As the end of the fossil fuel ramps up, the battle for who will own the supply chain infrastructure of the net-zero energy age is gaining steam across the West and China. In this energy shift, we believe the West and China should bore all the huge costs of this transition. But then we contend with urgent local climate change issues also. If we are to make significant progress, we will need the costs of the energy transition to be distributed fairly. Yet African businesses must provide leadership into this net-zero age.

Because of the gradual shift in investment capital to green ventures, we should expect that citizens will take a chunk of the rise in energy costs; that’s because it is expected that fossil fuels will become more expensive in the years ahead. With lots of African nations living in energy poverty, it is even going to be tougher to drive in the message of clean energy. But we believe that energy-related behavioral change can help make an impact on energy transition strategy, which can only be possible with African businesses driving a consistent heightened energy awareness targeting Africans with well-aligned incentives.

Getting the African private sector to support this transition will demand a harmonized renewables sector. A sector fragmented and also having to contest against oil and gas projects with juicy yield remain challenging. To kick start this process, African private firms will have to join public sector investment. African government will have to work with its development partners to source long-term capital, while its private sector will fill in the balances, with a strong proposition of public good.

It is expected that this energy transition would cost Africa billions of dollars over the next decade yet African governments are faced with the paucity of funds and competitive modernization projects. A graduated, measured transition will help us navigate the net-zero age. African governments would have to work with development partners and private firms to share the cost. The increasing pace of the global energy transition means that each African nation would have to develop its national recovery plan to attract investments required for the transition. The bulk may be covered by private companies.

Fueling the transition

We expect that investment in the oil and gas sector will slow down, becoming very expensive. But we can forge new partnerships to develop storage and logistics projects toward hydrogen, ammonia, and renewable fuels. For countries like Nigeria that are looking for solutions to navigate volatile oil and gas revenue, they could join the Transhydrogen Alliance. This was set up for the production and import of green hydrogen and green ammonia into Europe. A strategic decarbonization effort, providing storage assets for the next generation of low carbon fuels. Africa should participate in this alliance or develop its alliance with key partners so we can all work together to meet the ambitious, and essential, Paris carbon reduction targets.

It is time for African firms to invest in the energy transition. We believe such investments should focus on local companies driving or benefiting from the emerging net zero-age pulling us from fossil fuels. The categories should include distributed energy, electrification, mobility, and resource efficiency.

Disruption is coming to a business near you

We anticipate that 500 multi-billion-dollar energy companies globally are going to be disrupted in this energy transition. Those companies operate in every area of our economy. We view the energy transition as a far-reaching shift in fuel sources (from fossil fuels to renewable, carbon-free sources) and fundamental changes in how energy is generated, distributed, and consumed

This means shifting from a centralized, highly regulated set of technologies and markets with passive consumers to much more distributed, intelligent, and networked technologies and markets, and more active consumers. African businesses must take advantage of this opportunity to invest across these multiple themes- electrification, distributed energy, mobility, and resource efficiency. COVID19 has taught us the essence of resilience. We need to support the evolution of ecosystem technologies and products which are necessary to drive the massive shift underway from gasoline-powered transportation to electric transportation.

Many new business cases will require financing for low carbon energy solutions and transition finance to assist in making the shift. The focus should be on transitioning the whole value chain, rather than just the scope of the business. This will lead to significant climate impact and better returns. We can only do more if we measure our climate actions by participating in industry metrics, disclosures, ratings, carbon budgeting, and carbon pricing. We will need to build digital platforms where this can happen.

There are climate action financing opportunities for those who demonstrate the right combination of financial and climate returns in the context of a planned transition. Inaction also means missing out on the commercial opportunities from innovative propositions and business models, as offered by this energy transition.

In all, For African businesses to make significant progress on this energy transition, we will have to marry business and technologies as the transition depends on them. Each driving the other and sustaining the other. But R&D will be the lubricant while African businesses must innovate their business models as R&D provides cost-competitive technologies. African businesses must invest to decarbonize with a mindset of transition rather than cleansing, engineering out emissions in all scopes, or even building an oasis of green. We have to acquire the leadership know-how, align our corporate and community incentives and promote an internal experimental culture to excel in this energy transition.

