Go-to-market strategy and partnership assessment for a company supplying smart metering and cloud solutions to mini-grids in SSA

Lack of access to modern electricity solutions is not only a barrier to basic human rights, but it also impedes economic progress, as well as reaching health and environmental objectives. Luckily, progress towards electrification is improving, thanks to the growing number of mini-grid actors, among others. FlexGrid is one of them. The company provides electricity to remote villages through the development and installation of solar mini-grids. Unfortunately, a significant number of hurdles exist for mini-grid developers and operators to become profitable and to scale up. As such, FlexGrid’s founders decided it was time to diversify and find a new revenue streams to grow. More precisely, they want to enter the market of smart metering and cloud solutions providers and become a supplier themselves. In addition, FlexGrid was not satisfied with its previous suppliers it had experienced in the past and know other operators feel the same way, which means there could be a gap in the market. This report will thus outline a business plan for becoming a supplier, as well as evaluate whether FlexGrid should undertake this project alone or in partnership with another company, namely Solergie, a Solar Home System developer and operator. The business plan highlights the whole project of the new company being launched by FlexGrid, as well as the expected evolution of the company and its activity during the first 10 years of its existence. The new company will target two groups of customers: mini-grid operators and developers in sub-Saharan Africa (such as FlexGrid themselves), as well as governmental organisations with a stake in rural electrification. These customers need reliable solutions, that are easy to use and do not come at an exaggerated price. The three most important competitors (SparkMeter, SteamaCo, and CalinMeter) claim their solution is reliable, yet multiple of their customers experienced otherwise. The new company created by FlexGrid will thus position itself as an incumbent providing reliable solutions, at a lower price than the main actors in the market. The pricing strategy of penetration, i.e., lower prices than competition, aims at grasping as much market share as possible from the very beginning of the company’s existence. Forecasts show that the company will only become profitable from year 5 (2027). However, as from the launch, the new company has in its portfolio the AMADER organisation in Mali, to whom it will already provide 3 500 smart meters through a grant program (FinExpo). The grant that the company will obtain will cover the losses generated during the first 4 years, as well as allow investments to improve and expand the offering. This report also assesses the possibility of launching the new company in association with another organisation, Solergie, active in the development and installation of Solar Home Systems in sub-Saharan Africa. Three scenarios are analysed. Firstly, a Joint Venture partnership for both the smart meters & gateways as well as the cloud solution. As a result, the company would supply a solution that includes components from both FlexGrid and Solergie. Secondly, a Joint Venture for only the cloud side of the business. This cloud solution would combine elements of both platforms, as to create one management platform able to support mini-grid and solar home systems operators. Both platforms are different but present non-negligible similarities that when combined would create an attractive platform, cost synergies, and target a broader range of customers. Finally, a third scenario is depicted in which Solergie would become the hardware (smart meter & gateway) provider of the new company. In fact, the hardware of Solergie is significantly less expensive and is proven to be reliable. The platform would still be the one of FlexGrid. The strategic analysis performed by our team brings the conclusion that a combination of the scenario described in the business plan and the JV for the software solution would be the best way to go. Eastron would thus be the company’s hardware supplier, whilst the software would be created from the combined platforms of both Solergie and FlexGrid. On the contrary, the scenario of a JV for both hardware and software, is not recommended for two main reasons: both partners are misaligned in terms of objectives for the company and the two business models are different, which makes the two metering solutions technically incompatible. Finally, whether the company is launched by FlexGrid alone or in partnership with Solergie, the global strategy will remain the same in both cases: the prices should be kept at a low level, and the strategic positioning should emphasise reliability and a fully integrated service offering. In the first years of the company’s existence, investments should be focused on the improvement of the smart meters and cloud solution. It is crucial that its first customers positively experience the products, as to recommend it to other operators and developers. In addition, R&D investments should be made to develop a new technology aimed at providing analytics services to national utilities which often experience reliability issues. If research about competition is proven to be correct and forecasts are approximately accurate, the new company should be able to grasp market share relatively quickly. Ultimately, becoming a leader in the smart metering and cloud solution market should be a viable and realisable target.Greenventures Cleantech B