The SunWater Project – Advanced Solar Technology for Poor Farmers
In my last article, you heard about SunWater, a project to build a radically affordable solar water pump for $2-a-day farmers that will transform small plot agriculture, create new water markets, and significantly increase incomes that will raise bottom-of-the-pyramid families out of poverty. Our target customers are small-plot farmers in India and Africa.
These farmers need a reliable, low-cost water pumping system so that they can grow cash crops to increase their incomes. They also need electric power to add value to their crops (grinding, processing, etc.) and for household use. Current pumping systems cost too much or are unreliable.
Solar pumping systems have been available for years, and they show great promise. But they haven’t been adopted at scale for a very simple reason. They cost too much!
The purchase price of solar PV systems is much too high to be competitive with diesel pumps, even though the fuel and repair costs of diesel pumps are astronomical.
If we could cut the cost of solar pumping systems by 80%, we could transform small farmer incomes, create tens of thousands of new jobs, and significantly lower carbon emissions.
How It Can Be Done
So, how can we radically reduce the purchase price of solar PV powered pumping systems along with technologies that efficiently transport irrigation water from the source to the plant? Here’s a deep dive into the different parts of SunWater!
The good news is that affordable small farm systems are already available through the work of IDE. Through the work of IDE, the market price of drip irrigation has been drastically reduced by using comparatively thin walled lay-flat hose to convey irrigation water from sources like tube-wells to rows of plants. The cost of drip irrigation systems were reduced by designing affordable filters to remove dirt from the water, reducing system pressure to reduce the wall thickness of supply and lateral tubing bringing water to each plant, and simplifying the design of the emitters, or drip points, along each lateral. This reduced the cost of drip irrigation systems from about $1,200, or more to less than $600 per acre.
So what about the greater challenge of cutting the cost of a solar PV system and a pump motor combination from $7,000 to $2,500?
Here’s how I think it can be done:
1 Zero Based Design
In my new book with Mal Warwick, The Business Solution to Poverty: Designing Products and Services for 3 Billion New Customers we provide a detailed description of zero based design. Like zero based budgeting, it starts from scratch, making no assumptions about the technology and strategy that can best be used or created to address a specific problem. In this case, we’ve defined the problem as cutting the cost of an installed 2-kilowatt solar PV powered pumping system to $2,500. We have broken this down further to set a price target for the installed solar PV system of 70 cents a watt ($1,400 for a 2-kilowatt system), and the price of controller, pump and motor at less than $1,100, for a total retail price of $2,500. If we can achieve these targets, we believe solar PV powered pumping systems would be economically competitive with diesel-powered pumps, which would create transformative new energy markets in developing countries.
2 A Systems Approach to Design
To pull it off, we’ll need to work on solar pumping, irrigation, and livelihood enhancing high-value crop production and marketing as a total system, with each system component influencing the design of each other component, and of the total system. Figure 1 is a diagram of what this system looks like. Integrated financing also needs to be part of the system solution.
3 Mirrors are Cheaper Than Solar Panels
In spite of the fact that the price of photovoltaic (PV) solar systems have dropped significantly over the past ten years, the capital cost of an installed PV system used to pump irrigation water is still far too expensive to be competitive with diesel powered pump sets. But there are many options for further lowering the capital cost.
For example, a simple glass mirror is much cheaper than a solar panel. If we reflect the sunlight hitting ten glass mirrors that are a little bit bigger than the surface area of a 250 or 300 watt solar panel, we should be able to generate 2,000 watts from it. Since we’re pumping water, we can pump a small amount of water through a simple heat exchanger on the back of the PV panel to keep it from overheating. The mirror system would need to be incorporated into a simple frame that could be rotated to track the sun. This is just one out of the out-of-the-box solution that could lower the cost. A simple initial prototype we built in collaboration with Ball Aerospace engineers worked pretty well. See Figure 2.
