No Dawn For 'New Dawn' The Non-Diffusion of An Innovation

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Asian Journal of Management Cases
http://ajc.sagepub.com/content/6/1/27
The online version of this article can be found at:
DOI: 10.1177/097282010800600104
2009 6: 27 Asian Journal of Management Cases
Ashish Kumar, Ravi Shankar and Kiran Kumar Momaya
No Dawn for 'New Dawn': The Non-Diffusion of an Innovation
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ASIAN JOURNAL OF MANAGEMENT CASES, 6(1), 2009: 2735
SAGE PUBLICATIONS LOS ANGELES/LONDON/NEW DELHI/SINGAPORE/WASHINGTON DC
DOI: 10.1177/097282010800600104
NO DAWN FOR NEW DAWN:
THE NON-DIFFUSION OF AN INNOVATION
Ashish Kumar
Ravi Shankar
Kiran Kumar Momaya
This case describes events in the build-up to the diffusion of an innovation before it has
reached critical mass. The innovation in question is the large-scale use of renewable
energy to power telecom sites. A manager is passionate about this innovation, and it
seems to be a sound solution to an urgent business problem. However, he struggles to get
acceptance for his ideas from key stakeholders, and his proposal rides a roller coaster.
Keywords: Diffusion of innovations, renewable energy, telecom, mobile operators,
mobile communication.
In January 2008, Uday Kumar, the Key Account Manager of Mobile Network Equipment
Manufacturing Organization (MNEMO) in NOIDA (a suburb of Delhi), arrived at the CellFone
Tower Company (CTC) ofce for a meeting with the Head of Purchase and his friend,
Pawan Sharma. Kumar had been trying to get his rst large purchase order for renewable
energy systems from CTC. Sharma had called him last night to give him the news that
CTCs Chief Executive Ofcer (CEO) had verbally approved a billion-rupee investment in
this sector. He asked him to come over and agree on the terms of the purchase order.
Kumar was so red up that he did not notice anything amiss when he called Sharma for an
appointment. However, the moment he walked into Sharmas ofce, he knew that something
was wrong. A subdued Sharma told him that after a discussion with the Chief Financial
Ofcer (CFO), the CEO had put the project on hold. Kumar digested the news in silence,
This case was written by Ashish Kumar, Dr Ravi Shankar and Dr Kiran Momaya from the Depart-
ment of Management Studies, Indian Institute of Technology, Delhi to serve as the basis for class
discussion rather than to illustrate either effective or ineffective handling of an administrative
situation.
All facts and gures in the case have been disguised. This material may not be quoted, photo-
copied or reproduced in any form without the prior written consent of the Lahore University of
Management Sciences.
at INDIAN INSTITUTE OF MGMT on July 28, 2014 ajc.sagepub.com Downloaded from
28 ASHISH KUMAR,RAVI SHANKAR AND KIRAN KUMAR MOMAYA
and then shrugged. In any case, lets have chai (tea), he said. On the surface, he maintained
his calm but considering all of his efforts in this area, he could not help but ask himself
if he should even be interested in the renewable energy sector at all?
COMPANY BACKGROUND
MNEMO was a mobile network equipment manufacturer with a long history. Originally
part of a century-old British engineering group, it had focused on telecom and IT since 1988
and had grown into a major player in the telecom market within a span of four years. It
had a global market share of 28 per cent and a 40 per cent market share in India. The
manufacturer had about 30,000 employees worldwide. In India, most of the major operators
were its customers, but it had a special relationship with CellFone ever since the latter
became its rst customer from the Indian Market in 1995.
CellFone was one of Indias largest mobile operators. An Australian operator had recently
acquired a majority stake in the company. It had both GSM and CDMA networks in different
circles, and with a pan-India presence, it was denitely a dominant player in the industry.
It had a strong brand image and a good distribution network. It had several innovative
service launches to its credit, including the use of Caller Ring Back Tones, money transfer
and voice-based SMS. Exhibit 1 shows CellFones growth trajectory in the Indian market.
MNEMO India was organized into customer units, which were almost like Strategic
Business Units with their own prot and loss statements. The company made it a point
to have excellent resources working for CellFone, especially because of the strong global
linkages between the two organizations.
MNEMO AND CELLFONE IN NORTH INDIA
In 2005, Kumar was appointed Regional Manager for MNEMOs business with CellFone in
North India. He had about 600 people reporting to him, and was responsible for sales, margins,
operations and customer relationships. Launching the network in Jammu and Kashmir had
been a nightmare for both CellFone and MNEMO. They struggled in the harsh security and
climatic environment of Kashmir but succeeded in setting up a working network which was
a runaway hit in the supply-starved region. People queued up to buy mobile phone con-
nections and MNEMOs equipment sales grew from nothing to a huge value within a year.
