Business Resources

1.The issue in brief

Many NGOs and consultancies and individuals are embarking into the business of household energy services by putting emphasis on setting up private energy enterprises and businesses. To make these business ventures profit making and successful they need business skills such as business plans, good management, marketing strategy, after sales services, etc.

A introductory attempt has been made here for those:
  • interested entrepreneurs so they can find relevant resources and information
  • NGOs and consultants so that they include these essential skills in proposal
proposals.

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Figure 1. The tasks involved in developing a strategic approach to technology.

We will use this diagram as a first step towards understanding the decisions that business companies must take about their technologies which may mean various stoves and its design and parts, room heaters, solar appliances or anything to do with household energy services. These decisions all relate to the 3 major tasks that are faced by companies concerning technologies as follows:

  1. The first task is to acquire technologies that the company needs for its operation and offerings.
  2. The second task is to fully exploit these acquired technologies in the companies' own offerings or by other means.
  3. The third is to manage these two processes effectively in a complex organization

Acquiring Technologies

Companies need to constantly review and update their technologies and acquire new ones that they need for their operations.

The companies may acquire technologies in 3 ways:
  1. Make - It can make its own technology by developing it in its own R&D facilities. This method is slow, risky and expensive but an important way of maintaining the companies' research capability, its stock of technology, and its competitive position.
  2. Buy - A company can buy in a number of ways:
    • It can take a license on the technology of another company. It is quicker than to acquire technology than developing it internally. But that may mean they are buying obsolete technology or technologies that are available to the competitors.
    • A company can buy a technology by commissioning a contract research company to develop a technology. It is quick but expensive and the company does not gain ability to develop the future generation of technology for itself.
    • A company can also buy a technology by hiring staff from the company that has skill and technology that it wants.
    • Enter into a joint venture with a company. This is useful when company has some but not all skills or finance available for development.
    • Not buy the technology but copy it, or reverse engineer the technology from another company. This may be cheap but may cause problems if the company falls foul of the patent laws
  3. Neither Make or Buy - It can buy an offering from a supplier based on supplier's technology. The technology is called external technology. The advantages of not acquiring a technology are:
    • It saves time and cost of its own development. Its R&D budget can be used for developing other technologies. Many companies nowadays follow this path. They maintain a complex relationship with their suppliers who effectively manage technology on behalf of the their customers.

The decisions that a company takes on which technology to acquire and which not is critical for a companies survival. It is important that the companies choose an appropriate method of acquisition depending on the future requirement of its customers, urgency of the situations, availability of alternatives and age of the technology.

A number of functionaries need to be involved in these important decisions in addition to senior management.

  1. R&D staff-are the most qualified to judge the competence in a particular technology and those of external suppliers but watch out for the 'not invented here syndrome' that affects the research staff.
  2. The company's purchasing staff. -They are responsible for the company's action or potential relationships with the suppliers. They should be able to advice on whether suitable technologies exist with the suppliers.
  3. Business Marketers- Their input should be based on their knowledge of what the customers are likely to require in future offerings.

Exploiting Technology

  • Internal exploitation - Heads to lower costs and improved offerings but limited way of recovering the companies' investment in its technologies.
  • External Exploitation- It generates additional revenue. It exploits technology by selling commonly by license.

The wider exploitation of their technology is often disregarded by companies and business marketers and may opportunities for revenue and profit are missed.

Few companies actually analyse their inventory of technologies and develop ways to exploit them fully. Few companies actually have a clear idea of what skill and technology their companies actually has and what value they may have to other companies.

Full exploitation of a technology is likely to be achieved only by using it in house and externally at different stages in the life cycle of the technology in different counterparts and different applications.

Managing Technology

The third task includes the important issue of how the company can speedily and economically commercialise new technologies and bring them to its customers. It includes how the company can transfer knowledge around its different counterparts and also share knowledge with the world so that each operating unit can gain from development elsewhere in the company. This saves time and money although the same problems are not solved several times.

Examining Technology in a Company

Any offering that will solve a customers' problem will be based on a number of different technologies from a large number of different companies. The business marketer will therefore be dealing with an offering that includes the output from his company's many suppliers. This offering will also be based on his company's own technology as well as those of other companies with which it operates.

It is important for the business marketer, to be able to understand the role of these technologies in his company's efforts to solve customers' problem.

A way for the business marketer to examine his own company's technologies and those of others is to use the following categories of analysis.
  1. Examine the different types of technology within the company.
  2. Separate the technologies according to their importance for the customers depending on whether they use basic or distinctive.
  3. Examine whether they are in house or external technology.
  4. Examine where the technology and offerings based on them are in their respective life cycles.
  5. Separate the technologies according to their importance for the customers depending on whether they use basic or distinctive. Basic Technologies are the ones on which the company depends and the Distinctive Technologies are those of a particular supplier that are seen by customers as somehow special and source of that suppliers competitive advantage.

