NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Monday, March 9, 2015

Most startups fail to take off. The traditional method of starting a business has been to come up with a business plan, get investors to back it, assemble your dream team, get a product in play and push it hard. But this approach often exposes entrepreneurs to risks that blindside them later. The same could be said of the big ideas often touted to help the poor in emerging markets, either with access to cleaner water and sanitation or education.

Take PlayPump, a children’s carousel designed to help pump clean water in Africa. Despite getting US$16 million in funding, it failed to gain traction. Three out of every four development projects in Africa fail. They are managed with a fixed plan in mind, as if they were always big infrastructure projects with fixed components and measured outcomes. But there could be an alternative approach.

Lean growth

A new way to look at solving complex development problems could be the lean startup method, which favors hypothesisbased experimentation, iterative product releases and customer feedback over a big plan upfront with lots of intuition and conventional wisdom. The main pillars are better known as prototyping, experimenting and pivoting.

Take the market for kerosene as a good place to start with lean startup thinking. Two billion people around the world don’t have access to electricity, but the poor around the world spend around US$37 billion a year on kerosene or other lowquality energy solutions for lighting. But kerosene is both expensive and a serious fire and health hazard. More people die from indoor pollution than malaria because of it. Solar solutions require big onetime investments that are out of the reach of people living on $1-2 a day.

We have been working with Nuru Energy, a for-profit social enterprise in Rwanda that is dedicated to replacing the use of expensive, unhealthy and dangerous kerosene as a source of lighting. Nuru Energy offers ultraaffordable and portable LED solutions through a micro-payment business model. Its product has become the most popular off-grid lighting product in the country.