Kate Welch on d.light – illuminating the elements of the social enterprise model
There are almost a billion and a half people who live without access to electricity from an official energy grid. When night falls, many of them rely on kerosene lanterns to provide light for cooking, studying and working. These lanterns are threats to health and safety, giving off noxious fumes and often causing terrible fires. To address this issue, d.light Design has developed a line of affordable solar powered lanterns and seeks to touch 50 million lives by 2015.
In this blog post, Kate Welch, Chief Executive of Acumen Trust in the UK, puts d.light’s celebrated social business model to the test.
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d.light Energy Private Limited says it all. This is a design led enterprise which will undoubtedly bring a new solution to the problems of lack of electricity in many areas of India. But is it a social enterprise?
Test 1: Is it a trading company?
This is definitely the case. d.light currently has two solar powered portable lights, the S250 priced at $32 and the S10 at $11. Both are robust designs with well thought through solutions to charging, carrying, and ways of using the light. The products are appealing but the costs are high for the target market. Based on, possibly questionable, costs for kerosene, the S250 has a payback time of one year with the S10 giving a return to the customer after 4 months. The challenge is in reaching a reasonable proportion of the 1.6 billion people the product is designed for and persuading them to pay a fairly high price when money is scarce. Based on reaching 5 people per light we were given a figure of 2.5 million people reached so far so, although there have been a lot of sales, there is a long way to go! The company has major investors from both the social investment and venture capital worlds but has yet to make a profit.
Test 2: Does the business address a social and/or an environmental issue?
The answer again is yes. The time spent by one of the founders Sam Goldman in a rural village seeing the danger posed by kerosene lamps and the poor quality of light produced was one of the drivers to design a product that would bring electricity for individual use to extend the working, studying or leisure time. The impact on individual lives is huge and could change life in a village completely. d.light talk about how people have to be convinced of the benefits often taking a long time to build up trust in the product. If the company says it has a six month guarantee they will watch the light owned by the preacher for a full six months just to see if it will last that long. Converting a warm lead into a sale is going to be a lengthy business if every potential customer tests the product in the same way. The design concept extends through the distribution with the creative use of partners with local networks and trust already in place. The vision of reaching 50 million people by 2015 is challenging but the impact could be enormous.
Test 3: How will profits be used?
That question was asked by many of us and has yet to be answered. The founders and senior team own shares in the company, the venture capitalists who have invested will be looking for their exit. There was no indication that all or even some part of the profits when made will be used to further address the social issues. The team running d.light are well-qualified and experienced in consumer products and their marketing. They are paid at rates that have enabled them to leave well-paid jobs in large corporate to join d.light. A commitment to put 50% or more of the profit to address a related social issue would transform d.light into a true social enterprise.
Potential competition and points of tension
It was good to see a business that has a well-designed product that can solve social issues. However they have all the challenges of working in a crowded marketplace. d.light is very vulnerable to competition from a much cheaper product. They manufacture in China themselves and the potential for a copycat product priced at say $3 is high. This could destroy trust in their brand which is built on quality and would probably reach a wider market through existing distribution channels more quickly than the partner network being developed by d.light. They have also not yet experienced any tensions in the board which will be sure to come when the balance between social and financial return is being tested.
I wish the team every success but also challenge them to ask themselves what more good they could do with the profits they will make.