4 Improving Water Conveyance and Application Efficiency
Most diesel powered pumps convey water from the pump to the crop in unlined channels, and deliver it to plants by flooding the field, with the end result that 60 to 70 percent of the water pumped out of the ground is lost to seepage before it ever gets to the plants that need it. Using thin-walled lay-flat tubing to carry the water from the pump to the field, and low-cost drip irrigation to deliver water to the plants would double the overall efficiency of traditional water conveyance and application methods. This would either double the water available for irrigation or cut the size of the pumping system in half, either of which have the same functional impact as cutting the cost of the solar powered pumping system in half.
Fifteen years ago, I and my colleagues at IDE started designing and field testing a low-cost drip system for small farms that is about one half the price of conventional drip systems. Such a low-cost drip system costs about $1,400 for 2.5-acres, including the lay flat hose to carry water from the pump to the field, and IDE field tests in a variety of countries have demonstrated that typical farmers can earn net income after expenses of 45 cents/square meter, or $4,500 from a 2.5-acre plot of diversified high-value cash crops like off-season vegetables by putting the low-cost drip system to work.
5 Improving Farmer Income
You can’t pay for a low-cost drip system and a solar PV powered pumping system, and make a profit by using the water these systems produce to grow low value crops like rice, wheat, corn, and pulses. To earn a reasonable livelihood, small farmers need to learn to irrigate in the dry season when vegetable prices are two or three times as high as they are during rainy season when everybody can grow vegetables. Savvy farmers plant four or five high-value crops, because it’s impossible to predict what the market price for any one crop will be. Also diversified cropping both lowers risk and increases probability that at least one of the crops will generate lucrative profit. So, it’s just as important to help farmers optimize income as it is to lower the cost of pumping and improve the efficiency of conveying and applying water from the source to the crop.
6 Creating a Scalable Profitable Business Model
The best way to reach scale is to release market forces, creating opportunities for every participant in the marketplace to earn a reasonable profit. This includes the manufacturers of both the solar PV powered pumping systems and the irrigation systems, the dealers who sell them, the technicians who install them, and the farmers who buy them to improve their livelihoods.
The first barrier to profitability is the capital cost of $3,900 for the total system. Even though it can earn attractive returns on investment, the upfront cost is too high for most small farmers. For this reason, an important player in the system needs to be a business that offers the solar PV powered pumping and irrigation system on a lease basis or on credit, with the lease/credit business also earning an attractive profit.
SunWater is a project run by my company, Paul Polak Enterprises. We are partnering with a group of volunteer engineers from Ball Aerospace, the company that built the instruments on the Hubble space telescope, to build the proof of concept prototype of the $2,500 solar PV powered pumping system. Jack Keller, a world authority on drip and sprinkle irrigation, and Bob Yoder, an irrigation engineer I worked with at IDE, are working on the design of the total system and its beta testing and pilot commercial rollout in Gujarat, India. There we will be working with an Indian subsidiary of Paul Polak Enterprises, and they will play the local leadership role.
From Gujarat, SunWater India will initiate a full scale rollout of the affordable solar PV powered pumping and irrigation system in India’s Eastern states, where the majority of India’s existing 19 million diesel pumps are located. My dream is that after we create a new market for solar PV powered pressurized irrigation in India and other countries in Asia, we will repeat the process with a global commercial initiative to provide affordable village electricity to a significant percentage of the billion or more people in the world who lack a connection to the electric grid.
How You Can Help
Each dream starts with a first step, and our first step is to raise $50,000 in an Indiegogo campaign to fund the completion of the proof of concept prototype by volunteer engineers at Ball Aerospace. Ball Aerospace is providing their workshop facilities and their technicians are donating their time and talents as a contribution to this initiative. We are asking for help from the public to cover the estimated $50,000 cost of materials needed to develop, build, and bench-test the transformative proof of concept prototype. If you like this idea, I would very much appreciate your help — you can contribute to the Indiegogo here.
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Transforming Solar Pumping to Eliminate Rural Poverty
What if we could harness the limitless power of the sun to carry water to the crops of millions of small poor farmers around the world?
If I want to water my petunias, I turn on the tap outside my house, hold my thumb over the end of a battered green hose, and water away.