MNEMO was also running the network until the nal acceptance of the sites, and this
took a whole year.
After the rst ush of back slapping, the energy bills at the sites started coming in
and the business heads of CellFone began turning the screws on Kumar and his boss.
There were accusations of pilferage by MNEMO personnel, and unfortunately some of
NO DAWN FOR NEW DAWN 29
them were proven true. The relevant people were immediately sacked and it was true
that both CellFone and MNEMO personnel had collaborated on the theft, but the damage
was done. The state of electricity supply in Jammu and Kashmir was pathetic, the sites
had to run nonstop on diesel and the cost of diesel was eating into the Earnings before
Interest Depreciation and Amortization (EBITDA) margins of CellFone. This affected
the personal bonus of CellFones CEO and this showed in his aggression in complaining
about the rising diesel bills.
The way the system worked was that there were diesel-lling companies (DFC1 and
DFC2) which were paid a lump-sum amount per month to ensure that the sites kept going.
They had Petrocards which they used to draw diesel from the oil company pumps into
special vehicles. These special vehicles had a beat plan according to which they visited
the cell sites and topped up the diesel in the diesel generator (DG) tank. At the end of the
month, the DFCs would submit a bill to MNEMO for the diesel consumed, MNEMO would
certify that the bills were good and CellFone would pay off the bills directly to the DFCs.
There were some issues with the system. Firstly, as a friend who worked for CellFone
told Kumar: DFCs arent run by gentlemen anywhere in India, not even in Delhi. Secondly,
CellFone had entered the agreement without understanding the complicated supply chain
aspects and negotiated the DFC payments to a very minimum rate. The DFCs could not
make money at these rates and therefore resorted to pilferage.
As a step to counter the pressure, Kumar led a project to pay the DFCs on the basis of
the number of hours the cell sites had run on diesel generators (DGs). This input was
collected by a remote monitoring system. It had taken months of effort to rst make the
system tamperproof. This was followed by tough negotiations and eld tests to sign off
on the diesel consumption normshow much diesel was consumed by different types of
DGs for different types of loads. With these two inputs in place, MNEMO and CellFone
had been able to bring some order into the processDFCs were paid on the basis of the
number of hours of DG run and the agreed consumption norms.
RENEWABLE ENERGY SYSTEMS FOR THE TELECOM SECTOR
For Kumar, it was frustrating that in spite of being a telecom engineer with a good radio
engineering background, he ended up giving most of his time to energy issues. But
there was no doubt that these issues were extremely crucial for business. The electronic
equipment manufactured by MNEMO had a Mean Time Between Failure (MTBF) rate
1

1
Mean Time Between Failures (MTBF) is a commonly used term in the electronics industry. It indicates
how reliable a product is. MTBF of three years means that the component will fail once in three years on
average under specied working conditions.
of up to three years. The weak links in the network managed by his team were really the
power elements, especially the DGs and batteries, and the microwave transmission links.
One day, while travelling past a state government ofce, he saw a bank of solar panels
and suddenly something clicked in his mind. He realized that people like him were doing
an unusual thing, taking mobility into areas which did not even have regular water and
electricity. This called for unusual solutions.
Kumar started reading about solar and wind power and this was around the time when
global warming was being regularly highlighted in the media. There was enough material
to read. Very quickly, he found that the renewables sector was nowhere as professionally
developed as the telecom sector. There were a handful of large companies, some with a
global presence, but most of the companies in India were organizations.
Most of the work being done did not address the need of the mobile network world either.
A lot of effort was being put into plants which could generate megawatts (MW) of electricity
in one location. However, the problem for companies like MNEMO and CellFone was
that their demand was completely decentralized. CellFones total demand was about
100 MW, but it was distributed across 30,000 locations.
Kumar started going deeper into the subject of renewables, and then gradually got
more and more interested in this area. Very soon, he had taken a proposal to CellFones
Director and gotten it approved. The Director didnt see it as a key issue, and according
to Sharma, he went along to humour Kumar.
Within a few months, CellFone had invested in a solar-wind-DG hybrid at a site which
did not have any Electricity Board (EB) supply. There was a site inauguration function and
a small splash in the media. That was two years ago.
Since then, he had given a little time every week in trying to develop the case for large-scale
use of renewables on sites where there was no EB supply. But it had been a long journey.
First of all, he had to convince some skeptics within MNEMO that this was worth investing
in. There were some people at the global headquarters in London who were interested
in the Corporate Social Responsibility value of the project. However, that only irritated
Kumarhe was clear that this was actually a business proposition.
The way he looked at it, the expense on diesel for a site which ran nonstop on DG could
be around Rs 50,000 a month. Obviously, with newer mobile consumers having aver-
age revenue per user of Rs 150 per month, it was going to be difcult to go out to small
villages if the energy spent was not brought under control. The problem was that it took
upwards of two million rupees to put a solar-diesel hybrid system in place.
