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SELCO India: A Case on Empowering Rural Livelihoods through Value Creation*

CASE STUDY, STRATEGY
ET Cases - GSMC, 13 Pages
AUTHOR(S) : Prof. Pallavi Agarwal, Assistant Professor, Strategy Management, Institute of Corporate Sustainability Management Gurgaon

Case Preview

SELCO India: A Case on Empowering Rural Livelihoods through Value Creation

 

SELCO India, headquartered at Bangalore, was established by Dr. Harish, a solar thermal expert in 1995 with the intention of serving the poor of un-electrified remote  regions of Karnataka. It was started to enforce the proposed framework of decentralized energy distribution systems to serve the impoverished people of rural India. It focused on the energy needs of these customers and envisioned serving them with customized products and services (Exhibit I)...............

Till date, it has already served more than 1, 25,000 customers across Karnataka, Gujarat, Kerala, and recently Tamil Nadu. However, its geographical expansion in Andhra Pradesh & Maharashtra created problems among the aspirational shareholders of the company. As a result, the company had to reconsider its expansion plan and decided to replicate its business model by scaling up its technology rather than expanding geographically.

With this intended aim, Harish was desperately looking forward to meet the worlds’ prospective CEOs in the World Economic Forum at Davos. 30 world’s best CEOs came to forum to propose their future business models on the development of the remote regions of the developing countries. Harish was also one of them who wanted to present his viewpoint on ‘rural electrification’ through the viability of different renewable energy sources, but unfortunately found that none was capable enough to offer any real solutions for the alleviations of energy poverty..................

Scope of Renewable Energy

India is Asia’s third-largest economy where mostly electricity is generated through coal, hydro power and nuclear energy. But there is a sad fact that 25% of India’s households out of 289 million people do not even have electricity to power a light bulb, according to the 2011 census. The figure has risen to 33% in rural areas. Estimates from the International Energy Agency also suggest that not all Indian homes will have electricity even in 2030...........

Foundation of SELCO India

The seed of founding SELCO had germinated when Harish during his PhD in energy engineering from University of Massachusetts, U.S.A., made a pre-doctoral visit to Domino Republican in 1991. He met a man named Richard Hensen there who involved in installing smallmodular solar systems to provide lights to three-four rural households.........

The Inception

Dr. Harish, a solar thermal expert wanted to dispel the notions that poor people cannot afford and maintain technology and also commercial venture cannot run as a social enterprise. To deal with these issues, he first decided to operate as a for profit organization with the purpose of assessing its financial profitability and growth to drive sustainability in the long run..........

The Progression

In 1996, Harish received a conditional loan of USD 128, 000 from Winrock International, a global nonprofit organization for setting up its first three solar service centers that sold, installed and serviced solar lights under the USAID Renewable Energy Commercialization project. However, this grant meant that if the venture succeeded, the money had to be paid back. This grant, however, helped his company Selco India to establish its own entity.............

The Breakdown

Enthused with its progression, SELCO started expanding geographically in different regions of India such as Andhra Pradesh and Maharashtra for serving their energy needs with the same employees of Karnataka. The organization also decided to transfer the give control of the operations of its Karnataka market in the hands of newly appointed business associates who unfortunately neither had much perseverance nor any passion towards its socially proclaimed mission.........

The Restoration

Harish realized that the business expansions cannot be well off with commercialization. So he again started focusing on energy needs of countryside people of Karnataka with the aim of his organization’ socially proclaimed mission. For the same, he called back its old employees from the new branches to rejuvenate the company. To get out from severe crisis, he met one of the largest shareholders Gaia Kapital of SELCO USA who owned 90% stakes of SELCO India. But instead of making any further investments, he asked Harish to lay-off the employees and shut down the operations of SELCO India.............

Building Ecosystem

After the restoration the company realized that there is need to concentrate on redefining its business model. So that it could build strong innovative linkages between end user, energy service, technology and financing. Their unique endeavor not only facilitated the energy needs in the form of complete package with customized products, doorstep financing, and a strong service network but also pushed great efforts in assessing the real need of the consumers to get the solutions at their end (Exhibit VII)...........

The Way Forward

Today, SELCO has earned a revenue of Rs.16 crore, and is determined to serve 2, 00,000 additional rural homes in the next three to four years. With the projected revenues of about Rs.24 crore in 2013-14 and Rs.30 crore in 2015, it aims to be the catalyst for bringing in real empowerment to the BoP people to aspire, learn, and grow as business partners in the energy businesses rather than treating only as beneficiaries..........

