Disruptive Innovations start on the lower end of the market

Why European companies have to be present in Africa, part 3

“Our customer don’t switch to the public grid, even when they get the opportunity after many years of waiting”, the Chief Innovation Officer of Mobisol explains. “In one village we have colocated more than hundred off-grid-solar power systems. Then the village got connected to the national grid. But only six customers switched to the grid. Above all, after a short while five of them switched again back to us .”

Off-Grid Solar Power Systems …

Mobisol sells “off-grid solar power systems” to poor people on the African countryside. As its name tells, the system is not connected to the central electricity grid. But it is connected to the mobile phone grid. 

What is a surprise at the first glance, becomes clear at a second. People appreciate very much the independency of an own autonomous system. Centrally managed grids in African countries are still too often interference-prone. “Load shadding” has become a famous African term.

… highly innovative …

Usually, the customer buys the equipment on credit. It consists of a solar panel, a battery, installation materials, possibly a radio or TV-set, and a control unit with a SIM-card.

Repayments are done by mobile money through the control unit and its connection to the mobile phone grid. Mobile money is standard in African countries. The really innovative part is the collateralisation of the credit: The possibility to switch off the electricity externally via the mobile phone connection guarantees repayments.

Today, in Eastern Africa already more than 600.000 rural households own an off-grid solar power system. A number constantly increasing. M-Kopa, a Kenyan venture with an accumulated investment of already more than 50 million USD, leads the market. Other suppliers are Off Grid ElectricBboxxAzuri Technologies and, of course, the German Mobisol. All in all, these companies have already created close to 10.000 jobs.

Off-grid solar systems serve new customer segments with new solutions. They create new markets, new employment, and new income streams.

And they disrupt markets.

… and disruptive!

Market-creating innovations always start at the lower end of the market, we learn from Clayton Christensen, the father of the theory of disruptive innovations. It is the “innovators dilemma” – Christensen’s book of the same name – that while existing market leaders are correctly concentrated on their existing clients, at the lower end of the market other innovators test, learn and improve new solutions and create market shares.

Today’s new innovators are quicker than ever. M-Kopa shall turn its existing 420.000 customers into a million this year. And most notably, it is not a one-shot game. Out of the households which have already paid back their credit, 70.000 bought another appliance as an electric stove or a fridge. Mostly on credit and again collateralized through the possible switch-off of the solar power supply system.

Access to 4 billion poor consumers?

Have M-Kopa and its combatants found a way to access the needs, demands and markets of the four billion future consumers at the global “bottom of the pyramid”?

We don’t know yet. But in any case, they are working directly with them, testing new solutions, learning, and constantly building up trust.

If things go on, all of a sudden the big traditional electricity supplier will find themselves in a totally different market which they can not dominate anymore.

But the story will not stop there. In the not so far future, any other supplier of goods and services will be confronted with standards and platforms, they will not be able to ignore.

European companies have to be part of the new disruptive African solutions. Because in our networked global society, some of Africa’s innovations of today will shape our own solutions of tomorrow.

Hans Stoisser als Buchautor:

Der schwarze Tiger – Was wir von Afrika lernen können

von Hans Stoisser, Kösel Verlag,
ISBN 978-3-466-37125-9

Der schwarze Tiger - Was wir von Afrika lernen können


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