Kumar had to struggle to put together a loose partnership of solar and wind original
equipment manufacturers (OEMs). The suppliers had been very enthusiastic at rst,
but over a period of time their interest levels had waned as they found that the pur-
chase order (PO) was not going to materialize until the next quarter. However, Kumar
kept them motivated by promising business at a global level once they got started.
Kumar and Sharma had assessed the technology and economics of some renewable
energy sources. They wrote a joint proposal note to CellFones executive team (Exhibit 2
is an extract from that note).
There were many questions that Kumar had to address. Some of them are listed below:
From MNEMO: Why should we do this? Is it our core competence? Will CellFone
really give us a PO? Wont they go straight to the Original Equipment Manufacturers?
How much resourcing will it take? When can we expect a customer PO?
From CellFone: What will happen if the solar panels get stolen? Why should we take the
lead in this, instead of some other operator? Why dont you just ensure that the DGs
are better maintained instead of running around with these ideas? Is the govern-
ment not planning to take electricity to all the villages in India? Dont solar panels
take up too much space?
From the OEMs: should we not sell directly to CellFone? Why are you looking at
other technologies?
Though Kumar found his head spinning even now when he looked back and thought
about all these issues, he was proud that he had been able to motivate a diverse group of
people and put a credible offer on the table before CellFone. He had proposed the Project
New Dawn, under which MNEMO would put up 100 sites for CellFone. Sharma had been
a supporter of the project.
Kumar and Sharma both believed that the concept was sound. During their rst few
days together on the proposal, they put together a simple business case, which they called
Version 0 (see Exhibit 3). It was deceptively simple. In fact, the norm for diesel consump-
tion for an hour itself was something which experts debated endlessly. Kumar was lucky
to be able to rely on the norms which he had hammered out a while back. Later he wryly
recalled how many additional layers of detail had seen this business case go from Version
0 to Version 8.
One factor which had denitely helped Kumar was that the site he had championed
was up and running without a glitch. The DG on that site hardly ever ran at allit was
used for a few hours once in a while just to keep it in running condition. The rst offer
had been submitted to CellFone within six months of the launch of the site.
COMPANY PROBLEMS
After that, things started to spin out of control. First, there was a management change in
CellFone as the Australian operator bought out the promoters. It was one of the largest
deals that year. The employees had already made good money through stock options,
and being part of a global corporation felt good. Kumar personally thought that many
of them who had acquired shares, which were now worth Rs 300 each as opposed to the
earlier Rs 11, had become complacent. During the management change, decision making
came to a halt.
Then, CellFone followed the others in the industry and hived off its tower business
into a TowerCo called the CellFone Tower Company (CTC).To top it all, a new CFO from
a public sector bank joined CTC. He was very conservative. Kumar still remembers the
meeting with this CFO, who had been very straightforward and blunt. He was an experi-
enced person, very polite. He told Kumar and Sharma:
Look guys, I know you are interested in this area, but we are not an R&D organization.
We are answerable to our shareholders. If I put money into a new site, I am investing
in my core business and I get my money back in two years. If I allocate money to your
proposal, you tell me I will get the money back in four years. But I personally I dont
count the depreciation benet. Its already available under another section. I invest two
and a half million today, and save less than 500,000 per year over the next few years.
Guys, money has a time value. Its just not attractive enough for me. The payback will
take more than ve years!
Kumar used the opportunity to dig a little deeper into the projects viability and found
that while calculating the payback, he could bring in savings in other running costs and
also factor in an estimated diesel price increase. Together, they helped to counter the
issues raised by the CFO. He was able to show him through Version 8 of the business case
that the payback period was in fact 34 years, but by then opinions in both CellFone and
MNEMO had been formed, and it was difcult to change them.
Kumar found it interesting that business cases were really a matter of taking a view. Spread-
sheets had become so much a part of business culture that people formed an opinion rst,
and then either put some gures in a spreadsheet together to support their own opinions,
or poked holes in others spreadsheets to refute their opinions.
CONCLUSION
The mix of management changes and the negative feedback from the CFO had proven
too much for Project New Dawn. Kumar was patient, but only up to a point. He was being
questioned almost every week on when the project would be taken forward. He dis-
cussed it within the team and decided to put Project New Dawn on hold for a while.
MNEMO was not doing too well and this project had already consumed three million
rupees without anything to show for results. The engineers working on the project were
getting impatient. More than anything else, it was starting to be seen as a waste of time.
It was important for Kumar not to lose his hard-earned credibility. As he was about to
send an e-mail regarding this to the management team that had supported Project New
Dawn, he received Sharmas phone call.
Exhibit 1
CellFones Growth in the Indian Market
Source: Company documents.
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No Dawn For 'New Dawn' The Non-Diffusion of An Innovation

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