If a small farmer in Ghana or China wants to water a small patch of vegetables he’s growing to sell in the local market, he breaks his back hauling water in two buckets or sprinkling cans from a nearby stream. It takes six hours a day every other day for three months to water a tenth of an acre of vegetables that he hopes to sell for $100.
The billion rural poor people in the world today want out of poverty, but to do that they need to grow more cash crops to increase their income. The only way to grow more cash crops is to pump water. However, the current ways of doing it don’t work.
Foot Pumps, Diesel Pumps, and Solar Pumps
A foot-operated treadle pump that costs $25 will irrigate as much as half an acre with about four hours/day of work to earn a transformative $100 or more in new income after expenses. But this is very hard work, and anybody in his right mind would prefer to use a mechanized pump if he could afford it. A five horse power diesel pump irrigates two and a half acres of vegetables, but it costs $350, and $450 a year for diesel, and another $150 a year for repairs – $2100 over three years, not counting the damage to the crop when the diesel pump is down waiting to be repaired. It is too expensive for poor farmers.
What if the same farmer could use a 2-kilowatt electric pump powered by solar photovoltaic panels instead? The fuel costs and operating costs would be pretty close to zero. But, there’s a big catch. It would cost about $7,000! Most small farmers in Asia and Africa could never afford to buy one of these either.
A Way Out of Poverty for Rural Farmers
But there is a way out! What if we could find a way to cut the cost of a 2-kilowatt solar pump system from $7,000 to $2500? What if we added a $1400, 2.5-acre low-cost drip system, and used the solar pump/drip system to grow 2.5 acres of diversified off-season fruits, vegetables and spices? Doing this, farmers can clear at least $4500, enough to make payments on a 3-year loan or lease and put some real money in his pocket. That’s the way out of poverty!
SunWater – the Project
The SunWater project aims to achieve breakthrough affordability for photovoltaic pumping and irrigation, enabling small farmers all over the world to move out of poverty. Farmers using these pumps will also provide jobs for their neighbors to plant, weed, harvest and market the crops they grow.
Today, 19 million diesel engines are being used to pump irrigation water from shallow wells in India alone, spewing millions of tons of carbon into the atmosphere. If marketplace forces could replace a quarter of them with radically affordable solar photovoltaic powered pump systems, we could transform small farmers’ livelihoods and radically reduce rural carbon emissions.
SunWater Technology
We are launching an Indiegogo campaign to develop a 2kw solar-powered pumping system that can do the same job as a 5 hp diesel pump, the most commonly used size. We’re taking a whole-systems approach – we use mirrors to concentrate the sun, which brings down the cost of the solar cell. Since we’re pumping water, we use the water to cool the solar cells, increasing their efficiency. We hook up an inverter so we can use an AC pump motor, which are widely available and cheap. Then we tune the mirrors, solar cells, cooling system, and pump so that it gives the right output for the right cost.
These pumps can only pump during the day, but they don’t use diesel fuel, they rarely break down, and when they do, they can be repaired easily. This system has very low operating costs compared to a diesel pump.
The system will cost $2,500 instead of $7,000, and when paired with a low-cost efficient drip irrigation system, a farmer can pay it off in two years. This quick payback time makes all the difference. At that price, with access to leasing to overcome the purchase price barrier the solar pumping systems should fly off the shelf . And after the payback, there’s no fuel to buy. The Indian government has a 20% subsidy on these systems, so the cost to the farmer will be close to $2,000.
How You Can Help
If you too want to help transform the lives of poor rural farmers so they can raise themselves out of poverty, you can contribute to this Indiegogo campaign at:
This project will open the door to transforming water pumping for farmers in developing nations, and start them on the path to bringing electricity to a billion people who will never connect to the grid. The best way to predict the future is to invent it. Will you help us invent a future of abundance for the people who need it most, rural farmers in India and Africa, by contributing to this Indiegogo?
If you want to hear more about the project, the team, and the technology, stay tuned for my next blog post!