Types of technology

  • Product technology- They have the ability to design a particular type of offering. Product technology's are the basis of a company's problem solving ability. For example In Mac Donald's, the Product technology is to apply to the design of offering that solves customer problem of needing to eat quickly and be served speedily. All the offerings thus are based on achieving this goal.
  • Process Technology- These technologies provide the ability to produce or implement an offering on time, in the right place, to the right specification at the right price and to do all these things consistently.

Technology in Supplier and Customer

Business marketing takes place at the interface between the technologies of supplier and customer.

Involving customers in technological development

The active involvement of customers has frequently been shown to be one of the key factors in successful new product development and launch. Customers are important to suppliers in technological development for several reasons:

  • Customers have to face the problems of using the current offerings and have the greatest knowledge of how a new offering can provide a improved solution.
  • Customers know how a single offering can be used in combination with others from different suppliers.
  • Customers know about alternative and substitute offerings and how a new offering compares to alternatives.
  • Customers know how the offering will be used by their customers and at other points in the network.
  • Perhaps the most important, customers are likely to be committed to the development process because they will benefit from improved performance.

It is the business marketers job to locate potential development partners among customers to establish a relationship with them and to manage interactions with them during the development process.
Authors / contributers wanted! Do you have knowledge or expertise in this topic? If you do, please consider writing something for this topic...

3.Current Best Practice

Many individuals, NGO's and even multinational companies are at present establishing household energy based enterprises some of which are mentioned below.

  • Anasset- LPG
Country: Ghana
Entrepreneur: Mr. Seth Nanemeh
Energy Service: LPG
REED Services: - Business Plan Assistance
  • US$ 38,000, 4-yr loan
  • Post investment enterprise development services

Mr. Seth Nanemeh is an experienced businessman with 10 years experience in the marketing of Liquefied Petroleum Gas? (LPG?), including five years managing his company Anasset. Although his business was operating well in the capital of Ghana, Accra, he saw the opportunity to expand into many rural and semi rural areas where LPG was unavailable or too expensive.

To expand, he needed additional infrastructure to store and deliver LPG. The amount of capital, however, could not be raised from conventional banks, so he turned to AREED.
Working with the AREED team, Mr. Nanemeh started an initial phase to upgrade the existing LPG operations in Accra and then expand. Since the AREED investment in December 2002, Anasset has made steady progress and significantly increased the number of households buying LPG for cooking while increasing the company's gross profit margin by more than 40%.

AREED was interested in Anasset because there is a growing demand for LPG by institutions, businesses and households, the company's growth will create new job opportunities, and his company has good potential to attract a private sector co-investment after this first phase.

  • USISS - Solar Dried Food
Country : Mali
Entrepreneur : Bamba Coulibally
Energy Service : Solar Dried Food
REED Services :
  • Business Plan Assistance
  • US$ 18,000, 5-yr loan at 12% interest
  • Post investment enterprise development services

Mr Bamba Coulibally knew this country, Mali, was short on refrigeration, which means substantial amounts of food spoil before it can be eaten. He also knew that solar drying technology developed in a former aid project could be used to preserve meat, fruit and vegetables.
Since 1990, the company, USISS (Usine Semi-Industrielle Sechoire Solaire), has been successfully selling dried meat, mango and onions in the capital Bamako using existing solar technology.

Mr Coulibally was confident he could greatly expand the business while improving the quality of dried foods by using better equipment. Mr Coulibally went to AREED for enterprise development services, including the development of an acceptable business plan. The enterprise was interesting to AREED because USISS is an example of a company using clean energy to generate income. The structure of the business is also interesting because it is simple and a good case study for replication.

The AREED investment allowed USISS to purchase higher quality equipment for both drying and packaging dried food products. The new driers, completed in January 2003, have increased the amount of dried products available for sale and thus increased company revenue. USISS now distributes its products through grocery stores, station services, and street vendors.

USISS believes it can triple production and revenues within three years. The company hopes to increase capacity to eventually run ten or more solar dryers?.

For more information please click on the following link: http://www.areed.org/projects/index_projects.htm

4. Areas of Research

Authors / contributers wanted! Do you have knowledge or expertise in this topic? If you do, please consider writing something for this topic...

5. Resources

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6. Organizations and People

Here is a list of organizations that help to nurture new business entrepreneurs by providing them with either products, training or finance.

The World Business Council for Sustainable Development (WBCSD)

The World Business Council for Sustainable Development (WBCSD) is a CEO-led, global association of some 190 companies dealing exclusively with business and sustainable development.
The Council provides a platform for companies to explore sustainable development, share knowledge, experiences and best practices, and to advocate business positions on these issues in a variety of forums, working with governments, non-governmental and intergovernmental organizations.

Members are drawn from more than 35 countries and 20 major industrial sectors. The Council also benefits from a global network of about 60 national and regional business councils and regional partners.

