SELCO 2009: Determining a path forward
Harish Hande and the company he founded, SELCO, provide solar electricity for lighting and power to India's poor. For the work of his company, Hande has received numerous recognitions; he is frequently cited as one of the top social entrepreneurs in India and an example for the entire developing world.
The road to SELCO’s success, however, has not always been smooth. Hande cofounded SELCO (with Neville Williams) in 1995 to sell and service photovoltaic (PV) systems in his home state of Karnataka, India. During its initial years of operation, the company expanded deliberately as it gained capital and experience. Then in an ill-fated attempt to scale-up during the early 2000s, SELCO created a franchised dealer network, seriously hurting the company financially and deviating from its mission to help the poor. As the company was recovering from this move, the price of solar panels spiked and sales declined. Investors put pressure on Hande to lay off employees and contract the organization.
With the help of the World Bank’s commercial finance arm, the International Finance Corporation (IFC), Hande was able to restructure the company in 2008. SELCO remained a for-profit business, but Hande was able to seek new investors more aligned with its mission. In addition, Hande was able to keep his sales and service organization intact, complete with its core of highly motivated employees.
Most importantly, SELCO was able to continue devising innovative solar solutions. The company had become known for redesigning off-the-shelf solar electric components to suit the particular needs of the urban and rural poor. The SELCO design process began with an extensive needs assessment of a particular segment or activity. Whether designing for street vendors, midwives, or rural farmers, SELCO created solutions for the particular needs of its target market. Sometimes this meant redesigning the solar equipment and sometimes this meant restructuring activities so that solar energy could power a client’s needs.
From his field research, Hande realized early in SELCO’s history that the success of solar installations for the poor would depend on designing creative financing solutions for its customers. Many thought the capital expense of purchasing solar panels and batteries put this technology out of the reach of those at the bottom of the income-generating pyramid. But, SELCO spent time cultivating India’s banks and microfinance organizations to convince them of the efficacy of solar power. Over time, the company formed partnerships with these institutions to craft financial instruments that allowed entrepreneurs and families to repay the capital expenses associated with installing solar equipment.
However, SELCO’s careful process of needs assessment, design, financing, and service was time-consuming and costly. The company had provided energy solutions for over 100,000 households in its fifteen years of existence, allowing customers to increase their income and quality of life. However, India’s developmental problems were daunting; over 400 million individuals were in poverty. Observers frequently wondered if SELCO’s activities could be scaled up to extend solar energy's benefits to more people.
In 2009, SELCO was considering its plans for how the company might expand. The company decided to institutionalize its design process by building an innovation center. SELCO also added products that provided energy solutions beyond solar. Some within the company were hoping the company would go “deeper” and look at designing solutions for even poorer members of the Indian population. Others were hoping that the company would go “wider” and expand beyond its current geographical areas in Karnataka and Gujarat. Whatever its direction, the strategic choices the company made at this point in its evolution would be crucial to determining its continued success.