.
The
majority
resides
in
Asia,
but
by
2030
Africa
is
expected
to
pass
Asia
for
the
largest
un-­‐electrified
market.
The
solar
portable
light
(SPL)
market
is
focused
on
off-­‐grid
and
under-­‐electrified
markets.
The
SPL
market
is
targeted
predominately
at
consumers
and
small
business
of
the
BoP.
The
potential
for
off-­‐grid
lighting
is
substantial,
and
market
demand
is
growing
rapidly.
In
addition
to
global
population
growth,
there
five
major
drivers
of
demand
worldwide:
lagging
grid
growth,
price
trends,
technology
and
design
innovation,
kerosene
prices,
and
mobile
opportunities.
SPLs
align
well
with
the
energy
needs
of
the
BoP
as
a
result
of
several
factors,
including
rapidly
declining
manufacturing
cost
and
customer
payback
period,
rising
price
of
kerosene,
lantern
quality
improvements,
and
consumer-­‐centric
design.
Best
Practices
in
the
BoP.
Successful
organizations
operating
at
the
BoP
require
a
different
type
of
business
sense
than
that
of
modern
economies.
The
Michigan
team
conducted
a
literature
review
and
spoke
to
current
or
former
practitioners
in
the
field.
We
learned
the
following
lessons
around
operating
a
business
or
organization
that
serves
BoP
customers:
• Take
the
long
view
–
BrightLight
must
be
prepared
for
the
long
haul
both
in
terms
of
developing
relationships
with
local
communities
and
developing
a
sustainable
business
model.
As
our
contact
at
the
International
Finance
Corporation
stated,
“Success
is
still
early
days
in
terms
of
profitability.”
• Be
prepared
for
a
different
landscape
–
Margins
will
be
low,
distribution
channels
need
to
be
created,
and
consumers
must
be
segmented
across
a
number
of
different
factors.
This
work
will
require
partnerships,
extensive
on-­‐the-­‐ground
research,
and
mutual
trust
with
local
communities.
• Keep
it
local
–
BrightLight
must
create
a
local
presence
to
build
trust
with
end-­‐
consumers.
These
relationships,
in
turn,
will
inform
product
needs,
business
models,
marketing
strategies,
and
partnerships.
• Create
your
market
–
BrightLight
will
likely
have
to
create
a
market
for
its
product.
This
requires
teaching
end-­‐users
about
the
advantages
of
a
product
they
know
little
to
nothing
about
and
for
which
the
economics
are
different
than
their
current
energy
purchases.
• Embrace
cooperation
–
Regardless
of
the
business
model
it
chooses,
BrightLight
will
have
to
work
with
other
organizations,
including
governments,
non-­‐profits,
and
other
businesses.
Cooperation
is
a
key
ingredient
to
success.
• Don’t
give
the
lights
away
–
The
overwhelming
opinion
of
the
practitioners
with
whom
we
spoke
was
that
giving
lights
away
would
spoil
the
market.
BrightLight
will
have
to
create
a
business
model
to
ensure
that
end-­‐users
have
skin
in
the
game.
We
found
that,
in
many
respects,
developing
economies
require
business
skills
on
steroids.
Depending
on
the
organizational
and
business
model
it
chooses,
BrightLight
will
need
to
do
some
or
all
of
the
following:
determine
the
BoP
segment
it
will
serve,
identify
the
right
product
for
its
customers,
develop
social
networks
based
on
trust
to
educate
end-­‐users
about
the
need
for
lights,
leverage
local
connections
to
develop
“human
centered”
products,
maintain
positive
local
relationships
to
build
trust,
market
the
product(s)
to
end-­‐users
using
a
mix
of
traditional
means
(radio
advertisements)
and
non-­‐traditional
means
(puppet
shows,
songs,
etc.),
partner
with
NGOs
to
build
demand,
and
have
the
patience
and
capital
to
iteratively
improve
the
model.
