Designing a product for a new market requires knowledge about one’s customers and the conditions in the target market, as they are critical components for a successful design.
While small and medium-sized enterprises move forward to scale their already developed products worldwide, the required market knowledge often is not available internally. Furthermore, developers and engineers usually design technologies with a specific market in mind, which could lead to a product with inferior scalability on a global scale. Scaling cleantech to emerging markets represents an essential part of global climate change mitigation and, therefore, needs to be accelerated.
Technology Needs Assessment
Since 2001, the United Nations Environmental Program (UNEP) has developed the framework of Technology Needs Assessments (TNA) 1https://tech-action.unepdtu.org/tna-methodology/ to analyse the different needs for technology, especially in developing countries. Based on this framework and previously conducted TNAs, our services include assessing technology needs in the target market. For instance, we analysed climate change-induced technology needs in the agricultural sector.2 Identification and Evaluation of climate change-induced technology needs and business opportunities
The process of TNAs consists of three stages, on each of which the Scaletech team has extensive experience (see footnotes below):
- Identification and Prioritisation of Sectors and Technologies3Scaletech Management has collaborated on relevant prioritisation exercises in countries as diverse as Uruguay, Nepal, Bangladesh and Fiji, and in sectors including coastal zone management; agriculture; forestry; and water resources / hydropower. See https://www.oecd.org/env/cc/developmentandclimatechangeproject.htm
- Barrier Analysis and enabling Framework Identification4Caspary and Valencia (2008): “Barriers to successful implementation of renewables-based rural electrification.” German Development Institute.
- Creation of a Technology Action Plan5For instance, we developed Technology Action Plans for Chilean heavy industries for whom the establishment of carbon markets would represent a financial risk.
Technology Scouting and Selection
To identify the best solutions for the determined technology needs, we scout technologies and help with the selection as part of our services. One method we use is the marginal abatement curve6http://planwashington.org/blog/archive/understanding-carbon-reduction-marginal-abatement-cost-curves/ which ranks technologies based on cost-efficiency, e.g. per avoided unit of greenhouse gas (GHG) emissions. Furthermore, we account for the overall abatement potential of each technology, which enables us to provide our customers with a collection of measures to achieve their emission reduction targets cost-efficiently.
For instance, in one of our projects, we organised an innovation challenge for a multinational mining company to deploy technologies from U.S. incubators to the multinational’s emerging markets operations.7 Transfer of cleantech from U.S. incubators to multinational mining company operations in emerging markets through an innovation challenge As part of the innovation challenge, we evaluated relevant innovative cleantech firms regarding two main aspects:
- Technological validation and sales history in the home market of the submitted technology,
- Suitability to local market demand in the emerging target market and its scalability potential.
Based on this evaluation, we identified several promising technologies and developed plans for their transfer to the operations in the target market.
Using this expertise in evaluating the scalability of technologies, our services also include evaluations of the scalability of cleantech solutions, e.g. for technology competitions where we have served as judges.
Planning Technology Transfer
Market Research and Marketing
If you plan on entering a new market with a technology, you probably already did some market research on your potential target markets, using e.g. your own cost structure or benchmarks of pricing. We add to your initial market research by a combination of analytical evaluation methods and a range of quantitative methods. Our services include, among others:
- Assessing the creation of additional value through entering a specific market8Ghemawat (2007): Managing Differences: The Central Challenge of Global Strategy. Harvard Business Review, March 2007, https://hbr.org/2007/03/managing-differences-the-central-challenge-of-global-strategy., and
- Using multi-criteria decision analysis to decide between entering different markets.9Technology Scaling in the Context of Mitigation Strategies at COP 25
We base all our services on analytical, quantitative measures, including the Economic Value of your product to the customers in the target market10Economic value to the customer estimates the value a customer derives from purchasing your service. This may ultimately enable you to capture more value than traditional price setting strategies., a suite of Pricing Tools 11These include ‘likelihood of purchase’-surveys for different price levels; identification of key psychological price points; online pricing experimental test markets; Price Segmentation Studies (identifying optimal pricing levels for different customer groups); or more complex econometric or conjoint analyses., or ongoing analyses once you have entered the market, such as Elasticity Calculations12Price elasticity means responsiveness of sales to a change in price..
The right strategy is vital in entering a new market. We offer you advisory on several strategic decisions and help you to identify the required capabilities for your expansion. We support cleantech scaling based on our previous research on regulatory and financing frameworks for cleantech13Caspary and O’Connor (2002): Beyond Johannesburg: Policies and Finance for Climate-friendly Development. OECD, Paris, https://doi.org/10.1787/705865878263., and on our extensive experience with analyses on broader macroeconomic and global dynamics as they relate to cleantech.14Caspary (2016): Consequences of the fragmentation of global environmental governance: the case of safeguards in the financing of large dams. I.J. Environmental Studies, vol 73 no 6, https://doi.org/10.1080/00207233.2016.1205922.15Caspary (2009): Policy Coherence for Sustainable Infrastructure in Developing Countries: The Case of OECD-Country Public Financing for Large Dams, Global Governance, vol 15 no 4, https://doi.org/10.1163/19426720-01504007.
