Once again a case for Solar Powered Air Conditioner

--------------- Read this after games which RIL plays for logical flow of thought. --------------------------

Many people participated in the research we conducted some 3 months back on FB/Twitter/Orkut and Linkedin. The survey results were astonishing and overwhelming. At the cost of being repetitive, our group would like to thank everyone for being part of this project. I have been thinking on this idea more and more that why we are not using solar powered AC. Are they really expensive? Or the marketing department in these companies is dud. Well that might be an exaggeration, but can marketing techniques be used to push this product. I believe it can. Of course, there are problems, but in the following paragraphs I would like to make you believe, that it is not all that difficult.

One important question:

 Respondents of the survey were asked the reason for not installing Solar power based product.

The top three reasons for not installing based on the survey are:
- Initial set up cost is too high.
- Most of the comments in others indicate that the product is not at all popular and they don’t know how to use it.
- They don’t know where to buy.

These findings point to one point in bold:

Value articulation of Solar based product is not up to the mark.

The message that should go out from all the companies which are involved in selling the solar based products is summarized:

Based on these major customer pain points, the problem can be summed and looked upon with the help of this 2X2 matrix.

 

With low credibility and low visibility of this product, we are at the quadrant which is “unknown”. The Strategy to come out of this should be two step:


1. Increase the credibility (most important step) and

2. Increase the visibility.

Focus on value rather than cost:

I won't go into the detail of the case for solar power in this post, but will highlight one general point that I feel is very important. This concerns the importance of focusing on value rather than cost.

There is, for example, an active debate in the UK at present about whether nuclear is cheaper than CCGT (= combined cycle gas turbine I think!) electric power. People will typically address this issue by preparing charts that show the cost of a unit of electricity produced either way. They sometimes also show a point on the chart for solar power and this tends to look pretty unfavourable (i.e. solar power is shown as being high cost). Analysis such as this may seem very logical but it misses an important fact. This is the fact that for a commercial company the objective function is to maximise value not minimise costs. Value comes from cash flow which in turn comes from sales revenue less costs. So a focus just on cost means that sales revenue impacts are missed out.

The need to focus on value is not just an issue for policy makers considering solar power. For example:

• when considering cost reduction exercises my view is that targets should be set in terms of the value benefit from a cost reduction rather than simply the headline saving in the year in question. This would pick up factors such as the sustainability of the reduction and any impact on sales.

• when considering working capital the aim should not be simply to minimise it. It should be to ensure that working capital decisions maximise value. Hence, some working capital increases may well be good.