When do you begin the Growth phase in your company? When you can retain customers and that demonstrates that you have a product-market-fit. If you ramp up growth when you cannot retain customers, you will burn money, and achieve nothing.

More so, retaining customers means that your next cohort of customers MUST have better experiences than the previous, demonstrating that you are closing the gap between the frictions in the markets and the solutions you have for them.

That gap must keep getting smaller as your product continues to mature. In further mathematics in secondary school, they call it an asymptote (closing the gap as the limit tends to infinity).

Do not scale a product that does not have a market fit yet. You will waste your resources. Have patience, get a market fit and then ramp-up.

I used to be super-academic here with bluntness and perspectives anchored on data, telling companies how I see it. But I have stopped those posts as they made many lose confidence in themselves. I recalled asking a company which raised more than $100m to sell itself. That ecommerce firm was using money to attain growth when the product had not attained any fit in the market.

In Tekedia Mini-MBA, many asked us to give them options to prepay for 5 years; Emmanuel S Akintunde first asked, and now we have dozens. Immediately, we knew that we had obtained the optimal state that members could pay for an online school 5 years ahead. With that validation, we began the growth phase.

El Salvador, the first and only country that has taken the weird decision to adopt bitcoin as a legal tender, has found a succor to the energy challenge that comes with bitcoin mining.

On Friday, President Nayib Bukele tweeted that El Salvador is delving into volcano-powered bitcoin mining. The move, which is expected to erase the concern about the effect of bitcoin mining on the country’s electricity supply, is the first major step Bukele is taking to calm critical nerves.

His decision to make El Salvador a bitcoin country has been widely criticized, including by the International Monetary Fund (IMF) and World Bank.

The flashy 25-second teaser video the president tweeted on Tuesday, includes shots of a government-branded shipping container full of bitcoin mining rigs, technicians installing and plugging in ASIC miners, as well as sweeping landscape aerials of an energy factory in the thick of a forest, bordering a volcano.

In June, Bukele said that he had instructed state-owned geothermal electric company, LaGeo SA de CV to “put up a plan to offer facilities for #Bitcoin mining with very cheap, 100% clean, 100% renewable, 0 emissions energy from our volcanos.” The video, which has since gone viral with more than 2.3 million views, is captioned simply with “First steps…” and is believed to be a sign that the president is moving to fulfill the promise he made three months ago.

“We’re still testing and installing, but this is officially the first bitcoin mining from the #volcanode,” Bukele tweeted, explaining that the project still has a lot of work.

Bukele explained that Salvadorians are embracing the bitcoin idea with rapid increase. He said that 2.7 million people are already using Chivo, a virtual wallet created to enable fee-free bitcoin transactions.

Other bitcoin miners were quick to support the volcano-powered bitcoin mining. SMSTR founder and CEO, Michael Saylor said the “mining upgrades thermal energy into digital energy that can be exported anywhere in the world and stored without power loss.”

As bitcoin lovers race to contain the concerns hanging around the carbon footprint of bitcoin mining, Volcano-powered energy has been widely touted.

“It’s just geothermal energy,” said bitcoin miner Alejandro de la Torre, who recently made the move from China to Texas. “Iceland has been doing it since the very, very beginning of bitcoin mining.”

Bukele’s delve into volcano-generated energy is the latest boost to the push to use cleaner energy alternatives to ameliorate bitcoin’s carbon footprint. It also sets El Salvador on the path of a new energy-based economic boom, given that the Central American country is home to volcanoes. Geothermal energy accounts for nearly a fourth of its domestic energy production, according to official data.

?A fully renewable, untapped energy resource has been put to work strictly because of bitcoin,” said bitcoin mining engineer Brandon Arvanaghi. “Bitcoin is the greatest accelerant to renewable energy development in history.”

El Salvador has mined 0.00599179 bitcoin, or about $269, with power harnessed from the volcano, amidst growing support by Salvadorians.