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Four Transformative Business Opportunities in Emerging Markets
University of California, Berkeley- Haas School of Business March 13, 2012
I’m going to describe a little bit about the four businesses and then we’ll have a little bit of time for question and answers. Here’s an example in the area of health. The four businesses I talked about are: health, education, water, and energy. One opportunity in health is that about a billion people need reading glasses. You don’t have to design a technology; you can actually have reading glasses of various strengths built in mainland China for about 50 cents or less. The real challenge is the global distribution system and a robust sales rack that is available in the village. If a farmer in Orissa can’t read what’s on the package of vegetable seeds she might have a lot of trouble deciding what seeds to buy. That kind of a business can reach 100 million people who can’t see straight now. I’ve talked about the affordable safe drinking water model that we’re developing – it has huge potential economic impact and profitability for the company. In solar energy I think it’s possible to cut the functional cost of photovoltaics by 40 percent by using a low cost solar concentrator that concentrates ten times as much sunlight on a smaller solar strip. We are going to run a test to see if we can do that. D-Rev did that successfully by turning a 2 ½ watt into about 20 watts, [and] we are going to see if we can do that to produce 1,500 watts, which would then make photovoltaics competitive for solar pumping with diesel pumps. There are maybe 15 million diesel pumps in India today. Here’s another major initiative that we’re working on…coal represents 40 percent of carbon emissions in the world, and recently there has been tremendous interest on the part of utilities in Europe in replacing coal with torrefied briquettes. They’re using timber byproducts like sawdust and bark. They’re building fairly expensive $10 million to $40 million plants in North America that really do an initial stage of pyrolysis. They heat sawdust to something like 300 degrees for three hours or so in the absence of oxygen that produces a blackened product, which can be coal fired with coal without any capital investment. If you burn plant biomass, it has taken carbon out of the air and then if you burn it efficiently, it puts it back with zero unbalanced carbon emissions impact, compared to taking coal which is sequestered under the ground and releasing it in the air. So this is a major initiative going on now, financed by utility companies in Europe. The thing is that you can do the same with any plant biomass. Six billion tons of coal is burned every year, and there’s four billion tons of agricultural waste produced every year. The real challenge is that waste is dispersed in decentralized locations in villages. When it’s bulky and relatively cheap, the transport costs kill you. So when the process of designing not a $10 million torrefaction plant but a $10,000 village-based torrefaction plant with a three kilometer collection radius, it’s the reverse of last-mile distribution – it’s last mile collection. If that’s successful it could be a $10 billion dollar company. We’re doing a beta test in India over the next six months to make that work. Right now, there’s 1.25 billion tons of charcoal. That’s a $15 billion market today – just charcoal. Just to wrap up, there are 2.6 billion customers waiting for a revolution in global business. I ask how many of you can help lead that revolution?
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Simplicity Brings Hope to the Digital Age
Seoul Digital Forum, May 22, 2012
Business leaders today spend all their time trying to serve the richest 10% of the world’s customers. We need a revolution in business thinking to create products and services for the other 90%, not because it is the moral thing to do, but because there are vast new profitable markets awaiting the brave companies willing to create ruthlessly affordable new products serving the world’s 2.6 billion bypassed customers who live on less than $2 a day. The Appropriate Technology Movement, which showed such great initial promise, died prematurely because it was peopled by tinkerers instead of hard-headed entrepreneurs.
Henry Ford, Akio Morita, and Steve Jobs transformed business in the twentieth century by creating radical breakthroughs in two key areas: affordability, and miniaturization. Ford built a lighter, smaller car for $500 that armies of factory workers could afford to buy.
(Left) 1927 Cadillac LaSalle, $2685, 3770 lbs. (Right) 1927 Ford Model T, $360, 1655 lbs.
At a time when computers cost a million dollars and filled a whole room, Jobs and Wozniak created a computer that a college student could afford, and that was small enough to sit on his desk.
Pictured Left - Mainframe computer circa 1977 Pictured Right - 1977 Apple II
Apple PCs were classy and expensive. Apple lost its dominant position in the PC market it created to more affordable IBMs and a rapidly growing army of other PC-clones. After Henry Ford’s breakthrough, Detroit moved up-market with high-margin, expensive, aspirational Lincolns and Cadillacs, and then was brought to its knees by Japanese imports, which were smaller, cheaper, and more fuel efficient.
