The Bottom of the Pyramid (BOP) comprises more than four billion of the world’s most impoverished individuals. When it comes to driving meaningful societal change and upliftment among this underserved segment, the prevailing belief is that charitable donation is the optimal path to pursue.
Contributing funds to aid those in need is indeed an honorable pursuit, but it necessitates an ongoing, self-sacrificing flow of capital. A more sustainable approach exists, one that leverages a business mindset to serve the BOP population while simultaneously making a financial impact.
We looked at one small startup company, Shenzhen Power-Solution Ind Co (SPS), that is trying to make a business case serving the underserved market by leveraging technology and innovation – doing good by doing well.
In the BOP community, unmet needs – some of them very basic, and taken for granted in developed countries – offer an extensive and untapped market. The International Energy Agency reveals a staggering statistic: nearly 800 million individuals worldwide lack access to electricity, with 75% residing in sub-Saharan Africa. Those living below the poverty line often grapple with the choice of living in darkness after sunset or relying on the dim glow of candles or kerosene lamps, which, besides being costly, pose substantial safety hazards and contribute to numerous fatalities each year, highlighting a critical global issue.
Most BOP residents inhabit rural areas in developing countries, where even basic amenities like lamps are unaffordable luxuries. Consequently, there is a significant demand for lighting solutions among this demographic. In 2009, Shenzhen Power-Solution Ind Co (SPS) addressed this urgent issue. Founded by Li Xia, who experienced BOP challenges in Northeast China as a child, SPS is deeply connected to the issues of resource deprivation. The question is: can this demand translate into viable business opportunities, and can SPS truly succeed?
SPS introduced a product known as “Candles Killer” to meet this market demand. This innovative lamp combines a reading light on one side with a solar panel on the other, mounted on a pedestal. The lamp can be attached to a plastic bottle using an adjustable metal bracket, allowing it to be raised and used as a desk light. Manufactured from eco-friendly materials, the product can also be fixed to a wall, with adjustable angles ensuring optimal functionality.
However, a crucial question remains: can individuals in the BOP segment genuinely afford such a product?
“Candles Killer has gained rapid acceptance in Ethiopia, Kenya, Nepal, Nigeria, and other developing countries.”
Given the BOP population’s meager average income of less than $2.50 per day, the affordability of essential products becomes a considerable challenge. Take, for example, the cost of operating a kerosene lamp, ranging from $1 to $1.50 per month, which already places a significant burden on their limited finances. SPS introduced Candles Killer at an accessible price point of just retail $5 – equivalent to 3-4 months’ worth of kerosene expenses. It offers a working lifespan of five years and provides three times the illumination of a traditional kerosene lamp.
Beyond its cost-effectiveness, Candles Killer operates cleanly, eliminating fire hazards and harmful gases associated with kerosene usage. This not only addresses financial constraints but also enhances safety and environmental sustainability. Furthermore, thanks to its low cost – not to mention its safety and illumination features – Candles Killer has gained rapid acceptance in Ethiopia, Kenya, Nepal, Nigeria, and other developing countries.
SPS noticed the critical role of mobile phones in this underserved segment in their daily lives. They came up with another product – a solar-powered device capable of charging smartphones and illuminating homes with multiple light bulbs, featuring a built-in radio function. This was clearly a transformative product, but its high cost presented a formidable challenge, hindering accessibility for end users who had trouble paying the initial lump-sum cost.
In response, the company unveiled a flexible pay-as-you-go payment plan. Consumers could initiate their purchase by acquiring 1-3 months’ worth of electricity recharge cards, subsequently extending their product usage by renewing them. Over a span of 1-2 years, they could systematically pay off the loan amount, ultimately owning the product outright. This innovative approach significantly enhanced affordability and the frequency of product usage.
The introduction of the installment payment model not only provided end users with affordable access to SPS’s product line but also fostered stronger consumer engagement. Through this continuous cycle of repeat purchases, SPS accumulated a wealth of valuable end-user data encompassing consumption patterns, installment behavior, payment preferences, and credit worthiness. This data could be used to develop new products and new services.
Xia exhibited unwavering dedication to deeply comprehending the needs and challenges faced by end users. To truly gain insights, she committed up to four months each year to being on the ground in Africa. During these trips, she not only engaged with distributors but also visited remote rural villages, gaining firsthand observations of how the end users live.
One notable expedition led Xia to Kenya, where a grueling journey was followed by hours of hiking to reach the remote villages. This immersive experience proved invaluable in shaping SPS’s product development strategy. Throughout her journeys across Africa, she noticed the many discarded water bottles strewn across the streets. Recognizing an opportunity, she and her team ingeniously harnessed this waste by incorporating it into the redesign of Candles Killer. They replaced the bulkier and lengthier bracket with a sleek metal hook that could function either as a stand or fixed to water bottles, significantly expanding the lighting area. This innovative modification not only doubled the product’s packing capacity but also reduced transportation costs, simultaneously addressing plastic recycling.