“Best
in
class”
organizations
have
built
their
operating
procedures
and
business
models
around
these
principles.
While
success
is
never
guaranteed,
it
is
imperative
that
BrightLight
follow
these
best
practices
as
it
builds,
pilots,
refines,
and
scales
its
model.
Only
then
will
BrightLight
have
sustainable,
lasting
impact.
The
Solar
Lantern
Value
Chain.
The
solar
lantern
industry
has
grown
significantly
in
terms
of
activity,
sophistication,
and
number
of
involved
organizations
since
2006.
Donor-­‐
based
models
comprised
the
majority
of
involved
organizations
in
the
past,
but
as
the
price
of
photovoltaic
cells
decreased
and
distribution
channels
were
forged,
the
cost
of
operation
dropped
and
market-­‐based
models
became
increasingly
viable
and
prevalent.
In
turn,
the
quality
of
products
has
improved,
in
part
due
to
the
rise
of
BoP-­‐centric
lantern
design,
which
the
industry
now
considers
critical
to
earning
customer
buy-­‐in.
Distribution
and
financing
remain
major
market
barriers,
and
current
organizations
rely
on
in-­‐field
NGO
partners,
microfinance
banks,
cooperatives,
and
village
level
entrepreneurs
to
help
overcome
them.
As
these
hurdles
are
minimized
in
the
next
five
to
ten
years,
more
private
sector
investment
will
flow
into
this
industry,
turning
solar
powered
lanterns
into
a
commodity
and
helping
to
de-­‐risk
and
solidify
distribution
and
financing
techniques.
No
single
organization
has
achieved
scale
in
this
field,
due
to
the
highly
customized
nature
of
serving
diverse
BoP
demographics
and
geographies.
As
a
result,
most
successful
organizations
advocate
replicating
rather
than
scaling,
which
keeps
local
activities
small,
flexible,
and
customizable,
but
still
enables
transfer
of
key
principles
among
satellite
business
groups.
In
other
words,
no
single
product
or
business
model
works
for
all
BoP
lantern
markets.
The
solar
lantern
value
chain
is
comprised
of
eight
segments
of
activity:
minerals,
design,
assembly,
wholesale,
retail,
training,
financing,
servicing.
In
general,
private
sector
companies
tend
to
operate
on
the
upstream
end
of
the
value
chain
(minerals,
design,
assembly,
and
wholesale)
while
both
private
sector
and
non-­‐profits
tend
to
operate
downstream
(wholesale,
retail,
training,
financing,
servicing).
Social
enterprises
operate
across
the
entire
value
chain.
After
analyzing
47
industry
players,
we
grouped
them
into
5
broad
categories:
Gorillas,
Upstream,
Downstream,
Financiers,
and
Catalysts,
described
briefly
below.
We
found
that
many
companies
were
integrated
across
multiple
categories,
and
many
others
chose
a
niche
role
within
a
category.
• Gorillas
are
vertically
integrated
social
enterprises
that
have
proprietary
operations
along
the
value
chain,
but
often
rely
on
partners
for
certain
activities.
By
relying
less
on
partners
overall
however,
Gorillas
remain
more
adaptable
than
other
companies
to
changing
BoP
market
needs,
which
is
a
competitive
advantage.
• Upstream
players
are
typically
for-­‐profits
or
social
enterprises
that
focus
on
manufacturing,
assembly,
and
design
of
lanterns,
and
have
little
direct
engagement
in
upstream
activities.
As
the
price
of
PV
drops
and
the
industry
matures,
we
predict
upstream
players
will
be
driven
to
consolidate.
• Downstream
players
we
found
to
be
the
most
diverse,
ranging
from
private-­‐sector
companies
or
social
enterprises
to
non-­‐profit
sector
NGOs.
These
organizations
engage
in
varying
degrees
in
lantern
distribution,
training,
servicing,
gathering
feedback
to
inform
better
design,
and
occasionally
financing.