The digital revolution is following the same path, and risks facing the same do-or-die crossroads as General Motors because of it. Microsoft serves the top 10%, and leaves serving poor customers to the Gates Foundation. The One Laptop per Child movement serves children from middle-class families in developing countries, where there are a billion potential customers whose ability to use computers is constrained because they can’t read and write. Iphones and iPads are only available to the rich. But the future of digital technology is in services made possible by radically affordable hardware. Cell phones are already providing market information for small farmers, and access to mass markets for savings and credit for the poor.
Masai herder in Kenya on a cell phone
There is a misplaced perception that the marketplace serving bottom of the pyramid customers requires products that work poorly, break quickly, and look cheap, and that high quality products and services can only be given away as charity. Nothing could be further from the truth. Products that are attractive to poor customers must indeed be affordable, but they also need to work well and look good. Poor customers are, if anything, more aspirational than the rich!
(Left) $500 iPad - (Right) $35 Aakash tablet
Can the design genius of Steve Jobs and Apple be harnessed to create a $15 iPad that would create revolutionary transformative markets serving the world’s 3 billion most bypassed customers? I sincerely hope so. Businesses that don’t learn quickly and effectively how to compete profitably at scale serving bottom of the pyramid customers risk going out of business in much the same way that Detroit was overtaken by Japanese imports.
I will be speaking on this topic at the Seoul Digital Forum on May 22. A video of my presentation and panel discussion will be available after the event.
Would you like Paul to Speak at your event?
Please contact Paul’s speaking agent, Larry Leson . larry@lesonagency.com . 609-235-5037
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Is it Immoral to Earn Attractive Profits from Poor Customers?
by Paul Polak
There are at least 7 billion different perspectives on morality, but the viewpoint I like best defines sin as the failure to reach your potential.
By this definition we have at least 2.6 billion deep sinners – the 37% of people in the world who live on less than $2 a day. They are the future Steve Jobs’, Mohandas Gandhis, Madame Curies and Pablo Picassos who will instead eke out a living as drug dealers, child soldiers, prostitutes and destitute slum dwellers.
The three trillion dollars or more we have wasted in misguided development aid probably represent an even bigger sin. But it seems to me that the worst sin of all is our abject failure to achieve scale for the handful of projects that have produced measurable positive impacts on the lives of poor people.
How can we successfully achieve scale? It takes planning and designing from the very beginning, and the unleashing of powerful positive market forces at the locations where poor people are buyers and sellers. The only way to unleash those forces is to demonstrate to global businesses that they can earn attractive profits selling transformative products to poor customers. This is exactly what I have dedicated the rest of my life to accomplishing.
But, I am not an economist. How do some of the world’s leading economists view the prospect of earning sizeable profits serving poor customers at scale?
Is it immoral to earn profits selling to poor customers?
No!
“No!” says Milton Friedman, the celebrated free market economist.
“…there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game.” Friedman believes that a marketplace of enterprises earning profit within the rules is the most powerful lever to improve society.
Yes!
“Yes!” says economist and Nobel Prize winner Muhammed Yunus.
“Poverty should be eradicated, not seen as a money-making opportunity.” Yunus believes that investors in social businesses should only get their money back. In my view, that adds up to a sizeable interest-free subsidy, which is a constraint to scale.
Why do I believe that the answer to extreme poverty is to earn attractive profits serving poor customers?
The microfinance movement and the work of iDE combined have probably helped about 50 million extremely poor people move out of poverty. Even if we have helped 100 million poor people move out of poverty, this amounts to less than 4% of the 2.6 billion people in the world who live on less than $2 a day. This is pitiful!
I define meaningful scale as any strategy or initiative capable of helping at least 100 million $2-a-day people move out of poverty by at least doubling their income. We desperately need to find ways to bring to scale the few comparatively successful models for development that are available.
What are the common features of initiatives that have truly helped extremely poor people move out of poverty?
- They begin by thoroughly listening to poor customers and thoroughly understanding the specific context of their lives.
- They design and implement ruthlessly affordable technologies or business models.
- Energizing private sector market forces plays a central role in their implementation.
