d.light: How bringing its business plan to life Helped a social enterprise get Off to a strong start
introduction Imagine the following. You’re in the audience of a business plan competition. The next team up to present is d.light, a for-profit social enterprise that plans to bring light to people without access to reliable electricity. Two young men introduce themselves as the founders of d.light, and say they’re going to start their presentation with a demonstration. The lights go out. In a few seconds, you see a dim light at the front of the room, and smell smoke and burning kerosene. After about 30 seconds, your eyes start to water and it becomes slightly uncomfortable to breathe. The lights switch back on and the smoke clears. The young men apologize for the lack of light and the smoke, but say the demonstration was staged to illustrate a point. Around 1.6 billion people, or more than one fifth of the world’s population, have no access to electricity, and about a billion more have an unreliable or intermittent supply. A large share of these people use kerosene to light their homes at night. Kerosene fumes are extremely unhealthy, even fatal. In fact, the United Nations estimates that kerosene fumes kill 1.5 million people per year, and cause countless health complications for others. sam Goldman and the origins of d.light The scene described here actually took place—several times. It’s the way Sam Goldman and Ned Tozun, the co-founders of d.light, introduced the company at business plan competitions and when they pitched investors. d.light is an international consumer products company serving “base of the pyramid” consumers who don’t have access to reliable electricity. Although d.light technically started in a class at Stanford University, its beginning can be traced to Sam Goldman’s youth and early adulthood. Growing up, Goldman’s parents worked for the United States Agency for International Development (USAID), a government agency that provides economic and humanitarian assistance in countries across the globe. Goldman lived in Pakistan, Peru, India, Canada, and several other countries. As a young adult, while working for the Peace Corps, he lived for four years in a West African village that had no electricity. A neighbor boy was badly burned in a kerosene fire, an event that deeply impacted Goldman. At one point during his time in the village, Goldman was given a battery-powered LED headlamp, and was struck by the dramatic difference that simply having light at night can make in a person’s life. He could now cook, read, and do things at night that were unimaginable without the benefits reliable lighting provides. Impacted by this experience, Goldman sought out a graduate program that would provide him the opportunity to start thinking about creating a business to take light to people without access to reliable electricity. He landed at Stanford, which was starting a program in social enterprise. A pivotal class was Jim Patelli’s 2006–2007 Entrepreneurial Design course. The class was divided into teams, and each team was challenged to address a significant issue in the developing world. Goldman was teamed up with Ned Tozun, a business classmate, and two engineering students, Erica Estrade and Xian Wu. The team tackled the problem of light for people without access to reliable electricity, and developed a rough prototype of a portable LED light that could be recharged via solar power. That spring, the team traveled to Burma for the purpose of going into villages that didn’t have access to electricity to introduce their device. villagers told them they spent up to 40 percent of their income on kerosene. When shown how their crude prototype could provide light at night and be recharged during the day simply by deploying small solar panels on their homes, the villagers were so taken that one woman actually wept. According to one account of the team’s trip, in one village the local police confiscated the prototypes. They, too, needed light at night. design and distribution After completing the Entrepreneurial Design course, the teammates headed their separate directions for the summer. In the fall, they reunited, determined to continue to work on their business concept. The concept of using solar power to recharge portable lights in poor rural areas wasn’t new. In fact, it had been tried many times. The problem, in Goldman and his team’s estimation, was a combination of design and distribution. Previous models relied either on NGOs and governments “giving” fairly expensive lights to people without access to electricity, which they couldn’t afford to replace when used up or if broken, or commercial enterprises buying extremely inexpensive lights in China and exporting them to Africa and elsewhere, where they performed poorly. It was clear to Goldman that neither of these models was sustainable. So Goldman and his team, driven by the possibility of changing literally millions of people’s lives throughout the world, recruited talented engineers and distribution experts, who worked on a near pro bono basis, to help with the project. The goal was to produce a solarpowered portable LED light that was exactly what rural villagers needed—nothing more and nothing less. It also had to be cheap enough that villagers could afford it yet capable of being produced in a way that yielded sufficient margins for d.light to be profitable. The decision was made early on that d.light would be a forprofit company. The company’s goal was not to impact 100,000 people or a million people but to impact hundreds of millions of people. Goldman and his team knew that their lofty ambitions would take cash and additional R&D efforts, which would require private-sector investment capital. During this period, which covered the summer of 2007 until early 2008, Goldman and his co-founders continued traveling to remote areas for the purpose of obtaining feedback about their prototype. During Christmas break, instead of traveling home to see his family, Goldman was in the middle of Myanmar doing research. The team thinned some in early 2008, with Goldman, Tozan, and Wu continuing. d.light was now up-and-running and opened its