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CLOSING CASE Better generation: the global generation of business by Amber Guan and Klaus Meyer Energy efficiency became a hot topic worldwide as governments committed to limit greenhouse gas emissions. One stream of innovations focused on distributed power generation, that is, small- scale generation of electricity with capacities from 1-100 kilowatts, close to the energy user. Individual owners of land or buildings (factories, farmyards, private homes) could install small windmils or solar panels to serve their own needs. However, these new technologies still faced substantial obstacles: high costs of instalation, lack of knowledge what technology works where, and inconsistent (or absence) of governmental regulation. To overcome the technological barriers, Toby Hammond developed a tool called "Power Predictor', a combined wind and solar power measuring device that collects local data from the site where it is mounted. These data enable an assessment of the specific site's wind and solar generation potential, and thereby allow for forecasting the payback time for renewable energy investments, and to offer recommendations for the most cost-effective form of renewable energy equipment. With degrees in Environmental Biology and in Sustain- able Development, Hammond worked as environmental The device is called a 'Power Predictor', it is a combined wind and solar power measuring device that collects local consultant to private and public sector clients before data from the site where it is mounted.founding Better Generation (BG) to manufacture and dis- international growth and building market share were tribute his device. In 2008 he teamed up with Graham essential goals for BG. In the words of Graham Brant, Brant, a venture capitalist with 28 years experience in global business, including positions with Microsoft, such with our unique product concepts and the value as CEO of Microsoft Hong Kong. After leaving Microsoft, proposition in the market place, we could sell our he set up a small investment fund, Beyond Asia Capital, product at a much higher price than we do now. that invested in hybrid Chinese/Western start-up compa- However, by charging a relatively low price, we are nies, before focusing full-time on his role as CEO of BG. aiming to drive sales volume and grab market share. Together, Brant and Hammond could pursue the Power Therefore, the success of our business is based on Predictor idea on a global scale. building volume. This is the case not just in the UK The essence of BG's business model was to focus market, but also for the international market. What on a key bottleneck for micro-generation industry: the we really want to be is the Google of the micro- difficulties of obtaining detailed data about the viability energy generation industry.' of individual sites for micro-generation, and of obtain- Better Generation was organized as a group of ing supplier-neutral advice about the most appropriate three companies. BG Group based in Hong Kong was solution for the site. Their Power Predictor came in two the parent company and the operational hub, while BG parts: a measuring device and web-based software. UK was responsible for European marketing and prod- The device collected the data, which are uploaded and uct design. BG China was a joint venture with a young analyzed using web-based software and BG's own technology firm in Chengdu manufacturing wind sen- databases to create reports for individual customers. sor products and large wind turbine control systems. The most strategic element of this business model was This structure was designed to support a tax-efficient BG's ownership of the data uploaded by the Power trading strategy, to operationally integrate the China- Predictor's users. BG thus built a global database of based manufacturing unit and to support a cost effi- renewable energy micro-generation resource data cient global sales platform. stored in the cloud. This database of solar and wind The micro-generation industry was boosted by conditions in a wide range of local geographies was government initiatives around the world in the wake of expected to be of great value to both future custom- the Kyoto protocol. However, many incentive schemes ers and to developers of new technologies. BG used and subsidies focused on large-scale energy gen- this database to connect turbine manufacturers, dis- eration. Micro-generation still faced high initial set-up tributors, retailers, and installers and thus to reduce costs and uncertainty regarding the efficacy of available the adaptation barriers to micro-generation systems. technologies. Therefore, the perceived market poten- This business model enabled BG to explore distribu- tial was strongly associated with government incen- tion channels and to lock-in potential micro-generation tives to help consumers with the high up-front cost. system buyers. It also provided a platform for the com- Moreover, local planning permissions for wind turbines pany to enter the market for micro wind turbines in the created obstacles that varied not only between coun- future. Graham Brant explains: tries, but also across provinces and towns. 'Establishing a worldwide wind and solar resource The institutional environment for the renewable database is an ambitious plan. It involves an energy industry was therefore crucial for prioritizing enormous effort to research the worldwide wind which potential markets to enter. The market size and and solar micro-generation technologies, complete the generally supportive policies for micro-generation the list of approved micro-generation system led BG to focus on the USA. For example, the federal installers and distributors in each country, and government offered tax credits for energy generation distribute Power Predictor worldwide. The way of from wind turbines, including a special scheme for doing it is to internationalize the business as early small wind turbines for home, farm and business use. as possible. We are leaming as we are doing, once However, responsibility for the specific regulation of the the right model is established, we will just copy it to energy sector and of building policies was mainly up to other countries.' individual states in the US, which created a very frag- mented market. Other countries, such as continental The success of this business model depended on Europe, focused their energy policies on larger scale the scale and scope of the operation. The value of the power generation, and thus offered less immediate database depends on its volume and reach. Therefore, market potential for BG. In its initial entry, BG usedlocal distributors to reach markets fast, yet carefully CASE DISCUSSION QUESTIONS designed distributor agreements to be sure to retain 1 What motivates Better Generation to become the rights to its database. Other early business opportunities came from unex- international very fast? pected sources. In Haiti, a mobile telecom company 2 What are the risks of a fast internationalization was looking for the most efficient way to provide power strategy for Better Generation? for each of its mobile phone connection masts across 3 How can Better Generation build the resources the country. In South Africa, the government offered required for a fast internationalization strategy? financial incentives for villages to invest in micro-energy, 4 How should Better Generation develop its inter- but wanted a financial feasibility study before disburs national strategy in terms of countries chosen and ing any funds: the Power Predictor report became part entry modes? of these feasibility studies. In Chile, BG also linked up with the government to map the potential for wind Sources: This case was prepared by Amber Guan (MBA Graduate, energy along the Chilean Pacific coastline. University of Bathj and Klaus Moyer based on archival data and personal interviews