Business model innovation for sanitation services


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This presentation shows some preliminary results of our re-invent the toilet challenge. For further information, please contact Heiko Gebauer (

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Business model innovation for sanitation services

  1. 1. Business model innovation Market-based approaches for sanitation services Ullrike Messmer& Heiko Gebauer Sandec& Environmental Social Sciences EAWAG Zurich, 12-09-2013
  2. 2. Diversion concept
  3. 3. „The poor“ “Victims and supplicants for aid” towards being “value conscious consumers and resilient entrepreneurs”
  4. 4. Key objectives 1) Understanding the role of business model innovation for sanitation services 2) Presentation of the business model of Eoos/Eawag and Xrunner 3) Current status of business model work among grantees 4) Discussion and further steps
  5. 5. Business model thinking providing business knowledge Business models as the top of the iceberg of business knowledge KA Business models CR VP KP CS DM KR C R Leadership Business knowledge Business strategy Process management … Pricing Supply chain management Organizational change Marketing KP – Key Partner, KA – Key Activities, KR – Key resources, VP – Value proposition, CR - customer relationship, DM – distribution & marketing, CS – customers, C – Cost structure, R - Revenues
  6. 6. Key factors for doing business with the poor • Affordability, accessibility, acceptance, and awareness (Anderson and Markides, 2007) • Pay-per-use, no frills service, paraskilling, distribution networks, contract production & deep procurement (Karamchandani, Kubzansky, and Frandano, 2009) • Adapting products and processes, investing in removing constraints, leveraging poor people’s strengths, combining capabilities and resources with other organizations, engaging in policy dialogue with governments (UNDP, 2010)
  7. 7. Examples of supply chain management at Waste concern in Bangladesh Urban poor Waste production Waste concern Waste separation & collection Compost plant MapAgro& waste concern baraka agro products Demand creation Marketing & distribution Enriching compost Non-profit approach Rural farmers Compost application Profit approach Supply chain contract Visualizing supply chain management activities Disaggregation of supply chain activities into material, information, and financial flows Contractual arrangements between supplier and buyers Incentives for each supply chain actor and consistency among the incentives
  8. 8. Example of pricing and financialflows at Sarvajal Installed water systems ... Micro-credit institute Bank 4000 3500 3000 2500 Sarvajal (Franchisor) (5000 $ / 2600$) Microentrepreneurs (Franchisees) 1:n 1:m 500 $ (40% of revenue) Communities (Villages – 3’000) 0.12 $ for 20 liters 2000 1500 1000 500 0 2008 2010 2012 Source: own interpretation and interviews. Based on Macomber and Sinha (2012) 2014 2016
  9. 9. Business model innovations drive market creation Creating needs where markets exist Creating markets where needs exist Traditional (narrow) perspective concentrating on product and service innovations Grameen‘s phone ladies illustrate the power of business model innovations More open (holistic) perspective driving business model innovations Developing a cheap and affordable phone, distributing it to low-income people, and charging appropriate air time prices (pre-paid) Providing a micro-credit to village person for buying a phone Training village phone operators in entrepreneurship Renting out phone minutes (payas-you-use) to village people + Pre-paid services Village Phone Operator Villagers
  10. 10. There are four reasons why business model thinking is beneficial 1. Business model is a holistic concept, which integrates socialand profit-oriented motives into consistent, overarching strategic goals 2. Business model can create revenue structures that match the volatile cash-flows in the low-income segment 3. Business models can make markets more inclusive for the poor by clearly depicting different value creation options 4. Business model thinking considers organizations not as isolated actors, but rather as integrated into business eco-systems, in which actors integrate resources to create value
  11. 11. Combing traditional growth thinking and business model innovations Market penetration Creating needs where markets exist KA CR VP KP KR C CS DM 4 - Scale-up R 3 - Success Market creation Creating markets where needs exist 5 - Maturity Business model innovation 2 - Survival 1 - Existence Time
  12. 12. Different degrees of scope in the pro-poor solutions can be scaled-up Market penetration (Scale reached by pro-poor solutions) Incremental BM BM customization BM replication FIRST ENERGY Scaling-up cooking stoves Radical BM BM diversification BM customization BM replication DESIPOWER Energy solutions for villages Low High Scope (Complexity and heterogeneity of needs addressed by pro-poor solutions) BM – Business model