first international offices in India, China, and Tanzania. Business Plan competitions and investor Presentations One thing Goldman stresses during talks about d.light is the instrumental role that the company’s business plan played in helping the company take shape and in raising investment capital. Early on, d.light entered several business plan competitions. It the spring of 2007, it took second place in the University of California, Berkley’s Social venture Competition and won first prize at Stanford’s Social E-Challenge. A big breakthrough happened in May 2007, when the team claimed the $250,000 first prize in the prestigious Draper fisher Jurvetson venture Challenge competition. This money provided seed funding for much of the work that was completed during the summer and fall of 2007. What’s particularly interesting is Goldman’s reflections about why d.light was so successful in business plan competitions and eventually with investor presentations. These reflections are instructive for entrepreneurs as they think about how to design and then successfully launch their ventures. As shown in the nearby table, there are six reasons that account for d.light’s success, specifically with business plan competitions. Collectively, the attributes shown in the table present d.light as an organization with a compelling idea, a strong management team, large markets to serve, an intense product focus, and a coherent, resolute, and extremely admirable vision for the future. d.light today Today, d.light is having the impact that its founders envisioned it could. The nearby chart shows the numbers on d.light’s social impact dashboard, which is
updated frequently. These numbers reflect the impact of the availability of light, produced by d.light solar lanterns, for people who didn’t previously have access to reliable electricity and light. The numbers are remarkable, particularly in terms of lives empowered, school-aged children reached with solar lighting, and savings in energy-related expenses. The numbers reflect the good that a well-managed social enterprise can create.
d.light sells its product through a number of channels in more than 30 countries. One strategy that has worked well is to employ “rural entrepreneurs” to sell the product. d.light likes to employ indigenous personnel, who know the local customs, people, and language, to sell its product on a commission basis. It also has partnerships with NGOs, microfinance organizations, and social enterprise start-ups that are producing solar lanterns to achieve the same goals it is striving towards. In 2013, d.light entered into a major partnership with Total, a french oil and gas company that sells d.light’s products as part of the “Access to Energy Program” throughout Africa. As a result of the Total partnership, and its initiatives across the world, d.light now makes more than 500,000 of its solar lanterns per month. The first few years of its existence, d.light’s production was more in the neighborhood of 20,000 to 30,000 units per month. d.light has funded its operations and growth through both investment capital and earnings. d.light is also continually updating its products. for example, its newest design incorporates a smartphone charger, knowing smartphones are the lifeline of many small business owners and others in developing countries. Indian mother of three with her d.light solar-powered lamp. challenges ahead As it continues to grow, d.light faces a host of challenges. The problem it is trying to solve, to provide a reliable source of light to people without access to electricity, is as large as ever. The United Nations now estimates that over 2 billion people in the world do not have access to reliable electricity. Incredibly, that number is higher than when d.light was founded in 2007. Its for-profit status is also periodically challenged. A
d.light lantern costs the equivalent of 30 U.S. dollars, an amount that remains beyond the reach of many people in underdeveloped countries. Some observers believe that companies like d.light should be nonprofits and give their lanterns away. d.light’s counter to this argument is that the only way to effectively tackle the worldwide shortage of reliable lighting is to stimulate business activity through the private sector. How can an entrepreneur in Kenya, the company argues, make a living selling solar lights if a nearby NGO is giving them away for free? d.light also continues to face the challenge of convincing hesistant customers with a little extra income to invest in unfamiliar technology. Although kerosene has many harmful side effects, it is an integral part of many villagers’ lives. It often takes an influential person in a village buying a d.light lantern for others to follow suit. d.light is also continually trying to lower the price point of its basic lanterns. d.light’s efforts have clearly made a difference in the lives of millions of people. The firm has received numerous awards to recognize what it has accomplished. One particularly nice distinction is its place in the British Museum’s History of the World in 100 Objects. d.light’s basic lantern, the S250, is object number 100 in the collection. d.light’s stated goal is to impact the lives of at least 100 million people by 2020. It appears to be well on its way to achieving the goal.
1. Why is the problem of bringing light to people who don’t have access to reliable electricity not being tackled in a meaningful way by a large lighting company, such as GE (General Electric) or Philips?
2. What qualities do Sam Goldman and his team have that will help them solve the problem of providing light to the billions of people in the world who lack access to reliable electricity?
3. Why does Sam Goldman go out of his way to talk about the importance of d.light’s business plan? In what ways do you think having a meticulously created business helped d.light in its launch efforts?
4. If you were one of d.light’s founders, what would your marketing strategy be? How would you go about educating people in remote areas of the world about your product and the beneifts associated with purchasing it?
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