Existing Firm-internal Capabilities
Through the so-called RAT test16Lessard, Luca, and Vives (2013): Building your company’s capabilities through global expansion. MIT Sloan Management Review., we help you identify your existing skills which offer you additional value if transferred to the target market. RAT stands for:
- Relevant: Do your capabilities create value in the new market?
- Appropriable: Do these capabilities allow for the capture of value? Also, are there any barriers, preventing competitors from meeting your abilities or developing alternative solutions?
- Transferable: Can you deploy your capabilities effectively in the target market, without sacrificing too much value creation and capture potential?
Corporate Structure and Local Business Models
We support you in choosing the best corporate structure for your venture in the target market. As part of our services, we analyse the pros and cons of the main alternatives for you, usually including:
- direct export to the target market,
- licensing the rights to use your product to another firm,
- creating a wholly owned local subsidiary of your parent company,
- or engage in a Joint Venture with another company to create an independently managed company that will produce and / or market your product in the target market.
We also suggest local business models appropriate to the local context, and previously analysed models that are little known to US or European firms, e.g. offering your product as a service rather than as a product, or through ‘sharing economy’ models adapted to the local market.17Caspary and O’Connor (2002): “Providing Low-cost Information Technology Access to Rural Communities in Developing Countries: What works? What pays?” OECD.
Market structure and Competitive Analysis
To maximise your chances of success in the new market, we build on our extensive experience on analysing target markets for clients.18 Identification and Evaluation of climate change-induced technology needs and business opportunities We may start by a microeconomic analysis of the market structure, which usually evaluates perfect vs monopolistic competition, with implications for the level of price-setting power you can expect. We may also analyse the threat of substitutes and new entrants, and the bargaining power of local suppliers and buyers.
In the process of transferring a technology to the target market, local partnerships can be very beneficial, as previously examined by our founders.19Garcia, Rodrigo et al. (2014): Strategic partnering in oil and gas: A capabilities perspective. Energy Strategy Reviews, Volume 3, September 2014, Pages 21-29, https://doi.org/10.1016/j.esr.2014.07.004. Moreover, the right corporate strategic partnership can help you plug gaps in complementary technologies, capital, or market access in the target market. We help you to identify potential partners and forge successful partnerships, securing your local supply chain but also access local maintenance services and distributors.
Once the target market is known, and we developed the strategy and financing options for your operation, accompanying your market entry is the next step. Managing future activities in the target market also involves examining whether your venture calls for more global integration (GI) of production, or more locally responsive (LR) approaches. To be able to weigh up the two, it is necessary to include the state of the industry, your company’s specific capabilities, business model and other factors in your analysis.20Bartlett, C. and S. Ghoshal (1987): Managing Across Borders: New Organizational Responses. Sloan Management Review.
We identify challenges in operations management associated with adopting operations from the home market to the target market. Based on the obstacles encountered, our work includes a span of tools.
We analyse your processes and identify potential improvements, e.g. using optimization models. Also, we identify sources of delay in material flow resulting from the technology scaling efforts and provide solutions, using inventory management software.
Supply chain risk analysis
This consists of identifying and assessing the likelihood and severity of supply chain risks in the target market for your company. Furthermore, it includes building monitoring systems and building governance and review systems to manage the identified risks.
Our extensive risk analysis experience in the sustainability sector21Caspary (2007): Climate change and investments in developing countries: weighing risks and response options. International Journal of Risk Assessment and Management, vol 7 no 1, https://doi.org/10.1504/IJRAM.2007.011412 enables us to identify potential risks and offer solutions for your operation. This includes qualitative risk assessments, like risk probability and impact assessments or SWOT analyses, and quantitative risk assessments such as sensitivity analyses, decision tree analyses and modelling approaches such as Monte Carlo simulations.22Our management has, e.g., assessed the portfolio risk for renewable energy investments of the International Finance Corporation, the private sector arm of the World Bank.
When financing the scaling of cleantech in a new market, we help to find the best-suited solutions. This includes a span of financial topics.