- Radical decentralization is integrated into economically viable last mile distribution.
- Design for scale is a central focus of the enterprise from the very beginning.
It is clear that all of these factors are integral components of a business system, but this takes us back to the original question: should it be a business system that enhances the livelihoods of poor people without making a profit for outside investors? Or should it make a profit for investors as well as the poor people who are served by it?
To me the answer is obvious. The only way for a business to help at least 100 million poor people move out of poverty is to follow the laws of basic economics, which means providing an opportunity for both poor and rich investors to earn what they consider to be an attractive profit from their participation.
I have no doubt that there are huge profitable virgin markets all over the world serving $2 a day customers waiting to be tapped. By the laws of economics, creating a new market requires taking a very large risk, but the reward should be commensurate to the risk. If the new venture is successful, all the investors – the poor customer who buys the product, the shopkeeper who sells it, the company employee who makes or transports the product or manages the supply chain, and all the financial investors in the company – should make an attractive profit.
Here is an example: Coal contributes 40% of global carbon emissions and releases millions of tons of heavy metals and other pollutants every year, worsening climate change and sickening people around the world. Properly carbonized biomass can be substituted for coal and co-fired alongside it in proportions up to 80%. The world’s farmers produce four billion tons of agricultural waste each year. If 100 million tons of this agricultural waste could be effectively and affordably carbonized in decentralized rural settings, a multinational enterprise finding a cost-effective way to make it happen could reach global sales of $10 billion a year within five to ten years. Such a company would not only provide attractive profits to investors willing to take on the substantial risk involved, but would furthermore double the incomes of at least 100 million $2-a-day enterprise participants in developing countries.
The only way a company like this can reach scale is with the financial backing of for-profit venture investments. And the only way to justify those comparatively high-risk, early-stage investments is if the company provides the opportunity to make exceptionally good profits if it succeeds.
We have two options. One is to keep hoping that governments will come through with billions of new aid dollars, keep asking individuals to dig deeper for charity dollars, and hope that the low-or-no-profit venture capital space takes off and becomes a truly global phenomenon. We could plod along full of hope but low on results, celebrating increases in impact of fractions of a percentage point.
The other option is to blend the designer’s sensibility, the artist’s creativity, the ground-level aid worker’s understanding of local context, and the entrepreneurs’ dynamism and drive for success, and create profitable global companies that serve poor customers with products and services that help them rise out of poverty. We could unleash the full power of the greatest force in human history – profit – and start ending poverty by the hundreds of millions.
It would be immoral to do anything else.
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Building A Better Mousetrap is Only the Beginning
Question: If you build a better mousetrap will the world beat a path to your door?
Answer: Without superb marketing and distribution nobody beats a path to your door.
In my work with a multitude of affordable technologies over the past 30 years, one key feature has become abundantly clear: If you have met the challenge of designing a transformative, radically affordable technology, you’ve successfully solved no more than 10-20% of the problem. The critical other 80% of the solution lies in designing an effective marketing, distribution, and profitable business strategy that can be brought to scale. Of these, perhaps the most important is designing an effective scale strategy.
This pump provides clean water, but it relies entirely on western donations, and to install a million of these would cost about $6.5 billion - likely an impossible sum to raise. Thus, this project will never reach scale.
Some technologies are simply not scalable. They solve a problem that exists only in a village or two but is not applicable to a thousand villages. The first step in designing an effective scaling strategy is therefore to put first priority on technologies that, if successful, can be applied to address parallel problems in at least a thousand villages.
For example, an Engineers Without Borders team successfully fixed a broken motorized pump that supplied drinking water to several hundred families in a village in Rwanda. This mechanized piped water system was too expensive to be implemented in many other villages, but fixing it addressed an important problem in one village. Designing a robust, affordable hand pump, on the other hand, could have addressed a drinking water problem for many of the other families in the village and in thousands of other villages as well.
