In the last interview of WE4F’s series celebrating World Creativity and Innovation Day, Wanweena Tangsathianraphap, Communications and Knowledge Management Specialist from the WE4F South and Southeast Asia Regional Innovation Hub, spoke with Max Nelen – Founder & CEO at Agrosolar, a Myanmar-based company that provides sustainable and affordable solar-powered irrigation systems for smallholder farmers in in Southeast Asia.
IN YOUR OPINION, WHAT IS THE CULTURE OF INNOVATION? HOW DO YOU DEFINE IT AND WHAT DOES IT MEAN TO YOU?
Max: We see innovation and technological innovation not as a standalone topic, but something needed in order to achieve our mission, which is to help 25,000 smallholder farmers across Southeast Asia by 2025. In order to do that, we need to innovate.
To achieve that mission, we need to understand who the smallholder farmers are and what they actually need. Only then, we can think about innovation and see different angles that need to be solved. The reason why we do not see solar irrigation across Southeast Asia yet is, in our opinion, for three reasons.
The first one is the product itself. In most countries, the pump is distributed at a very high price. It is often sold it at 1,000 USD or more, which makes it very expensive for the farmer to afford. So, affordability is an issue.
Second is the payment. When farmers want to buy the pump, they cannot do so because they get seasonal income. They cannot afford to buy the whole product [with] cash at that moment in time.
And the third one is the last mile distribution. There is a lack of retail and distribution channels within the last mile operations within rural areas, especially in more remote out-of-township areas.
The reason why I mentioned these three topics is [because] that is how we think about innovation…how we can solve these problems… how we can reach 25,000 farmers. So, innovation is not just this product, but also solutions to these three issues.
SO, INNOVATION IS MORE THAN A PRODUCT, BUT IS LIKE THE WHOLE ON-GOING PROCESS FOR YOU, RIGHT? CAN YOU ELABORATE ON THIS?
Max: Yes, it is an on-going process. I see it more as a service innovation. Product is just one part of the solution. For example, to solve affordability issue, the first point is to bring the cost price down. We have decided to do innovation by aligning the supply chain and then designing our own product. We talk to farmers. We take an innovative approach, that we do not just bring a product to market and hope it sells, but we really design a product that is according to their needs and we work with our core manufacturers to deliver that.
The second one is how we make the pump affordable to our farmers when they need it. So that is also an innovative approach again. We calculate their payback periods in terms of how much fuel they spend, calculate, and forecast their cash income over the next one or two years. We want our farmer to be able to pay back their system within two years and be able to pay it back according to their harvest periods when they have cash. So, we calculate it and then offer them financing, and that is a key.
The third one is how we solve the last mile distribution. We are building out this network, which is an innovative approach in a way that we are splitting the sales team. We have independent agents that look for leads and then we have a core sales team that closes the deal, distributes product, and goes all the way to after-sales service. And so, over time, we are thinking on how we can improve our after-sales operations – how we can offer better service to our customers. That is where digital innovation comes in. So, ok then let us try to put in an IoT [Internet of Things] into our pumps so that we can track the performance. We can have an alert of when a pump will potentially breakdown or measure how much of a pump is being used. Then we call up the customers and have a conversation with them.
FROM WHAT YOU MENTIONED ABOUT YOUR INNOVATIVE SOLUTION, HOW DO YOU COME UP WITH ALL THESE IDEAS? WHAT IS THE SOURCE OF YOUR INSPIRATION?
Max: I used to live in Singapore. While I was there, I was working as a consultant for the renewable energy sector or more specifically, in the access-to-energy space. I saw successful business cases of some access-to-energy companies in Africa, and was asking myself – can we bring this to Asia as well?
I then quickly realized that the majority of households here already have access to electricity, but when you look at the farm fields they don’t. There is no plug in the fields that the farmers can use to electrify; you can see this only when you are in the fields. That is what I did during many months in this region. I travelled across Myanmar, Vietnam, Thailand, and Indonesia. You just have to drive around the country and you can see every farmer using a fuel-based pump. Then I realized that maybe access to energy is still a problem here. Then you think, how can we serve more than 50% of the population who works in agriculture with sustainable energy? Can we actually increase their income by doing so?
