Nov 26, 2010
The MIT Entrepreneurship Review is pleased to introduce our new team of topic experts to our readers. Over the next four weeks, we will be publishing the articles that each topic expert submitted in their application to join the MITER team. Today’s article is from Diana Jue, a topic expert in the Energy/Cleantech group.
Appropriate Technologies Have Potential, but Can Their Users Access Them?
MIT students looking to attack global poverty often focus on inventing low-cost sustainable technologies. These livelihood-improving and environment-sustaining technologies include drip irrigation systems, bicycle-powered machines, and solar cookers. Their goals are to be low-cost, sustainable, and usually small-scale and decentralized. However, far fewer students fixate on the very real and pressing challenge of getting these technologies to the customers in need.
On campus, appropriate technologies are all the rage. Their popularity is evident through the demand for hands-on, design-based D-Lab classes that innovate technological solutions for developing regions and student groups that strut their stuff at biannual International Development Fairs. Outside of MIT, these technologies are becoming in vogue as well. U.S. Secretary of State Hillary Clinton recently announced a national commitment of $50 million to the Global Alliance for Clean Cookstoves, which plans to distribute 100 million clean-burning stoves by 2020. D-Lab founder and instructor, Amy Smith, was featured as one of Time magazine’s “World’s Most Influential People” in 2010.
When I applied to attend MIT as an undergraduate, I wanted to engineer solar-powered water purifiers and other technologies for rural Africa. However, after spending some time at MIT, I noticed that many students were inventing these technologies, but few were successfully disseminating them. The big picture of how to move these technologies from the lab to the land was not quite painted yet. Globally, philanthropic and government-funded initiatives were failing; limited funds, changes in management, and shifts in momentum did not lead to sustainability, scalability, or replicability. Appropriate technologies have been invented, but innovative ways to get them to their users are still lacking.
From the Lab to the Land through the Market
Today, the school of thought that businesses should help lead the effort to address health, economic, and social issues in developing countries is growing increasingly popular. Quoting Vinod Khosla, billionaire venture capitalist and co-founder of Sun Microsystems: “There needs to be more experiments in building sustainable businesses going after the market for the poor. It has to be done in a sustainable way. There is not enough money to be given away in the world to make the poor well off.” Also supporting this idea is the late C. K. Prahalad, business management professor.
The tasks of producing, marketing, selling, and distributing appropriate technologies have been taken up by “social enterprises”, which apply market-based strategies to achieve a social purpose. Social enterprises include nonprofits that implement business models to achieve their goals and for-profits whose primary goals are social. MIT, always in step with the times (or perhaps leading them) has turned toward social entrepreneurship. For example, in 2006, the MIT $100K Entrepreneurship Competition added its Development Track (now the Emerging Markets Track).
The challenges facing social enterprises are unique. Their target customers are usually invisible to traditional businesses, which fail to see them as significant market opportunities. Because they are viewed as producing insufficient tax revenues, governments often fail to provide these people with basic services. The social enterprises that emerge to fill this gap must be innovative – they must be able to provide their products and services at an affordable price while facing dispersed and fragmented markets, high transaction costs, high costs of customer acquisition, poor or nonexistent distribution systems, and limited financing options for the consumers and the enterprises themselves.
Because social enterprises are difficult to categorize and may require a novel assessment rubric, it is difficult to nail their failure rate with certainty. However, even if the failure rate of social start-ups is similar to commercial start-ups – fifty percent within the first three years – the consequences of social enterprises’ failures can be serious. For example, failures may prevent a social mission from being accomplished or waste limited social venture funds. Achieving economies of scale and generating profits – or at least covering costs – is difficult for these firms but is necessary to make a long-term, transformative, social impact.
Up Close: Clean-Burning, Fuel-Efficient Cookstoves in India
My Master’s thesis research on how to get appropriate technologies to the people who can benefit from them took me to India last summer,,because India has a long history of rural development and appropriate technologies (after all, E.F. Schumacher, author of Small is Beautiful and the presumed father of the Appropriate Technology Movement, took many ideas from Gandhi’s philosophy of self-contained villages). With its many nonprofit organizations, India’s social development sector is buzzing, and recently, more well-educated, socially conscious entrepreneurs have embarked on establishing new social enterprises.
In my research, a recurring appropriate technology concept is the clean-burning, fuel-efficient, biomass cookstove. An estimated 826 million Indians depend on simple biomass-burning cookstoves, which emit smoke that contributes to infant-killing indoor air pollution and climate change. The Indian Institute of Science’s Centre for Sustainable Technologies have been developing these clean-burning cookstoves for the past 35 years, and the government embarked on the unsuccessful National Programme on Improved Chulhas (Cookstoves) between 1983 and 2002. The program failed for a number of reasons: the custom-built stoves were not appropriate for customers’ energy needs or cooking habits, dissemination was difficult because stoves were made on-site by local artisans and entrepreneurs, quality control and user education were nonexistent, program administration was cumbersome, monitoring was nil, government subsidies for the stove seemed to decrease use and maintenance, and there was no accountability for poor program performance. Disseminating through social enterprises can address these problems because social enterprises address customers’ fuel/cooking needs and demands for quality.
Each cookstove I identified is aimed toward large-scale commercialization achieved through collaboration among social enterprises (depending on the cookstove, each social enterprise has different responsibilities and capacities), nongovernmental organizations (NGOs), academic institutions (sometimes for product development), commercial firms (like factories or rural retailers), social venture capitalists (to finance the social enterprise), and microfinance institutions and village banks (to finance the customers). Strategies vary from cookstove to cookstove, but I believe that the most innovative strategies attacked the sales, marketing, and distribution problems.
For example, one of the main distributors of First Energy cookstoves (formerly of BP) is Adharam Energy Private Limited, which is a spin-off of the Covenant Centre for Development, a NGO. Adharam has identified jyothis – female village-level entrepreneurs who are usually members of women’s self-help groups (village-based financial intermediaries) – who give live demonstrations of these stoves to females in the community and sell them door-to-door by collecting monthly intents of purchase from customers.
Compare First Energy’s strategy with Envirofit’s. Envirofit primarily sells stoves through traditional rural trade networks, distributors, and retailers. Its cookstoves are situated next to durable items like televisions in township stores, which are up to 30 km away from the rural customers’ residences. To generate demand at the stores’ doorsteps, Envirofit has invested in a mass media advertising newspaper and television campaign directed at household males, who are targeted with a cell phone that is coupled with the cookstove for marketing purposes.
Another social enterprise, Villgro Stores, acts as a distributor of agricultural products (and Envirofit cookstoves) to rural areas. Although physical stores exist, the lynchpin of Villgro Stores’ operations is its village-level entrepreneurs, who are usually male farmers who purchase products from the stores to sell door-to-door.
Innovation in Dissemination is Key
These are just three models of disseminating appropriate technology throughout the market currently being implemented in India. Each strategy presents its own difficulties. First Energy and Villgro Stores face the problem of finding and investing in village-level entrepreneurs, who are not in infinite supply and require expensive training and handholding. Envirofit’s efforts are expensive and will only be able to reach the top of the bottom of the economic pyramid — that is, wealthier rural households with incomes of about $170/month or higher — by working through traditional distribution networks and mass marketing campaigns. To reach the lower income households, Envirofit is relying on old-fashioned word of mouth and time.
Despite their limitations, these innovations in appropriate technology dissemination are nevertheless admirable. These social enterprises are venturing where no one else has discovered potential or has had the gumption to foray. Right now, these dissemination models must be identified, monitored, evaluated, learned from, and innovated upon. Only then will appropriate technologies be able to live up to their potential to sustainably transform lives for the better.