In 2012, Dr Simon Bransfield-Garth launched Azuri Technologies, a company that was developing a new type of solar panel. Rather than compete for a share of existing customers of his industry – a red ocean approach – he took a blue ocean approach that looked to noncustomers.
Read on to learn how Azuri created a ‘blue ocean’ in Sub-Saharan Africa, and what it means for the 600 million potential customers in its rural communities.
When we started Azuri in 2012, prices for solar technology were going down so fast that competing in the red ocean of that industry made no sense. So, we took a blue ocean approach. We started looking at our noncustomers – those people who would not usually consider solar technology as an option.
In Sub-Saharan Africa, the lack of infrastructure means that people can’t simply plug into the electrical grid. If you want to use solar power, you need to purchase your own solar power system. But if you don’t have capital, you can’t afford to do that.
The solar panel payback period is a calculation that estimates how long it will take for you to ‘break even’ on your solar energy investment. We calculated that the payback time on solar equipment, when you already have a good connection to the electrical grid, is 15 years. But if you don’t have a good connection, and you’re otherwise spending a small fortune on candles or kerosene, the payback time is just 15 months – a much higher return on investment. So, we focused on off-grid markets.
With Azuri’s PayGo solar system we felt we could offer consumers something that was extremely attractive while still making commercial sense – an unexplored blue ocean opportunity.
There are currently about 600 million people who don’t have access to the electrical grid in Sub-Saharan Africa. And due to the rapid population growth rate in Africa, the number of people who are off-grid is increasing.
Azuri delivers solar electricity to communities in Africa as an affordable pay-as-you-go service. The entry-level PayGo solar home system provides eight hours of clean lighting each day and the opportunity to charge mobile phones at home. After the installation of their Azuri system, customers use an integrated mobile money service to top up their unit. Instead of having to buy the equipment up front, people pay for the solar power as they use it. Importantly, this top-up costs less than their current weekly spending on kerosene and phone charging, so customers start making savings straight away. After two years, the customer owns the product and doesn’t have to pay any more.
Access to affordable power and mobile phones gives consumers the essential ingredients to join the world economy in the modern era: the internet, and a disposable income. Having power at home, people feel encouraged to buy mobile phones, radios and televisions, which give them access to the media and the internet. By being online more often, and following the media, people can really boost their businesses.
So, from the customer’s point of view, it’s a transformational shift. People’s standard of living starts to increase because the technology makes them more productive.
It’s a virtuous cycle: the more productive people become, the more money they have to buy new technology. And this new technology makes them more productive.
The first indicator is that we already have 130,000 customers. We have doubled our size every year for the last four years, and we are continuing to grow very rapidly. This is one of those opportunities where you grow very substantially. As I said before, there are 600 million people off the grid, and we have sold 130,000 systems to date, so we still have a long way to go before reaching market saturation.
We are still in a blue ocean of uncontested market space right now.
In the book, Poor Economics, there is a good description of the ‘Poverty Trap’ – a self-reinforcing mechanism which causes poverty to persist. Individuals spend so much on the day-to-day activities that they are unable to save any money to spend on anything else.
The example given is fruit sellers in India. People can’t afford the carts they need to go and sell their fruits, so they rent them. But the people who rent out the carts charge so much money that the fruit sellers can’t save the money they need to buy a cart.
The same thing is true in Africa. Currently, people are spending a small fortune on kerosene or candles for lighting their houses or for mobile charging fees. By getting solar power, people can reduce their spending and save enough to build businesses or buy assets such as a bicycle. They can also use the light to keep their stores open later at night, further increasing their earning potential.
Find out more about Azuri’s blue ocean in the Sub Saharan desert.