Innovation ‚with‟ low-income segmentsHeiko GebauerCenter of Innovation Research in Utility Sectors (EAWAG), Zurich,Switzer...
© Gettyimages
Business research stays at a cross-roadBusiness at its cross-road Base of the Pyramid (BOP)1.2 Billion (≈ $2000 annum)1.6 ...
Traditional business growth thinking ….MarketpenetrationTime (or cumulativeinvestments)1 - Existence2 - Survival3 - Succes...
… is limited when it comes to low-incomesegmentsBOP marketpenetration1 - Existence2 - Survival3 - Success4 - Scale-up5 - M...
Why are market creation and business modelinnovation important to the water & wastewatersector?BOP marketpenetration1 - Ex...
What drives business model innovation?– A capability perspective or resource-based viewSource: Fischer, Gebauer&Fleisch (2...
Empirical examplesBOP marketpenetration1 - Existence2 - Survival3 - Success4 - Scale-up5 - MaturityBOP marketcreationBusin...
The re-invent the toilet challenge illustratesthe business model innovationBOP marketpenetrationExistenceSurvivalSuccessBO...
diversion toilets can be retrofitted intoexisting structures.
Empirical examplesBOP marketpenetration1 - Existence2 - Survival3 - Success4 - Scale-up5 - MaturityBOP marketcreationBusin...
OSHO goes from a charity-based to project-based and, finally, to a profit-based businessmodelNo recovery ofinvested capita...
Non-for-profitorganizationSocialbusinessProfit-maximizingbusinessesN/AOSHO goes from a charity-based to project-based and,...
Empirical examplesBOP marketpenetration1 - Existence2 - Survival3 - Success4 - Scale-up5 - MaturityBOP marketcreationBusin...
05001000150020002500300035004000Business model innovation at sarvajal– affordable, accessible, and pure waterInstalled wat...
05001000150020002500300035004000Installed watersystems2008 2010 2014 20162012...Holistic extension of the business modelSa...
Empirical examplesBOP marketpenetration1 - Existence2 - Survival3 - Success4 - Scale-up5 - MaturityBOP marketcreationBusin...
Septage sludge management can be scaled-up through different business modelinnovationHoneysucker businesses in BangaloreSu...
Empirical examplesBOP marketpenetration1 - Existence2 - Survival3 - Success4 - Scale-up5 - MaturityBOP marketcreationBusin...
Re-considering corporate social responsibilityenable MNEs to be more innovativeCorporate social responsibility(CSR)• CSR I...
Innovation „with‟ the low-income segmentfacilitates a giant leap for all clean-techbusinessesSource: Hart and Christensen ...
“Thats one (small) step for a man, onegiant leap for mankind” Business model innovations enable growth inwater and wastew...
Innovation in-developing-countries
Innovation in-developing-countries
Innovation in-developing-countries
Innovation in-developing-countries
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Innovation in-developing-countries

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This presentation shows how innovations and capability development in low-income countries could work. The presentation shows example of business ventures trying to success with business model innovation.

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Innovation in-developing-countries

