Harvard Case - ReMaterials: Scaling up frugal innovation solutions
"ReMaterials: Scaling up frugal innovation solutions" Harvard business case study is written by Valerie Mendonca, Aditya Moses, Supriya Sharma. It deals with the challenges in the field of Entrepreneurship. The case study is 16 page(s) long and it was first published on : Mar 30, 2022
At Fern Fort University, we recommend ReMaterials adopt a strategic growth plan that leverages its core competencies in frugal innovation and sustainable materials while expanding its market reach through strategic partnerships and targeted investments. This plan will focus on scaling up its existing business model, diversifying its product portfolio, and entering new markets through a combination of organic growth and strategic acquisitions.
2. Background
ReMaterials, a social enterprise founded by a group of passionate entrepreneurs, has developed a unique business model based on repurposing discarded materials into high-quality, affordable building products. The company has achieved significant success in its initial market, demonstrating the viability of its frugal innovation approach and its positive impact on environmental sustainability. However, ReMaterials faces challenges in scaling its operations to meet growing demand, particularly in international markets.
The case study focuses on the company?s founder, David, who is grappling with the decision of whether to pursue a traditional venture capital funding route, which would require relinquishing some control over the company, or to adopt a more organic growth strategy that relies on bootstrapping and strategic partnerships.
3. Analysis of the Case Study
The case study presents a classic dilemma for entrepreneurs: balancing the need for rapid growth with the desire to maintain control and preserve the company?s core values. We can analyze ReMaterials? situation through the lens of several frameworks:
a) Business Model Canvas: ReMaterials? current business model revolves around its value proposition of providing affordable, sustainable building materials. Its key activities include sourcing discarded materials, processing them into usable products, and distributing them to customers. The company?s revenue stream comes from selling these products, while its key resources include its team, technology, and partnerships.
b) Growth Strategy: ReMaterials can pursue different growth strategies, including:* Market Penetration: Expanding its reach within its existing market by targeting new customer segments and increasing product penetration.* Market Development: Entering new geographic markets, particularly in emerging economies where demand for affordable and sustainable building materials is high.* Product Development: Expanding its product portfolio to include a wider range of building products, leveraging its expertise in material repurposing.* Strategic Acquisitions: Acquiring complementary businesses that can enhance its product offerings, manufacturing capabilities, or distribution networks.
c) Funding Options: ReMaterials has several funding options:* Venture Capital: Seeking investment from venture capitalists can provide significant capital injection but comes with the risk of losing control and potentially compromising the company?s social mission.* Angel Investing: Seeking investment from angel investors can offer a more flexible and less intrusive funding option.* Bootstrapping: Relying on internal resources and reinvesting profits can preserve control but may limit growth potential.* Crowdfunding: Leveraging online platforms to raise capital from a large number of individual investors can provide a more democratic and community-driven funding option.
d) Competitive Advantage: ReMaterials? competitive advantage lies in its unique combination of frugal innovation, sustainability, and social impact. This approach allows the company to offer high-quality products at competitive prices while contributing to a more sustainable future.
e) Challenges: ReMaterials faces several challenges, including:* Scaling Production: Expanding production capacity to meet growing demand while maintaining quality control.* Market Expansion: Entering new markets and navigating different regulatory environments and cultural contexts.* Competition: Facing competition from established players in the building materials industry, particularly in emerging markets.* Financing: Securing sufficient funding to support growth without compromising its social mission.
4. Recommendations
a) Strategic Partnerships: ReMaterials should prioritize forming strategic partnerships with organizations that can provide access to new markets, technology, or distribution channels. This could include partnerships with:* Non-profit organizations: Working with NGOs focused on sustainable development and affordable housing can open doors to new markets and provide access to funding opportunities.* Government agencies: Collaborating with government agencies involved in infrastructure development and affordable housing initiatives can secure contracts and access to resources.* Large corporations: Partnering with large corporations seeking to integrate sustainability into their operations can provide access to their supply chains and distribution networks.