In June, El Salvador became the first nation to approve bitcoin as a legal tender, and has been working to contain the changes the decision will bring. Bukele said in June that the country is working on a new law that would grant permanent residency to any individual who invests three BTC into El Salvador’s economy. He added that the government will act as a backstop for entities that aren’t willing to take on the risk of a volatile cryptocurrency, since businesses are mandated to accept it.

The government has been increasing the volume of bitcoin on its balance sheet, buying the dip whenever bitcoin takes a dive. However, the future outcome of the decision remains uncertain, and will make or mar Bukele’s political career.

Companies are established to fix market frictions, not to unveil new technologies. The most catalytic innovations happen at business models, not necessarily at the tech stack. Innovators, spend time evaluating your business model and do not think tech can unlock opportunities which your business models cannot capture.

The biggest innovation in Tesla is the pricing model and that is the reason Wall Street gives it multiples than other car companies. Yes, even if you take all the cars in Tesla and give them to Toyota, without the SaaS-like business model, nothing will change in Toyota.

IBM got about 9,130 patents in 2020 while Apple received 2,791. IBM is worth $128 billion but Apple hits $2.36 trillion. IBM runs an industrial age business which does not benefit from the compounding acceleration of returns which digital aggregation has unleashed in our world, via a near zero marginal cost. Apple, Facebook, Amazon, Google, Microsoft, Alibaba, Tencent, etc are united by one thing: DNA of aggregation in some key products.

So, if you do not have the right model, technology will not change the outcome. The solution is not more tech, but a better business model.

More so I am not sure your economics textbook has been updated with Aggregation Construct and that is why you may need to update.

Comment on LinkedIn Feed

Comment #1: Value creation, delivery and capturing, the trio holds everything on business model.
Now it’s not enough to be making money, but rather how you make it, the latter is what places premium on what you do.

Comment #2: Good thought-provoking piece there. I am in agreement with all that has been said so far except for paragraph 3. IBM ACTUALLY runs an industrial age business that DOES BENEFIT from the compounding acceleration of returns that digital aggregation has unleashed in our world. The issue is more of consumerism (the preoccupation of society with the acquisition of consumer goods). Every year, Apple releases the same product with minute feature change at higher prices, status based class-driven lifestyle product, like a commodity. IBM products have a smaller market audience and an expectation of at minimum 4 to 10 years lifespan before a refresh by the customer can occur. We can’t compare both companies at all, they do not serve the same target market or audience. One is end-user computing, while the other is infrastructure computing. However, the piece is totally thought-provoking and a good read.

My response: IBM makes hardware like Tesla but Tesla runs a better business model. Tesla is the 6th most valued company in America. Do not think the problem with IBM is its market. The challenge is that its business model is bad. Sure, the new guy is updating it. Apple was trapped in the iPhone until it stopped reporting its numbers and upgraded its playbook, unlocking massive opportunities.

Comment #3: Ndubuisi Ekekwe ; correct me if I’m wrong Sir, I’ve noticed that you are more impressed by companies whose business model make bigger guarateed returns than companies whose value creation might not be big on financial returns. Which is a capitalist mindset I’ll say. I think it is time to start seeing business operations from the point of greater societal impact with moderate returns. Apple’s playbook is annoying I’ll say, it runs purely on rich folks insatiable hunger for items of ostentation. I have more respect for Tesla I’ll say!!!!

My Response: :Sir, I’ve noticed that you are more impressed by companies whose business model make bigger guarateed returns than companies whose value creation might not be big on financial returns.” – Tesla makes 500k cars in a year and is valued about $750 billion while Toyota makes 10.5 million and is worth less than $300 billion. Toyota brings a revenue of $275 billion while Tesla is about $31B. Toyota made a profit of $20B while Tesla $721 million.

So, your statement is not correct because across most indicators Toyota generated more $$ but I still liked Tesla. Where Tesla did better is valuation, not because of financials on $$ on business model. Any car sold by Tesla today can be earning revenue till it stops being on the road. Toyota, that is not possible. That makes Tesla a software company!

The Aggregation Construct