Opening Markets: Lessons Learned through Innovation Grants

Innovations are needed across the cookstoves and fuels value chain – from product design to technology improvement to consumer finance. However, few funders take risks on unproven innovations, and investors do not often fund research and development without a ready-made market for the innovation. Through its enterprise development grant programs the Alliance provide funding for cookstoves and fuels businesses to develop better technologies and business models appropriate to the local context, and improve the fragmented value chains in many markets. Since 2012 the Alliance has been supporting proof of concept for potentially game changing ideas and sharing lessons learned from both successful and failed innovations.

In 2012, the Alliance released the Pilot Innovation Fund (PIF) to finance the proof-of-concept of innovative approaches along the value chain in order to strengthen supply and enhance demand for clean cookstoves and fuels. In return for seed capital to finance and pilot these innovations, recip­ients were required to document lessons learned and share results to advance awareness of scalable solutions in the sector. Pilot grants can be awarded to enterprises at any stage of development.

Successful pilot projects can go on to apply for Spark grants to scale their innovative solutions.  The goal of the Spark Fund facility is to help enterprises who have already established proof of concept reach commercial viability and scale by funding business capacity development and growth.

Since 2013, the Alliance has disbursed 39 grants and $5.8 million US to support the piloting and scaling of innovative technology and business models in the cookstove and fuel sector through the PIF, Spark Fund, and Catalytic Small Grant programs. As a result, Alliance grantees have developed 13 new products and tested multiple business model iterations.

Through the first two rounds of the Pilot Innovation Fund, the Alliance not only garnered learnings from its partners implementing the innovations, but from the process of supporting and encouraging innovation in the sector. The Alliance conducted a strategic review of the Pilot Innovation Fund in 2014 with the support of I-Dev International. Two of the key findings about the nature of the fund are below:

  • Grant amount & timeline are somewhat limiting to conduct effective testing and establish credible proof-of-concept
  • The PIF fund as structured in the first and second round of the funds spurred the testing of business models, but in incremental innovations. Program not as successful as it could be at incentivizing and driving higher quality innovation focused applicants

I-Dev and the Alliance grantees made the following recommendations which were taken on when re-designing the fund:

  • Narrowing of the PIF scope to focus on funding game changing, not incremental innovation.
  • Draft the criteria of the fund to incentive research and development and strategic business partnerships.
  • Extend the program timelines and funding amounts to allow for testing and iteration of innovations.

The Alliance has approached the third round of the Pilot Innovation Fund with this criteria and has successfully attracted innovative partnerships and technology developments.

The case studies on this page are part of the Alliance’s commitment to document and share lessons learned through the Pilot Innovation Fund and other grant programs. The Alliance has segmented grant projects into innovations and lessons learned at various stages of the cookstoves and fuels value chain: design, manufacturing, marketing & distribution and consumer finance. Each case study presents the implementing organization’s profile, grant objective, grant achievements, and lessons learned. In some sections, the Alliance has decided to include lessons learned through innovations within a Spark Grant.

Though each grantee has experienced unique challenges when implementing their innovation, there are a few common themes throughout the portfolio and each stage of the value chain:

Trial and error is a legitimate and necessary process. Many champions in the clean cooking sector are looking for the ‘silver bullet’ that will create the perfect technology or the business model that will be profitable within six months. While those possibilities exist, our experience with more than 30 grants has shown that iteration, time, and failures are necessary. One grantee for example had tried a consumer finance model that was not successful, but tried the same model with a different product bundle and found success. Conversely, another grantee tried three iterations of a similar consumer finance model and had to mostly abandon the idea of providing financing to customers. Trial and error are needed in both technology and business model innovation. However, there is such a thing as too many iterations or a focus on incremental change that can lead to a long pilot that never launches an enterprise. So striking a balance is important.

Distribution requires more resources, time and effort. It did not matter whether the grant was focused on design or manufacturing, most grantees reported significant challenge with distributors, particularly when trying to get stoves or fuels sold in informal networks. Most of the informal networks are not prepared to take on large volumes of stoves and prefer to take new products on consignment. This often leads to headaches for stove manufacturers managing networks of hundreds of retailers and distributors and defaults on credit. Over time, some manufacturers have found enough sales traction where they are able to work with sub distributors who in turn supply stoves to retail and small distributors. Others have found that the only way to work with micro distributors and retail outlets is through an NGO model that allows for the training follow up with distributors to be subsidized by grant funding. That is not to say that these are the only two models, but more work needs to be done to address the challenge of distribution in markets in order for the cookstove and fuel adoption in each country or market to reach millions instead of thousands.

While demonstrations are the best way to educate consumers about the product, consumers are more likely to trust a cookstove company with an established brand presence. Whether the enterprise was trying to get consumer to switch to a new fuel or introduce a cookstove as a new category of product, consumers and distributors are more likely to take a chance on the product if they had seen professional advertising or heard the company’s name on the radio. At the very least, many consumers will wait until they’ve seen a company representative a few times before making the switch. Enterprises need to invest in establishing trust with their customers from the very start of operations.  

There are many more learnings through these case studies. Some will seem like they are common sense; others will be interesting models to attempt to replicate. Even the common sense learnings are important to take into consideration when building out a cookstove or fuel enterprise as it is very easy for an enterprise’s management team to get lost in the day-to-day management that strategies around sales, production flows, and design are quickly forgotten.

I. Design

A. Applied Sunshine - Pilot Innovation Fund Round II: Applied Sunshine, LLC.

B. GVEP - Improving the Performance and Quality of Locally Manufactured Improved Cookstoves

II. Manufacturing - Overview of Lessons across the portfolio

A. Burn Manufacturing Co. - Spark Fund: Support to Burn Manufacturing to scale up ICS production in East Africa

B. Sustainable Green Fuel Enterprise - Support to the Sustainable Green Fuel Enterprise (SGFE) Pilot Project

C. Greenway Appliances (Spark) - Spark Fund, Round II: Greenway Grameen Infra

III. Marketing and Distribution - Overview of Lessons across the portfolio

A. Solar Sister - Empowering Women of Nigeria with Economic Opportunity and Access to Clean Cookstoves

B. Greenway Appliances (PIF) - Enhancing Consumer Demand through Increased Market Engagement

C. Ecozoom (PIF) -  Piloting Innovative Distribution and Incentive  Programs For Uptake of Clean Burning Pellet Fuel

IV. Consumer Finance - Overview of Lessons across the portfolio

A. UpEnergy - Leverage decentralized MFIs to boost the affordability and the accessibility of energy-efficient stoves in Uganda

B. Emerging Cooking Solutions

C. Potential Energy - Support to the Darfur-Based Stove Program

D. EcoZoom - Spark Fund, Round II: Eco-Zoom