Exhibits

Exhibit I: Customized Products & Services

Exhibit II: Historical Power Outages

Exhibit III: Northern Grid Power Failure

Exhibit IV: Source wise and State wise Estimated Potential of Renewable Power in India as on 31.03.2011 (In MW)

Exhibit V: Operations

Exhibit VI: Technology

Exhibit VII: Synopsis of SELCO Model

Exhibit VIII: Light of Education and Benefits

Exhibit IX: SELCO Incubation Centre

Teaching Note Preview

SELCO India: A Case on Empowering Rural Livelihoods through Value Creation

 

Synopsis

This case is about an eighteen-year-old Bangalore based social enterprise – “SELCO India”, which caters to the energy need of the economically impoverished sections of society. It was established by Mr. Harish Hande with the financial help of Solar Electric Light Fund (SELF), a U.S. based nonprofit organization. It is a for-profit organization, which has created, over time, a unique business model with customized products, doorstep financing, and a strong service network, which is uncommon to a market primarily consisting the poor. To date, it has provided solar lighting to 1, 25,000 homes in the remote regions of Karnataka, Gujarat, Kerala, and recently Tamil Nadu. It sells tailor-made solar products and services at an affordable price to cater to the needs of the consumers at the bottom of the pyramid (BoP). In addition to explaining the nuances of BoP market, this case describes how the rural people benefitted enormously by participating in income  generating activities through SELCO. The case also highlights Hande’s innovative ideas, unconventional thoughts, visionary power, and well integrated approach to build an ecosystem in the BOP market which makes it sustainable and also helps them in leading their life independently and gracefully. Research based on secondary data has been carried out to investigate the sustainability and viability of SELCO’s business model in the context of BoP. The case can be taught to  management students to explain the nuances of BoP market, and to demonstrate how a successful BOP strategy can be formulated and implemented. The key learning aspects of this case is to understand the importance of building ecosystem for the BOP and the complexities associated with it.

Pedagogical Objectives

  • • To educate the importance of decentralized energy distribution systems for resolving the energy crisis of un-electrified remote regions and also the other sub urban areas of rural India
  • • To sustain in energy generated businesses, the organizations have to develop some major facts and draws the future possibility of electricity driven growth for building the roadmap of sustainable energy solutions
  • • To explore the nuances of many bottoms of the pyramid (BoP) innovations and entrepreneurships by interpreting new dimensions for value creation
  • • To throw light on the prospects of efficiency and efficacy of the business model of any organization

 

Assignment Questions

  • I. What prompt SELCO to take a back-step from its geographical expansion plan?
  • II. How SELCO, with their innovative tailor-made products and associated services, enriches the life of BoP participants?
  • III. How it started concentrating to create the eco-system by allowing BoP participants to act as an entrepreneurs rather than only consumers?
  • IV. .............................................


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Abstract

This case is about an eighteen-year-old Bangalore based social enterprise – “SELCO India”, which caters to the energy need of the economically impoverished sections of society. It was established by Mr. Harish Hande with the financial help of Solar Electric Light Fund (SELF), a U.S. based non-profit organization. It is a for-profit  organization which has created over time, a unique business model with customized products, doorstep financing, and a strong service network, which is uncommon to a market primarily consisting of the poor. Till date it has provided solar lighting to 1, 25,000 homes in the remote regions of Karnataka, Gujarat, Kerala, and recently Tamil Nadu. It sells tailor-made solar products and services at an affordable price to cater to the needs of the consumers at the bottom of the pyramid (BoP). In addition to explaining the nuances of BoP market, this case describes how the rural people benefitted enormously by participating in income generating activities through SELCO. The case also highlights Hande’s innovative ideas, unconventional thinking, visionary power, and well integrated approach to build an ecosystem in the BoP market which makes it sustainable and also helps them in leading their life independently and gracefully. Research based on secondary data has been carried out to investigate the sustainability and viability of SELCO’s business model in the context of BoP.



Pedagogical Objectives

  • To understand the importance of decentralized energy distribution systems for resolving the energy crisis of un-electrified remote regions and also the other sub urban areas of rural India
  • To analyze the business strategies that organizations have to develop to sustain in the energy generation businesses and the elements that need to be factored to draw the future possibility of electricity driven growth for building the roadmap of sustainable energy solutions
  • To explore the nuances of bottoms of the pyramid (BoP) innovations and entrepreneurships by interpreting new dimensions for value creation
  • To analyze the prospects of efficiency and efficacy of the business model of any organization

Case Positioning and Setting
The case can be taught to MBA and Executive MBA for the following courses:
To explain the nuances of BoP market - To demonstrate how a successful BOP strategy can be formulated and implemented To understand the importance of building ecosystem for the BOP and the complexities associated with it.


* GSMC 2014, IIM Raipur


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