To
succeed
they
rely
on
a
dedicated
in-­‐field
staff
and
leverage
their
networks
of
partners
and
their
knowledge
of
the
BoP
to
achieve
last-­‐mile
distribution.
• Financiers
are
microfinance
banks,
foundations,
or
other
investors
that
provide
working
or
growth
capital
to
fund
the
growth
of
other
industry
players,
or
provide
microloans
for
end
users
to
purchase
solar
lanterns.
• Catalysts
are
NGOs
or
Foundations
who
work
at
the
interfaces
between
value
chain
segments
to
mobilize
others
and
enable
growth
by
removing
market
barriers,
matching
business
to
business,
and
providing
supporting
services
and
BoP
market
intelligence.
BrightLight’s
Capabilities.
For
BrightLight
to
determine
its
organizational
model,
it
must
first
evaluate
its
current
capabilities.
This
will
assist
the
organization
in
understanding
its
strengths,
assessing
where
its
capabilities
lie
on
the
value
chain,
and
evaluating
the
effort
required
to
achieve
its
chosen
business
model.
BrightLight’s
current
capabilities
include:
• Marketing
• Product
testing
• Fundraising
• The
ability
to
convene
stakeholders
• Access
to
utility
resources
–
funding,
energy
expertise,
and
technical
&
political
landscape
• Direct
community
relationships
To
better
understand
where
BrightLight’s
strengths
lie
in
this
sector,
we
mapped
the
organization’s
current
capabilities
to
the
value
chain.
This
analysis
suggests
that
BrightLight’s
capabilities
are
not
directly
linked
to
any
specific
segment
of
the
value
chain,
such
as
financing
or
manufacturing.
Rather,
BrightLight’s
strengths
are
indirectly
related
to
the
value
chain,
providing
unique
challenges
and
possibilities
for
BrightLight’s
future.
We
also
compared
how
much
control
BrightLight
has
over
their
capabilities,
determined
by
the
extent
BrightLight
relies
on
partners
to
execute
key
work,
as
well
as
the
competitive
advantage
those
capabilities
offer.
Though
the
true
competitiveness
of
a
capability
will
depend
on
a
number
of
external
factors,
the
competitive
analysis
suggests
that
BrightLight’s
current
capabilities
are
generally
competitive
and
the
organization
has
control
over
its
most
competitive
features,
which
include
its
fundraising
ability
and
influence.
However,
the
analysis
also
suggests
that
BrightLight
is
dependent
on
its
current
partnerships
for
many
of
its
capabilities.
One
thing
is
clear:
no
matter
what
type
of
organization
BrightLight
hopes
to
become,
it
will
require
additional
capabilities
to
the
ones
it
currently
has.
We
view
this
less
as
a
challenge
and
more
as
an
opportunity.
Business
Model.
Capitalizing
on
BrightLight’s
current
strengths,
we
propose
a
model
where
GBF
will
serve
as
a
connector,
integrator
and
catalyst,
facilitating
delivery
of
region-­‐
specific,
service-­‐effective
and
cost-­‐efficient
means
to
access
solar-­‐powered
energy
usable
on
an
individual,
family
and
community
scale.
GBF’s
strategy
recognizes
the
systematic
nature
of
new
market
development
and
creates
a
new
system
of
value
creation
through
providing
power
to
the
unelectrified
of
the
world.
Unlike
entities
that
provide
a
single
offering
GBL
creates
a
network
of
players
that
have
different
positions
in
the
value
network
to
avoid
competitive
conflicts
and
focus
on
providing
benefits
to
the
communities
we
serve.
By
recognizing
the
potential
to
create
a
value
network
around
a
new
model
for
electrification
for
the
poor
and
developing
world,
GBF
will
play
a
key
role
in
fostering
not
only
the
electrification
but
also
the
economic
development
of
those
at
the
base
of
the
pyramid.