In many instances, the design of a scaling strategy is not very complicated. What development practitioners usually miss is the importance of building design for scale into a project from the very beginning of the design process. For example, if you need to sharpen ten pencils, the way to do it is simple. If you need to sharpen a thousand pencils, you need to use a different strategy, but it can be done. If you need to sharpen 100,000 pencils, you need a still different strategy. Each of these problems is eminently solvable, but each one requires a different series of logical steps; it’s very difficult to efficiently change from a ten-pencil strategy to a hundred-thousand-pencil strategy if you’ve already committed your resources and your time to the former.
About 3 million manually powered treadle pumps like this one have been sold to $2-a-day customers
25 years ago iDE (International Development Enterprises) recognized the transformative potential of a simple, $25 treadle pump installed on a tube well. The design of that technology incorporated affordability, easy reparability, and applicability to millions of small farms.
Yet the key challenge was to design the mass marketing and distribution strategy that would make it available to several million farmers. In Bangladesh 25 years ago, there was no pre-existing system of mass distribution in rural villages, and many of the one-acre farmers who needed a treadle pump had never heard of the technology; didn’t know how to read and write; and had no access to mass media.
Private sector treadle pump manufacturer
To address the problem of distribution, we recruited 75 small private sector workshops who manufactured the treadle pumps; 3,000 village dealers who sold them at a 12% margin; and we trained 3,000 well drillers through a three-day course with a diploma, who then installed the treadle pump in the field for a fee. This set up the treadle pump market infrastructure, but that alone wasn’t enough.
A village dealer who sells treadle pumps at a 12% margin
Manual well drilling in Bangladesh costs 5-10 cents per foot and drills to a depth of up to 100 feet
The next step was to create market demand, so that each of these small enterprises could sell enough volume to make a decent living. For an illiterate population unreached by mass media, flyers, brochures, or radio campaigns wouldn’t work. So we recruited several village troubadour and theatre groups to write songs about the treadle pumps, and had them perform at markets and larger celebrations, incorporating demonstrations of working treadle pumps into their performances. Finally, we created a Bangladesh-style 90-minute Bollywood movie featuring the treadle pump that played off of a truck-mounted projector to an audience of a million people every year, in village open-air settings. Our film was often the first movie that our customers had ever seen.
Without the design of a scalable manufacturing, distribution, and installation network involving thousands of small entrepreneurs, we never could have sold the first million treadle pumps in Bangladesh. Without a large-scale marketing program incorporating activities like the Bollywood movie, neither the 75 manufacturers, the 3,000 village dealers, nor the 3,000 well drillers could have earned a reasonable living by making, marketing, and installing the treadle pump. The design of the mass distribution and mass marketing strategy turned out to be much more important to the success of the treadle pump program than the design of the treadle pump itself. Design of a transformative affordable technology was a necessary, but far-from-sufficient, condition for its success.
The design of an effective for-profit business strategy, of course, pulls all of this together. Every key player in the distribution chain has to make an attractive profit. The most important person in this chain is the end customer. A basic principle I’ve learned over the past 25 years is that for $2-a-day customers, income generation is the single most important feature of a successful technology. I don’t work with any technologies for dollar-a-day customers unless the customer can get three times his money back in the first year by using the technology. A treadle pump installed on a tube well costs $25, including a profit for the manufacturer, the dealer, and the well driller. The average farmer who buys it earns $100 net income in the first year, and could potentially earn $500 a year – 1/5 of purchasers of treadle pumps earn $500 in net income right away.
While it’s the most important, for the ultimate purchaser alone to earn a profit is not enough. The manufacturer has to make an attractive enough profit that he is likely to continue making the treadle pumps. Each dealer has to sell at least 20 treadle pumps in a season to earn enough income so that it is in his interest to continue to market treadle pumps to customers, year after year. And finally, the well driller must install enough treadle pumps in a season to make it worth his while to continue installing them. All of these active participants in the supply chain need to earn attractive profits before the technology can be successful.
A successful social enterprise serving $2-a-day customers begins with the design of a radically affordable, scalable, transformative technology. But this is only the beginning. It will fail to make a meaningful impact unless 80% of the designer’s energy is successfully turned towards designing a profitable business capable of reaching a million customers through an effective branding, marketing and distribution system.
This post was taken and adapted from Acumen Fund’s blog series on lessons in social entrepreneurship
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