Academic journal article Entrepreneurship: Theory and Practice

Radha Jalan and ElectroChem, Inc.: Energy for a Clean Planet

Academic journal article Entrepreneurship: Theory and Practice

Radha Jalan and ElectroChem, Inc.: Energy for a Clean Planet

Article excerpt

ElectroChem, Inc. was a global supplier of fuel cell technology for government and commercial applications. When the founder unexpectedly died in 1992, the firm had not yet achieved profitability and was burdened with a high level of debt. Without any formal technical training or business experience, his wife, Radha Jalan, became president. Her primary challenges included increasing ElectroChem's market share and reputation, technology development, generating sufficient revenues and cash flows, and securing external sources of capital. This case illustrates some of the challenges faced by a woman entrepreneur as well as issues associated with growth in an emerging market for energy source alternatives.

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In January 2002, Radha Jalan sat in her office in Woburn, Massachusetts, reflecting on the latest news about global oil prices. She shivered slightly as she looked up from her newspaper to gaze out the window at snow-filled streets and ice-covered trees and utility lines. That winter the northeastern United States was hit hard with record-breaking snowfalls. After shortages of oil and natural gas through the fall, energy prices escalated further with crude oil approaching $30 per barrel. Moreover, the Organization of Petroleum Exporting Countries (OPEC) announced its plans to reduce petroleum production. Normally taciturn Yankees complained out loud about high oil prices at church suppers and high school basketball games. Across the country, California was nearly in a state of emergency as its power grid proved to be woefully inadequate for energy demand, and sporadic blackouts created economic losses in the billions.

Since taking over the helm of ElectroChem, Inc. in 1992 after her husband's abrupt and tragic death, Radha felt that the prospects for fuel cell development and commercial use had become increasingly bright. Indeed, news headlines about escalating energy costs provided opportunities for producers of alternative energy sources such as fuel cells, photovoltaic, solar, and wind. In spite of that, however, the last 10 years had not been easy. Although ElectroChem had revenues of $400,000 in 1991, the company had not yet achieved profitability. Radha's leadership after the death of her husband led to a turnaround that positioned ElectroChem as a small, but important player in fuel cell research and manufacturing--one that generated a profit for four consecutive years from 1996 to 1999 and achieved over $2 million in revenues by the year 2001.

Nevertheless, both 2000 and 2001 proved to be difficult years, resulting in losses once again. Cash flow continued to be a problem and Radha struggled to find sources of capital that would allow her to fund ongoing operations as well as further growth. What would the first decade of the twenty-first century bring as fuel cell technology becomes more widely understood and, hopefully, more commercially viable? If the past was any indication of the future, ElectroChem might remain a survivor--the question for Radha at this point was "how?"

The Fuel Cell Industry

In 1839, a Welsh physicist named Sir William Grove (later considered the "Father of the Fuel Cell") developed fuel cell technology while experimenting with electrolysis (the process by which water is divided into hydrogen and oxygen by an electric current.) The term "fuel cell" was adopted by Ludwig Mond and Charles Langer, who tried to build the first prototype in 1889. However, it was not until 1959 that British scientist Francis Thomas Bacon and his colleagues produced a 5-kW system that powered a welding machine. Shortly thereafter, Harry Karl Shrig of Allis-Chalmers Manufacturing demonstrated a 20-horsepower fuel cell-powered tractor. (1) The U.S. National Aeronautics and Space Administration (NASA) became interested and provided research grants to develop a compact generator for space flights. Since then fuel cell technology has been used as a reliable source of electric power and water for Apollo and other space shuttle missions. …

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