Understanding public monetary instruments that apply to your product in the target market is essential to maximize your revenue in the new market. We have widely consulted23 Advisory of a “Big Four” company on supplying clean and reliable energy to its data centres in emerging markets and published24Caspary (2008): Tackling opposition to implementing fiscal reform in developing countries: The case of the infrastructure and natural resources sectors. International Journal of Emerging Markets, vol. 3 no 1, https://doi.org/10.1108/17468800810849240.25Caspary and Kauffmann (2007): Pro-poor Design of Subsidies for Water and Sanitation : Lessons from Africa. OECD, Paris. on such fiscal instruments in international markets and will help you those that represent costs to you (mostly taxes) while maximizing your benefit from cleantech-related subsidies.
Optimal Capital Structure
Your scaling plans may require you to rethink your capital structure decisions, which in turn will affect your financial flexibility, cash flow, tax exposure, and business risk and ultimately the risk and return to your owners and / or investors. We will help you with this decision by helping with the known determinants of the capital structure, such as your capital needs during the scaling, needed liquidity levels under ‘what if’-scenarios, or your ability to actually access certain types of capital in targeted markets.
International and National ‘Soft’ Financing
Accessing soft loans and grants can be an essential part of the financing strategy for your scaling effort. We help you to identify funds you qualify for and help with the technical aspects of your application, as we did in previous projects.26 Application to an international climate fund for an innovative energy storage technology Our services include, among others, quantifying specific environmental benefits of your technology that International Environmental Funds require, using our extensive experience in building impact assessment and monitoring frameworks27Caspary (2009): Assessing, mitigating and monitoring environmental risks of large infrastructure projects in foreign financing decisions. Impact Assessment and Project Appraisal, vol 27, no 1.28Caspary (2006): From Environmental Impact Assessment to Strategic Impact Assessment: Implications for Dam Building and Operation. International Journal of Hydropower and Dams, vol 13 no. 5., or identifying ancillary benefits outside the environmental sphere, e.g. energy access to underserved communities29Caspary and Valencia (2008): Expanding the Energy Frontier through renewable-based rural electrification. Yale Centre for Globalisation.30Caspary and Valencia (2008): Barriers to successful implementation of renewables-based rural electrification. German Development Institute., that may help make your case for financial support in that sphere.
Our senior management built our expertise in this field through extensive research on financing mechanisms to address global environmental problems 31Caspary (2008): Integrating responses to global environmental threats into policies and projects in developing countries. International Journal of Sustainable Development, vol 11 no1, https://doi.org/10.1504/IJSD.2008.020381. and the role of development financing in financing responses to specific global ecological issues.32Caspary (2019): Combating Marine Plastics: The Role of Finance and Technical Assistance by Development Finance Institutions. In: Friederike Stock et al.: Plastics in the Aquatic Environment, Handbook of Environmental Chemistry, https://doi.org/10.1007/698_2019_423. Based on this research, we also offer support in building new financing structures and green banks.33 Designing Green Banks for emerging economies: supporting private lending for technology scaling
Transfer and Adapt
Building upon the market knowledge from our advisory on marketing, strategy and financing, we offer additional core services during the execution of your technology transfer. These include the ‘Design for Scale’ of your technology, as well as iterative testing and adaption through pilot projects.
Design For Scale
In a final step, we employ an approach called ‘Design for Scale’ developed at MIT, in which we (re-)design cleantech products for their specific intended new target markets. This process usually involves only changes to certain design aspects of the technology while keeping its core the same.
In the process, we apply both computer-aided design and various rapid prototyping approaches, therefore, facilitating a product’s adaption to the new market in four ways:
First, the approach aims to adapt the product to specific user needs in the target market. Second, it implies an adaptation to the product complexities required in the target market (and the associated capacity to pay or to conduct maintenance). Third, our services include the identification and application of materials, manufacturing and maintenance procedures available in the target market; to achieve this redesign and testing, our experts have worked with experienced engineers, who are leading in the field of scalability design.34Elasaad et al. (2015): Field evaluation of a community scale solar powered water purification technology: A case study of a remote Mexican community application. Desalination, vol 375 no 2, https://doi.org/10.1016/j.desal.2015.08.001.35Kelley, Elasaad et al. (2014): Autonomous operation and maintenance of small-scale PVRO systems for remote communities. Desalination and Water Treatment, vol 55 no 10, https://doi.org/10.1080/19443994.2014.940650. Fourth, we work with engineers and designers in the target market to redesign the local systems for manufacturing and distribution, adding extensive design experience from our partners and engineers.36Sorin Grama co-founded “promethean power systems” and developed the Design for Scale concept at MIT. Furthermore, Huda Elasaad developed “PV pure” and works as Chief Technology Officer at the change:Water Labs. The process may also use findings from the abovementioned analyses, e.g. by working with local tax advisors to identify (and replace) components subject to heavy taxes or import duties; or components with high supply chain risks.
With our broad palette of services, we are your partner for success in targeting new markets. Contact us now to learn more about how we can boost your success.