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Case
-
Reference no. 1-15-008
Published by:
The Legatum Center for Development and Entrepreneurship at MIT (2015)
Version:
14 July 2015
Length:
16 pages
Data source:
Field research
Abstract:
Luminous Power Technologies and its predecessor companies were founded in India by Rakesh Malhotra. The company produced and sold products that provided the general population in India with a reliable and stable power supply where grid power was often unreliable and unstable. This market did not necessarily need expensive and ultrasensitive devices that provided totally uninterrupted power; rather, it needed adequately reliable power for household devices such as fans, lights, and other electrical appliances. Here is an interesting story that shows how a widespread problem can become a great entrepreneurial opportunity; in this case, the entrepreneur ended up making in the range of $300 million when he sold his interest to France-based Schneider Electric in 2011. While he made money, his efforts also allowed millions of citizens, who had routinely faced blackouts and load shedding, to turn billions of previously wasted hours into productive time. This case highlights the importance of consumer confidence, embedded in the brand that Malhotra carefully built, nurtured, and protected. It also shows the contrast between risk-averse bureaucratic thinking and entrepreneurial risk taking; the tenacity and resolve in maintaining reputations when things have not worked; the importance of recognizing the attractiveness and the needs of the average consumer as opposed to the narrow market of businesses, albeit with greater purchasing power. It points out the importance of both seeing the need to make bold decisions and, when necessary, pursuing slow growth in order to build a sustainable and reliable foundation. This case is part of the Legatum Center for Development and Entrepreneurship at Massachusetts Institute of Technology free case collection (visit www.thecasecentre.org/legatum for more information on the collection).
Learning objectives:
1. A societal problem can become an entrepreneurial opportunity. Malhotra started by addressing a problem common in his neighbourhood, but ended up making $300 million. 2. Further, it shows how an infrastructure problem can be addressed by a private company. 3. The case shows the value of entrepreneurial risk-taking as opposed to bureaucratic calculation. As shown, the father very much cared about his son but his cautiousness, if followed, would have prevented greater progress. 4. Entrepreneurs do not always succeed at first. They fall and get up, learn from failure. Luminous learned that strong brands need high-quality products and good customer service comes at the price of losing thousands of dollars with inferior ones. 5. Luminous illustrates the power of the consumer market as opposed to corporate customers. Consumers individually have lower purchasing power; however, the consumer market is far larger overall, something that can be addressed effectively through brands.
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