Throwing light on the millions without electricity

Ned Tozun is co-founder of d.light, a social enterprise that makes solar-powered products for people living without access to electricity in the developing world. In this interview he talks about the patience required to meet the exacting demands of a market in which distribution is an even greater challenge than product design. Below is a full transcript of the original interview together with further details of d.light’s work.

Once people have light, it opens up time for them.

Light opens up opportunity. Kids can study longer. Children don’t have to be exposed to the harmful fumes of kerosene. People can do more productive things at night that they couldn’t do before, which allows them to earn more income. Our customers not only save money because they don’t have to buy kerosene anymore, but their incomes actually go up

It hasn’t been an easy path to get here. I first connected with my co-founder, Sam Goldman, in business school. He was a Peace Corps volunteer in Benin, living in a village without access to electricity. One evening his neighbor’s son was burned in a kerosene fire. The child survived and was lying on a mat for six months in pain. Sam witnessed this and came out of the experience thinking, ‘This is not right. In the 21st century there is technology with solar panels and LEDs, it cannot be that one-fifth of the world still uses kerosene lamps for lighting.”

That was the impetus that got us started. We initially did a lot of research and built prototypes and eventually got to a place where we had a business plan. We were able to win some business plan competitions and raise a little bit of investment to get us going. Very early on, Sam and I realized that in order to make the company successful, we needed to be in the market. So Sam moved to India to focus on sales and marketing and I moved to China to focus on the operations and quality side of the business.

Fieldwork

There were multiple challenges we faced along the way. The first was on the product side. Even though these customers have very little ability to pay, the product quality standard has to be far higher than if you’re designing products for the US and Europe. They don’t want to invest a huge amount of money — $5, $10, or $20, which is a large sum of money for them — in a product that’s going to break in two months. They live in conditions that are hot, dusty, and humid. The products are going to get wet. They’re going to get dropped. They’re going to be kicked by a cow. All sorts of things will happen to these products. They’re in use nearly all the time, almost 24 hours a day, being charged during the day and used at night.

I see a lot of product concepts created in universities and design schools, and very often there’s a gap between a good idea and what’s realistic in the field. What enabled us to get the quality level to a place where customers really loved the product was a lot of field testing and human-centered design – taking real, physically manufactured products into the village, seeing what broke, and then iterating back into our manufacturing process to ensure we had very robust products.

From the beginning, it’s always been critical for us to design our products in collaboration with our customers and have marketing that really appeals to them and doesn’t talk down to them, but really treats them as an equal with dignity. Taking that approach has been something that has differentiated us.

The importance of local partnerships

The other thing we did on the product side was partner with our supply chain. The common perception is that there is a trade-off between cost and quality, but in our experience that’s not the case. There are things you can do to reduce cost that actually increase quality. I order to do that, and make those decisions, we had to work very closely with all parts of the supply chain and understand the cost structure of those organizations to make the various trade-offs needed to get to the price point our customers can afford. That insight isn’t readily available if you search the web – you just have to be on the ground and gain people’s trust in order to gather the information you need.

When we started d.light, there was essentially no market penetration of any solar products. Initially, it was our view that businesses just weren’t taking this seriously. They weren’t looking at this as a real market, similar to what happened with mobile phones in Africa. So we really wanted to be a first mover into this space. A big misconception we had was that if you have a great product at a great value for money, it’s just going to sell. A great product is necessary but not sufficient.  Distribution, marketing, and branding are so important and required more innovation than on the product side.

It took us years to figure out the right sales and distribution model. The big insight for us was to let our [distribution] partners do what they know how to do well and augment them with our expertise in building the market for solar. What ended up working for us was partnering with trusted distribution channels while maintaining the responsibility to drive sales and marketing initiatives so people could pull the product off the shelf. It really took four or five years for us to get to a point where there was enough understanding about these technologies and enough trust of our brand that larger partners with brands of their own were willing to take us on.

How to scale

There were a few key components that enabled us to scale. One was that we organized our company from the beginning as a global company. We created a global manufacturing base even though initially we were selling only in one country.

Another thing we did was create an investment structure that could scale with the company. We had investors who had the ability to make new investments in the company as we hit new milestones.

When we initially raised funds, we raised equity, which is fairly typical for a startup. We had a mix at that time of venture capital and impact investment. What differentiated these impact investment funds from the venture capital funds is that the impact funds were more patient in their time horizon. They realized these were difficult markets we were trying to crack. Having that patience in our capital structure was really critical in enabling us to be successful.

We also had a loan guarantee from USAID, which enabled our lender– a commercial bank– to have more comfort in lending to a company that worked in emerging markets and did not have a long track record. In addition to those sources of financing, we were also able to get some grant funding. This is something we had not even considered when we started the company, but foundations were interested in the impact we were creating. The grants allowed us to fund projects we wouldn’t be able to fund out of equity or debt financing but that could accelerate our growth and impact.

Third, a big inflection point for us was in 2011. We realized that the company was going to just enter into a phase of hyper growth. In order to do that with minimal risk, we really needed to bring on people who are culturally aligned and who had the right kind of experience and background. Prior to that, we were a fairly scrappy team: young, motivated, and entrepreneurial, but not a lot of experience. So we brought on a vice president of operations who has deep domain expertise and several other executives who have experience building brands and building distribution in Africa and India.

Learning to let go

One thing that founders can do sometimes is try to hold on too long. In our experience, letting go of control at the right times has been really enabling, and it enables others to step up into leadership. It’s really important to get the right people, so go through a tough recruiting process. But once they’re on board, empowering them is something that is critical in order to scale up the organization. When you are operating in 60 countries and building many different kinds of products, you can’t know everything anymore. You have to release some of that control to people you trust and people who have the right kind of experience.

Looking back, if we had known how hard it was going to be, and how many obstacles we would face, I don’t know if we would have done it. Whenever you’re trying to really change something big, you’re going to run into obstacles. But I can’t imagine doing anything else. It’s the most fulfilling thing I could imagine doing. If you’re thinking about taking the plunge, I really encourage you to do it. And to all of the social entrepreneurs out there, persevere and keep at it. When there’s a problem, there’s a solution out there somewhere. You just have to find it.

Today we have over 300 employees and offices in a dozen countries, primarily in Asia and Africa. We’re selling our products through 15,000 outlets worldwide selling almost half a million units every month. Since we started in 2006, we’ve been able to impact over 50 million people living without access to electricity.

This post is part of a major series of interviews with leading social entrepreneurs associated with the Schwab Foundation. For further insights from the world of social enterprise see the following posts:

Social Entrepreneurs: Innovators for Action

This post is part of a major series of interviews with leading social entrepreneurs associated with the Schwab Foundation. For further insights from the world of social enterprise see the following posts:

Explainer: What is a social entrepreneur
5 powerful ideas for global impact from social entrepreneurs
10 lessons from leaders — social entrepreneurs tell all
How to make everyone a microentrepreneur
Driving up school standards in Kenya with smart data
The full set of interviews

Author: Ned Tozun is President and co-founder of d.light. You can read more about d.light’s work in Fastest path to universal energy? Let the market decide.

Image: Indian boy holding a d.light solar lamp.