SPS soon faced a substantial challenge around customer service, with customers finding it hard to send their products to China or record troubleshooting videos, leading to strained relationships. In response, SPS took the proactive step of establishing a localized after-sales service center in Nigeria. Xia recalls, “The investment was relatively small, as the company hired local employees at a monthly salary rate significantly lower than in both developed and developing markets.”
This strategic move had a profound impact on customer satisfaction. By leveraging the skills of educated and trained individuals in Africa, SPS not only improved customer loyalty but also increased overall satisfaction.
“In Africa, a job opportunity is highly valued, and there are plenty of capable individuals looking for work,” Xia explained. “As it turns out, by investing just a marginal 1% increase in costs, we were able to generate a significant 5% boost in profits.” This approach not only addressed the immediate customer service challenges but also demonstrated the company’s commitment to adapting and investing in the local workforce, ultimately contributing to both customer satisfaction and financial success.
SPS remains resolute in its commitment to delivering unwavering quality. Initially relying on contract manufacturing for their products, the firm encountered a fundamental misalignment in values with their suppliers. Unfortunately, many of these partners held the belief that impoverished African communities did not require high-quality products, prompting a critical manufacturing decision.
In 2012, the innovative company took control by establishing its own facility. Starting with a modest team of 10 employees, the factory occupied a humble space of 500 square meters. Today, it has expanded to an impressive 3,000 square meters, employing over 100 dedicated individuals.
SPS’s dedication to excellence permeates every aspect of its operations. The company utilizes superior-quality raw materials and has invested in specialized outdoor environment simulation labs and precisely designed indoor testing facilities. Rigorous testing ensures that each product not only functions flawlessly but withstands the test of time.
Their commitment to quality has garnered recognition, with several SPS products earning the World Bank’s VeraSol, EU CE, and RoHS certifications. These accolades attest to the stringent standards upheld by SPS. Notably, Candles Killer guarantees a minimum lifespan of three years. Impressively, with just five hours of sunlight, it illuminates surroundings for over six hours during the evening while emitting zero carbon dioxide or harmful gases.
“Impressively, with just five hours of sunlight, it illuminates surroundings for over six hours during the evening while emitting zero carbon dioxide or harmful gases.”
In contrast to most businesses focusing on creating cutting-edge products with flashy features, SPS recognizes the need for a different approach. At the heart of SPS’s business model lies a dedication to crafting reliable and durable products without unnecessary expenses. They achieve this by streamlining their manufacturing process and reducing the number of parts required. Even the smallest details are optimized for cost-effectiveness, with their signature hook undergoing an exhaustive three-year redesign process to maximize functionality – with its bracket size reduced by over 50%, it is now compatible with any standard water bottle to double as a reading lamp.
SPS’s commitment to cost optimization extends beyond product design. The company meticulously designs packaging boxes to maximize utility, with each box doubling as a drawer or wardrobe and featuring collapsible inner support that converts into hangers, reducing waste and ensuring sustainability. Distributors provide these reusable boxes to customers after product sales. Through innovation and a commitment to cost optimization, the unit price of Candles Killer has dropped from an initial $10 to just $5.
SPS has made tremendous strides in bringing solar lighting to over 55 million people from over 7.8 million households in 66 counties as of 2023, marking a significant milestone in the company’s ongoing efforts to empower impoverished communities. As of now, the firm has achieved an impressive cumulative reduction of 6.7 million tons of carbon emissions, which is equivalent to planting 368 million evergreen trees for the Earth. In 2019, SPS attained sales of $10m, in 2022 it reached sales of $15m.
As customers gain access to lighting and radio services, the demand for television and other essential services such as clippers and refrigerators starts to emerge – this is where the energy ladder comes into play.
SPS is now expanding beyond lighting and delving into the media industry. The company intends to focus on education in the future, and its solar home system will feature a range of pre-installed content, including medical, agricultural, and educational resources, providing users with easy access to valuable information, called Solar Media. The firm has recently signed a Memorandum of Understanding (MOU) with an Ethiopian company, and, by mid–2024, will establish a joint factory on Ethiopian soil, marking a pivotal step to localize production. Â
In January 2024, at the World Economic Forum in Davos, Xia was honored with a 2024 Social Entrepreneur Award, catapulting the company to unprecedented heights. This accolade has opened doors that were previously closed for SPS, as its relatively smaller scale and perceived lack of credibility hindered potential collaborations with corporate giants.
This distinguished recognition means SPS now has an exciting partnership with solar panel manufacturer LONGi, enabling them to procure superior raw materials at reduced costs. This newfound alliance, highlighting the transformative power of a strong brand presence, has left Xia feeling “enlightened” and has cemented her determination to elevate SPS’s corporate identity in the future.
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