So, we first looked at multiple appliances that we could give. Irrigation was the one that came out of it as a positive business case. Farmers use it three to five times a week. That is where it makes economic sense for farmers to switch from fossil fuel to solar. Their payback periods would drop below two years, while the lifetime value of the solar installation is minimum 10 years. Over this 10-year period, the amount of money that they save can amount up to 6,000 USD. In comparison our Solar Irrigation Systems are retailed at around 1,000 USD, creating a return on investment of 50% per year.
IT SEEMS YOUR INNOVATION WORKS WELL AND DIRECTLY IMPACTS FARMERS’ LIVELIHOODS; CAN YOU TELL US WHAT THE RESULT IS SO FAR?
Max: Yes. We’ve installed 41 systems during the first half of 2020 with and have accelerated our growth with 104 installed systems over the last six months despite the challenging times of COVID-19. It is amazing and it really shows the value of our product. Partially, this is also because the fuel price has increased significantly, forcing the farmers to switch as they are spending more and more on fuel.
Why we are so good and why we are installing so well is because of the importance of understanding customer needs in rural areas. We are not pushing a product into the market; we are polling the demand and then offering a tailored solution.
We are also constantly evolving to bring the best value to the farmer. If you look at how we started, it began with just a solar irrigation pump that we designed. However, now we are offering a complete package that includes financing and after-sales services. Customers really love it.
In addition, we also letting them be flexible. For example, we will help them if they want to design their own mounting structure, if they need sprinklers or drip tape, if they want accessories on top of that. So, it is really this level of customized approach that makes us successful, while still keeping our core operations streamlined. That is, to be able to also deliver it fast to them at an affordable price point, which is important.
We are also looking to expand later this year. We are now in the region that is called the dry zone of Myanmar (having less than a thousand millimeters of annual precipitation). I think there are around 50 townships there. We are now present in five of those, so we have only covered 10% of the region. In the next six months, we are going to focus on penetrating six more townships, in order to become the market leader.
FOR YOUR SOLAR IRRIGATION PUMP, HOW INCLUSIVE IS IT? DOES IT REACH OR HELP WOMEN?
Max: My answer is yes and no. We look at this as from a farming household perspective, not just an individual farmer. Whether it is male or female, we want to help the households. Normally the household is constructed with men, women, and children. In some households, even grandparents are still involved. I have seen in average six or seven people within one household. So, we look at that and we try to benefit all of them.
It’s important to know that a lot of the field work is still being done by women. Most farmers that use fuel pumps, they keep them within their house, so they have to carry it. Our solar pump is a stand-alone system that is secured because there is a mounting structure, and it cannot easily be stolen. They can just switch it on and off and the water flows. There is no need to drag around a fuel pump or carry a 10-gallon jerry can.
Beyond this, what we are currently trying to do with WE4F, is to look into the possibility of including more women as our employees – as sales staff. We strongly believe a diverse culture in terms of gender, background and personalities is important to create a sustainable business. We decided to split the sales jobs into what we call a ‘Hunter’ and a ‘Closer’. We are looking to include more women into the ‘Hunter’ role because it is a job that can be done by any gender. We want to build a network of women that are our ambassadors of our brands and look for new customers in the villages that they are present within. We also plan to teach them sales skills to increase their income, which is highly commission-based.
LOOKING BACK, WHAT WAS IT LIKE BEFORE YOU WON THE AWARD AND WHAT HAS CHANGED AFTER JOINING WE4F? WHAT HAVE YOU DONE WITH THE GRANT AND TECHNICAL ASSISTANCE YOU RECEIVED?
Max: The grant really allows us to scale quicker and to be able to expand. We went from installing 50 systems to more than 100 over a six-month period. That is significant growth. We were able to hire new sales representatives and buy new stock. So that really helped us to get bit bigger footprint within Myanmar, and really get our name out there as a trusted brand. And obviously, with the technical support that we are receiving from the S/SEA RIH to go through our model and focus more on gender diversity within our company. Without the grant and technical support, we would not be able to do so.
EARLIER YOU MENTIONED COVID-19, BUT IT SEEMS THAT THE PANDEMIC DOES NOT IMPACT YOUR BUSINESS GROWTH. DOES THE PANDEMIC AFFECT ANY OTHER DIMENSIONS OF YOUR BUSINESS?
Max: We have been growing, so the question is whether we could have grown even more without the pandemic? It is not that obvious what the direct impact was, but there was definitely some indirect impact. We’ve seen a downward pressure on crop prices as a result of limited exports due to the pandemic. And so that’s where affordability becomes an issue. So, the need of financing is higher than it was before. While before we were able to sell more on a cash basis, we are now selling more on credit, together with our consumer financing partner.