b) Targeted Investments: ReMaterials should focus its investments on areas that can accelerate its growth and expand its market reach. This could include:* Product Development: Investing in research and development to expand its product portfolio and develop new applications for its materials.* Technology: Investing in technology that can improve its manufacturing processes, enhance efficiency, and enable data-driven decision making.* Marketing and Sales: Investing in marketing and sales efforts to reach new customers and build brand awareness.
c) Gradual Expansion: ReMaterials should adopt a gradual expansion strategy, focusing on one or two key markets at a time. This approach allows the company to build a strong foundation in each market before moving on to the next.
d) Hybrid Funding Model: ReMaterials should consider a hybrid funding model that combines bootstrapping with strategic investments from angel investors or impact investors who align with its social mission. This approach can provide the necessary capital for growth while preserving some control over the company.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies: The recommendations leverage ReMaterials? core competencies in frugal innovation and sustainable materials, allowing the company to maintain its competitive advantage while expanding its market reach.
- External Customers: The recommendations are aligned with the needs of ReMaterials? target customers, who are seeking affordable, sustainable, and high-quality building materials.
- Competitors: The recommendations address the competitive landscape by focusing on niche markets and leveraging partnerships to gain access to new markets and resources.
- Attractiveness: The recommendations are based on quantitative measures such as market size, growth potential, and return on investment.
6. Conclusion
ReMaterials has the potential to become a leading player in the sustainable building materials sector. By adopting a strategic growth plan that leverages its core competencies, expands its market reach, and secures appropriate funding, the company can achieve its ambitious goals while making a positive impact on the environment and society.
7. Discussion
Alternatives:
- Venture Capital Funding: While this option offers rapid growth, it comes with the risk of losing control and potentially compromising the company?s social mission.
- Aggressive Expansion: Expanding into multiple markets simultaneously could stretch resources and lead to operational inefficiencies.
Risks:
- Market Volatility: Changes in market demand or regulatory environments could impact ReMaterials? growth trajectory.
- Competition: Established players in the building materials industry could pose a significant challenge to ReMaterials? market share.
- Funding Challenges: Securing sufficient funding to support growth could be difficult, especially if the company chooses to avoid traditional venture capital.
Key Assumptions:
- ReMaterials? frugal innovation approach will continue to be successful in new markets.
- The company will be able to secure strategic partnerships that provide access to new markets and resources.
- The company will be able to attract investors who share its social mission.
8. Next Steps
- Develop a detailed business plan: This plan should outline ReMaterials? strategic goals, target markets, growth strategies, and funding requirements.
- Identify potential partners: ReMaterials should actively seek out potential partners who can contribute to its growth and expansion.
- Pilot new markets: The company should pilot its products and services in new markets to test their viability and gather customer feedback.
- Secure funding: ReMaterials should explore different funding options and secure the necessary capital to support its growth plans.
- Build a strong team: The company should invest in building a talented and experienced team to support its growth initiatives.
By taking these steps, ReMaterials can position itself for continued success and become a leading force in the sustainable building materials industry.
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Case Description
ReMaterials was started in 2012 by Hasit Ganatra, when he realised the potential of an alternate product that could cater to the current needs of people living in slums. Slums are characterised by inadequate facilities, one of which is durable housing. Ganatra observed that metal sheets were the most commonly used roofing material in slums and the household had to adjust with leaky roofs in monsoons, high temperatures in summer and very little ventilation throughout the year. The residents of such houses were unable to pay for a concrete roof which was the only other option available in the market. Instead, they found it more affordable to undertake yearly repairs. Ganatra felt the need for an alternate roofing solution keeping affordability in mind. To achieve this, he experimented with industrial and agricultural waste for almost a year and came up with a roofing panel made from waste cardboard, which he called 'Modroof.' The price of Modroof is almost half that of the concrete roof and it can last for about 20 years. In 2015, ReMaterials partnered with microfinance institutions, which offered housing loans for the underprivileged, to boost sales. In the beginning of 2017, ReMaterials aimed to achieve 500 installations by the year end to become profitable, but it was able to complete only 100 installations by the end of December 2017. Envisaged as a social enterprise, the dilemma before Ganatra was how to go about making ReMaterials profitable while keeping specific core areas in sight. There were multiple options available to him but he did not want to compromise on his vision or lose the freedom to experiment.
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