  13. 13. Strategy canvases for business model visualization Key partners • Who are our key partners? • Who are our key suppliers? • Which key resources are we acquiring from our partners? • Which key activities do suppliers and partners perform? Key activities • What key activities do our value proposition require? Value proposition • What value do we deliver to the customer? • Which one of our customer problems are we helping to solve? • What bundles of products and services are we offering to each customer segment? • Which customer needs are we satisfying? Key resources What key resources Key resources • What key resources doare required? our value proposition require? Cost structure • What are the most important costs for our business model? • Which key resources are most expensive? • Which key activities are most expensive? Customer Customers relationships • For whom are we • What relationship creating value? does each customer segment expect us to establish? Marketing • How do we reach our customer segments (awareness, evaluation, purchasing, and using) Revenue streams • For what value are customers really willing to pay? • For what do customers currently pay for? • How are they currently paying? • How would they prefer to pay? Source: Johnson et al. (2007)
  14. 14. Customer experience cycle for exploring customer needs Customer experience cycle Utility layers Productivity Awareness Referral Acquisition Simplicity Convenience Risks Retention Satisfaction Fun & image Conversion Environmental friendliness
  15. 15. X-Runner‘s customer segmentation
  16. 16. Short summary Business model thinking providing business knowledge Various key factors (e.g., affordability, accessibility, acceptance, and awareness) need to be considered in doing business with the „poor“ Business model innovations drive market creation Scale and scope needs to be considered for pro-poor solutions Combining traditional growth thinking and business model innovations leads to incremental and radical business model innovations, business model customization, diversification, and replication Business practices offer a broad range of tools to support business approaches for the poor
  17. 17. Key objectives 1) Understanding the role of business model innovation for sanitation services 2) Presentation of the business model of Eoos/Eawag and Xrunner 3) Current status of business model work among grantees 4) Discussion and further steps
  18. 18. How did we get to the existing business model? 1. Imagining actor relationships 2. Describing business model elements for actor relationships 3. Create morphological boxes with different options Factor Specifications (Options) Intended buyers Landlords Tenants “Rent a Toilet (Service)” Responsibility of maintenance (not cleaning) Only users User and service person Only service persons Removal & conveyance of fecal containers Individuals (users) Individuals & service Frequency 4. Selectionofconsistentcombinationofoptions Twice a week Depends on maintenance activity Only service Once a week
  19. 19. What is our existing business model? Key partners • Local toilet manufacturer • Ultrafiltration membrane manufacturer • Treatment equipment provider • Local contractors • Local community • Mobile phone operator Key activities • Renting • Installing • Using • Maintaining • Collecting • Treatment • Selling end-products Value proposition • Access to a clean and comfortable toilet • Reliable and safe emptying of the toilet and collection of separated feces and urine • Affordable weekly fixed service fee (including toilet rent, emptying toilet, transportation costs, and maintaining the toilet) • Retrofit Key resources What key resources Key resources • Logistic skills are required? • Operational skills (RRP) • Management skills Cost structure • Investment costs for toilets and RRPs • Operational costs for toilets, RRPs, and logistics Customer relationships • Twice a week visits by the collector • Mobile payment of the service fees Customers • Families with five persons including landlords and tenants • Wholesalers for endproducts Marketing • Community events Revenue streams • Service fee • Sales of end-products
  20. 20. What is our existing business model? Demand creation Toilet part production Toilet assembly Installation Toilet Operation Collection/ Transport Treatment Technology Production Treatment Technology Installation Payment Operations Resource Recovery End-product Sales & Distribution
  21. 21. How do we see the growth of the business model? (1)
  22. 22. How do we build the business plan?
  23. 23. What are key issues in the business model we are currently working on? • Reduce break-even time • Exploring more on the end-product market • Reconsidering the logistic approach for the collection • Working on different options for each step in the sanitation value chain
  24. 24. Cost, revenue & profit calculation
  25. 25. Resources Hystra (2009), Access to energyforthebase of the Pyramid. Research Report. Hystra (2011), Access to safewaterforthebase of thepyramid. Research Report. Karamchandani A., M. Kubzansky and P. Frandano (2009). Emerging Markets, Emerging Models: Market-based Solutions to theChallenges of Global Poverty. Cambridge, MA, Monitor 2009. Karnani A. (2007), “The mirage of marketing to the bottom of the pyramid: How the private sector can help alleviate poverty”, California Management Review, 49 (4), 90-111. London, T. and Hart, S.L (2010), Next Generation Business Strategies for the Base of the Pyramid: New Approaches for Building Mutual Value. Upper Saddle River, NJ: Financial Times Press.