Strategy

Ignite Power in Rwanda

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In 2015, months after completing a successful and innovative pilot to deliver off-grid electricity for rural households in Rwanda, Yariv Cohen, CEO of Ignite Power, felt stuck in negotiations with the government. Supported by the government, the startup had come up with a plan to install millions of solar home systems across the country, using the pay-as-you-go model, whereby the customers would pay for their kits in small instalments using mobile money. Removing upfront costs, using smaller solar systems, optimizing operations and leveraging government support, Ignite Power created a unique approach aiming to make solar kits - thus far expensive - an affordable alternative, even for the poorest households. However, despite the success of the pilot, the government insists on Ignite Power using larger systems, which Yariv fears will increase the costs for customers. With the impasse dragging out for months and the company's resources shrinking at worrying levels, Yariv has to decide whether he should insist on his approach or accept the government's proposal. In addition, the company has another strategic decision to make: produce its own solar systems or procure these from existing suppliers. Behind these singular decisions, Yariv and his team know that they are indeed facing fundamental questions that will shape the company's future.
Bibliographic citation: PELIZAN PAVLAK, L., RAHNEMA ALAVI, A., MARTÍ, G. (2021). Ignite Power in Rwanda. Electric Power on a Different Scale...for All? IESE, OP-625-E.
Date: 01/04/2021
Author(s): Leticia Pelizan Pavlak; Ahmad Rahnema Alavi; Gina Martí
Document type: Occasional Paper
Department: Strategic Management
Sector:
Languages: English
Learning objective To use as a case study to discuss, in general: 1. The problems related to energy poverty and the lack of electricity access in low-income countries and the role of the governments and private companies in improving electricity access; 2. Discuss the key components of Ignite Power plan and strategy, how it differs from the approach of existent solar companies in the country and what are the company´s competitive advantage. Using Porter´s Five Forces or Core Competence model could be useful; 3. Deep in the basis of the public-private partnership that Ignited Power shaped with the government, the government role, the regulation role and contrast it with the pure ?private-based? approach used by the existent companies. 4. Discuss and compare free competition and monopolistic approaches to bring electricity to rural areas using off-grid solar home solutions and the role of private companies and government in both systems. Compare the ?utility/dominant position approach? designed by Ignite with a more competitive and fragmented market, their advantages and disadvantages. In specific, to use as a case study where the students should take Yariv position and give responses to the following issues: - Why is the government pushing for larger systems? - What is at stake in the decision of agreeing or not with the government in using larger systems? How it could affect the company´s strategy? - What should Cohen do? How could he handle the negotiation with the government? - Why is the decision about to produce its own solar systems or procure these from existing suppliers important? - What criteria should be used to make such decision? What are the main risks for oth options?