HOW HAVE YOU PIVOTED TO RE-INNOVATE AND GET CREATIVE TO ADAPT TO THE COVID-19 SITUATION AND RELATED CHALLENGES?
Max: We used to sell just using cash. Then we started offering what we call the seasonal financing/ seasonal loans. We estimate when they will harvest, and we suggest to [customers] a one- to two-year payment plan. According to these harvest dates, we sign [a] consumer partnership with a consumer financing company. So, we do the first screening of the customer and suggest to them a plan. Then, the consumer financing company will accept it or reject it. Once the consumer financing company accepts it, they are responsible for collecting the money over time and we get the cash amount directly from them. So that is really a big change for us and allows us to reduce credit risk.
We also use more digital tools like a CRM (customer relationship management) app. It is an app that our sales team uses to collect data. The CRM system allows us to work in the most remote areas, as it can work offline. The sales rep just needs to sync it once in a while when internet connectivity is available. We started using the app before the pandemic but have been using it more now. If we did not have this app before, it would have been very challenging.
APART FROM AN UNEXPECTED SITUATION LIKE COVID-19, WHAT DO YOU THINK IS THE MAIN CHALLENGE FOR ENTREPRENEURS? WHY ARE COMPANIES STRUGGLING TO INNOVATE EFFECTIVELY NOWADAYS?
Max: I think the main challenges are the constantly evolving environments that you are in. Because if you’re in an early stage, in the beginning you will have a very small team and you need to do everything yourself from tax, to legal, to finance, to sales, to marketing, and also operations. You need to be an expert in almost everything. It is all about execution, and you will make mistakes. So that is why it’s difficult because, I mean, most founders don’t have any legal backgrounds and you also have limited funds to use for legal advisors and so on. Everything comes down to what you can do, and what you want to do, and how you can do it. Later, when the company grows, you have people to do that for you, and then you focus more on management and leadership.
For many entrepreneurs, some founders come from a technical background and then have no idea on how to run a profitable and sustainable business. Or the other way around – they come from a business background, but then have no idea about technical and legal implications within a certain country [and how that affects] building that business. So that is why it is ideal to have a management team with all the skills in-house.
SO WHAT IS YOUR SUGGESTION TO THEM? HOW DO WE DEVELOP AND ENCOURAGE THE CULTURE OF CREATIVITY AND INNOVATION AMONG ENTREPRENEURS?
Max: A few suggestions, that I have now seen as an entrepreneur are:
First, be willing to make mistakes. I think no entrepreneur, even the ones that have exited or sold off their company, have a smooth road to success. So, do not be afraid to make mistakes because otherwise growth will be limited. Growth is from making mistakes, learning from that, and implementing something better. We have not been successful because we had the best product from the start. Make those mistakes quickly. Try whatever makes sense and then iterate from there.
And second, you just need to talk to as many customers as you can. When I actually say talk to customers, I mean listen to them and ask questions. Then build something that is useful for them.
When I look at innovation and I want to come up with an innovative product, it needs two things. One – it needs to be valuable in the sense that customers are willing and able to pay for it. There are a lot of technologies out there that have been launched by entrepreneurs where the customer in the end is like “It’s nice, but I won’t spend my money on it”.
Two – build a business model around [the innovation]. So, product innovation is only one part of the solution. If you cannot have a clear distribution model and a clear revenue model that makes sense for the company, there is no point in doing innovation. Your company’s growth and the amount of people you can impact, will be limited. You will quickly run out of cash and, as we all know, cash is king.
Agrosolar designs, distributes and finances solar-powered irrigation pumps to provide smallholder farmers with a sustainable and affordable alternative to conventional fuel pumps. The company has a vision to alleviate energy poverty, boost income and productivity, and combat climate change in rural Southeast Asia. Agrosolar won Asia EDGE Ag-Energy Prize “Runner-Up Award, Youth Category” in 2020.
Wanweena Tangsathianraphap is a Communications and Knowledge Management Specialist for the WE4F South and Southeast Asia Regional Innovation Hub. She helps connect people together and bridge the gaps created by time, distance and culture through various communication tools. She believes in the power of knowledge sharing that it helps transform one’s ideas and shape personal view towards the world.