  1. 1. Innovation ‚with‟ low-income segmentsHeiko GebauerCenter of Innovation Research in Utility Sectors (EAWAG), Zurich,SwitzerlandLiverpool, 13-09-2012
  2. 2. © Gettyimages
  3. 3. Business research stays at a cross-roadBusiness at its cross-road Base of the Pyramid (BOP)1.2 Billion (≈ $2000 annum)1.6 Billion (≈ $ 725annum)1.2 Billion (≈ $ 365 annum)< $2,0004,000ExchangemarketBOP (low-income)market$2,000-$20,000 2,000> $20,000 500IndustrializedmarketsEmerging‘mass’ marketsPPP1 Population1 – PPP – Purchasing power paritySource Rangan, 2009:
  4. 4. Traditional business growth thinking ….MarketpenetrationTime (or cumulativeinvestments)1 - Existence2 - Survival3 - Success4 - Scale-up5 - Maturity
  5. 5. … is limited when it comes to low-incomesegmentsBOP marketpenetration1 - Existence2 - Survival3 - Success4 - Scale-up5 - MaturityBOP marketcreationBusiness modelinnovationCreating needswhere markets existCreating marketswhere needs existTime (or cumulative investments)
  6. 6. Why are market creation and business modelinnovation important to the water & wastewatersector?BOP marketpenetration1 - Existence2 - Survival3 - Success4 - Scale-up5 - MaturityBOPmarketcreationInnovatingBusiness modelMobile phonesMobile paymentMicro-creditsTime (or cumulativeinvestments)
  7. 7. What drives business model innovation?– A capability perspective or resource-based viewSource: Fischer, Gebauer&Fleisch (2012), based on Grant (1996), Teeceet al. (1997), Teece, (2007) Stefano et al.(2010)MarketpenetrationBusiness model(t2)Business model(t1)InvestmentsIndividualskillsSensing SeizingReconfiguringRoutinesInvestmentsIndividualskillsSensing SeizingReconfiguringRoutinesDynamic capabilitiesOperational capabilitiesFunctional capabilitiesActivities & tasksIndividual skillsFunctional capabilitiesActivities & tasksIndividual skillsDynamic capabilitiesOperational capabilities
  8. 8. Empirical examplesBOP marketpenetration1 - Existence2 - Survival3 - Success4 - Scale-up5 - MaturityBOP marketcreationBusiness modelinnovationCreating needswhere marketsexistCreating marketswhere needs existTime (or cumulativeinvestments)Re-invent thetoiletchallengeOSHO – Bonechar filters forfluorideremovalSarvajal HoneysuckerbusinessesUnilever
  9. 9. The re-invent the toilet challenge illustratesthe business model innovationBOP marketpenetrationExistenceSurvivalSuccessBOP marketcreationRent-a-toiletEnd-product salesScaling-upMicro-franchisingTime (or cumulative investments)
  10. 10. diversion toilets can be retrofitted intoexisting structures.
  11. 11. Empirical examplesBOP marketpenetration1 - Existence2 - Survival3 - Success4 - Scale-up5 - MaturityBOP marketcreationBusiness modelinnovationCreating needswhere marketsexistCreating marketswhere needs existTime (or cumulativeinvestments)Re-invent thetoiletchallengeOSHO – Bonechar filters forfluorideremovalSarvajal HoneysuckerbusinessesUnilever
  12. 12. OSHO goes from a charity-based to project-based and, finally, to a profit-based businessmodelNo recovery ofinvested capitalRepayment of investedcapital (self-sustainability)Financial profit maximizationSocial profit maximizationNon-for-profitorganizationSocialbusinessProfit-maximizingbusinessesN/ASource: Yunus et al. (2010)
  13. 13. Non-for-profitorganizationSocialbusinessProfit-maximizingbusinessesN/AOSHO goes from a charity-based to project-based and, finally, to a business-basedbusiness modelNo recovery ofinvested capitalRepayment of investedcapital (self-sustainability)Financial profit maximizationSocial profit maximizationB1-4CABusiness models (B1-4)Flexibility between project-base, high-volume productionbusiness model and so onBusiness model C)Extending thebusiness modelscopeSource: Workshop HEKS and OSHO 20-22-08-2012
  14. 14. Empirical examplesBOP marketpenetration1 - Existence2 - Survival3 - Success4 - Scale-up5 - MaturityBOP marketcreationBusiness modelinnovationCreating needswhere marketsexistCreating marketswhere needs existTime (or cumulativeinvestments)Re-invent thetoiletchallengeOSHO – Bonechar filters forfluorideremovalSarvajal HoneysuckerbusinessesUnilever
  15. 15. 05001000150020002500300035004000Business model innovation at sarvajal– affordable, accessible, and pure waterInstalled watersystems2008 2010 2014 20162012...Source: Sarvajal (2012)
  16. 16. 05001000150020002500300035004000Installed watersystems2008 2010 2014 20162012...Holistic extension of the business modelSarvajal(Franchisor)(5000 $ /2600$)Micro-entrepreneurs(Franchisees)500 $ (40% ofrevenue)Communities(Villages –3’000)0.12 $ for 20liters1 : n 1 : mOperational capabilities: maintaining andmonitoring the systemsDynamic capabilitiesIndividual skills – bright brains to repetitive gainsRoutines – Franchisee strategy tool / approachto balance own / borrowed capitalBankMicro-creditinstituteSource: own interpretation and interviews. Based on Macomber and Sinha (2012)Business model innovation at sarvajal– affordable, accessible, and pure water
  17. 17. Empirical examplesBOP marketpenetration1 - Existence2 - Survival3 - Success4 - Scale-up5 - MaturityBOP marketcreationBusiness modelinnovationCreating needswhere marketsexistCreating marketswhere needs existTime (or cumulativeinvestments)Re-invent thetoiletchallengeOSHO – Bonechar filters forfluorideremovalSarvajal HoneysuckerbusinessesUnilever
  18. 18. Septage sludge management can be scaled-up through different business modelinnovationHoneysucker businesses in BangaloreSuccess throughinnovationExistence & survivalScale-upmicro-networkreplicationPenetrationSeptagesludgeemptyingTimeExistence & survival• Micro-honeysuckers startto emerge after setting-uppit latrinesSuccess• Innovating the vacuumtruck, pumps, compositefield, use of fertilizers, &special applicationsScale-up• Extending the number ofmirco-honeysuckerbusinesses, instead ofgrowing the individualbusinesses
  19. 19. Empirical examplesBOP marketpenetration1 - Existence2 - Survival3 - Success4 - Scale-up5 - MaturityBOP marketcreationBusiness modelinnovationCreating needswhere marketsexistCreating marketswhere needs existTime (or cumulativeinvestments)Re-invent thetoiletchallengeOSHO – Bonechar filters forfluorideremovalSarvajal HoneysuckerbusinessesUnilever
  20. 20. Re-considering corporate social responsibilityenable MNEs to be more innovativeCorporate social responsibility(CSR)• CSR Integration – Integration withthe core business• CSR innovation – Expansion of thecore business• Grameen Veolia - surface-watertreatment systems• Procter&Gamble – PUR• Hindustan Unilever - PureitWater PurifierReverse Innovation• Previous transnational strategiesturn towards innovation in emergingmarkets and bringing theseinnovations back to theindustrialized markets• Reverse innovation could disruptexisting technology paths. But itfaces similar hurdles as disruptiveinnovationSource: Halme and Laurila (2009) Source: Govindarajan and Rmamurti (2009), Immelt,Govindaraja and Trimble (2009)
  21. 21. Innovation „with‟ the low-income segmentfacilitates a giant leap for all clean-techbusinessesSource: Hart and Christensen (2003)PerformanceTimeLow marketHigh marketSustaining technologyDisruptive technologyBOPMarket
  22. 22. “Thats one (small) step for a man, onegiant leap for mankind” Business model innovations enable growth inwater and wastewater businesses Recognizing and understanding the need gaps Holistic view of business models support localfirms to overcome production and transactionconstraints Multinational firms reconsider their CSRapproaches and supplement the transnationalinnovation strategy to reverse innovationstrategy

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