The Council's objectives are to:
  • Be a leading business advocate on sustainable development;
  • Participate in policy development to create the right framework conditions for business to make an effective contribution to sustainable human progress;
  • Develop and promote the business case for sustainable development;
  • Demonstrate the business contribution to sustainable development solutions and share leading edge practices among members;
  • Contribute to a sustainable future for developing nations and nations in transition. In order to achieve this, the Council focuses on three key areas:
  • Energy and Climate
  • Development
  • The Business Role

For more information please click on the following link: World Business Council for Sustainable Development (WBCSD)

AREED

The United Nations Environment Programme's Rural Energy Enterprise Development (REED) initiative operates in Africa as AREED to develop new sustainable energy enterprises that use clean, efficient, and renewable energy technologies. These new enterprises can meet the energy needs of under-served populations while reducing the environmental and health consequences of existing energy? use, particularly low quality biomass fuels? such as wood and dung.

AREED offers rural energy entrepreneurs in Mali, Ghana, Tanzania, Senegal and Zambia a combination of enterprise development services and start-up financing. This integrated financial and technical support allows entrepreneurs to plan and structure their companies for growth and makes eventual investments by mainstream financial partners possible.

For more information please click on the following link: African Rural Energy Enterprise Development

E&CO

E+Co's vision is one of Universal Sustainable Energy and its mission is to create viable, sustainable businesses.
E+Co's underlying purpose is to stimulate long-term, institutionalised channels of investment in environmentally superior forms of energy production and use in developing countries.
We see these businesses as the permanent, self-sustaining change agent. The problem addressed by E+Co is the 1.6 billion people that live without electricity and the 2.4 billion people that use dirty, dangerous fuels for cooking (World Energy Outlook, 2004; IEA). The situation is forecasted to remain virtually the same in 2030, despite projections that US$17 trillion ('04$) will be spent globally on energy over the next 24 years, almost half in developing countries where the energy poor live.

The Problem

The cause of this problem is not
  • The inability of the poor to pay for modern energy
  • The unavailability of technologies or business models to reliably deliver affordable energy
  • The bad will on the part of policy makers

The cause of the problem is a lack of local, market-driven human infrastructure that provides access to viable energy alternatives.

Solutions to this problem are held hostage in the vested interests that delay the major shift needed across multiple dimensions of the "Old" Energy +Finance Paradigm to a "New" Energy + Finance Paradigm:

  • OLD Energy + Finance Paradigm
Central station energy generation, electricity delivered via wires
Government sponsored and driven (supply driven)
Large project finance
15-20% return on Investment
Top down multi-lateral Projects
Short time perspective of Philanthropy: Let's try something new
Technology driven

  • NEW Energy + Finance Paradigm
Smaller, decentralized energy systems including cleaner cooking fuels
Entrepreneur driven (demand driven)
SME finance and consumer credit
Patient capital and shared credit risks
Bottom-up private enterprise development
Long term capacity building and market development needs:
Let's support something that works
Customer driven

Particularly challenging aspects of making this shift are evident in the "big" programs pushed via governments, where sadly, a lot of money has been wasted on unaffordable electricity grid extensions and capital city-driven, technology focused "projects" rather than sustainable, market-driven businesses. Top down planning and implementation has, and still does, dominate rather than bottom-up implementation. The challenge undertaken by E+Co is to create a means by which these clean energy businesses are supported, financed and expanded on a scale sufficient to meet the massive energy needs of households, businesses and communities in Africa, Asia and Latin America in a manner that is financially, socially and environmentally sustainable, or as E+Co measures it, across the "Triple Bottom Line".

For more information please click on the following link: E+Co's Mission and The Need

Appropriate Rural technology Institute (ARTI)

ARTI is a registered scientific society, established in April 1996 by a group of scientists, technologists and social workers, to develop and transfer innovative, sustainable technologies to rural people for income generation and to improve their quality of life. The institute is registered under the Societies Registration Act of 1860 under registration number MAHARASHTRA/4703/SATARA, and under the Bombay Public Trusts Act of 1950 under registration number F-4674

Samuchit Enviro-Tech (SET) Pvt. Ltd., Pune, India

ARTI's second commercial partner is the recently established company Samuchit Enviro-Tech (SET) Pvt. Ltd., Pune. With the aim of providing the crucial business backbone for rural entrepreneurs employing ARTI's energy technologies, SET Pvt. Ltd. provides a platform for their products and nurtures their sustainability.

For more information please click on the following link: Appropriate Rural technology Institute (ARTI)

Philips

Realising the business potential of the household energy market in rural areas Philips a multinational company has developed a wood burning cookstove which they will soon be launching into the market.

For more information please click on the following link: Philips - Password Magazine - Issue 28

Contributors





Last edited by Miriam Hansen , based on work by Donna Skordili and Nelson Ko .
Page last modified on Tuesday 12 of October, 2010 14:24:30 GMT. @HEDON: XQFB

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  • A practitioner's journal on household energy, stoves and poverty reduction.


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