Business model innovation in the water and sanitation … · Sarvajal (Franchisor) (5000 $ / 2600$)...
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Transcript of Business model innovation in the water and sanitation … · Sarvajal (Franchisor) (5000 $ / 2600$)...
08.06.14
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endeva
Business model innovation in the water and sanitation sector
Heiko Gebauer
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endevaCharacteristics of business models in the water and sanitation sector
• Water is a human right
• Conflicting goals between non-profit and for-profit organizations
• Middle income segments also lack water and sanitation services
• Low-experience goods
• (No) poverty penalty
• Mostly decentralized systems
• System perspective Usage Transport Treatment Reuse
Characteristics Water & sanitation chain
Access Treatment Distribution
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Source: Yunus et al. 2010
All organizations need business model innovation
Non-profit organization
Social business
Profit-maximizing businesses N/A
No recovery of invested
capital
Repayment of invested capital
Financial profit maximization
Social profit maximization
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Business model canvases for profit-oriented businesses
Non-profit organization
Social business
Profit-maximizing businesses
N/A
Key partners
Key Activities
Key Resources
Value Proposition
Customer Relationship
Customer Segments
Distribution & Marketing
Revenues Costs
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Non-profit organizations operate two differently oriented business models
Non-profit organization
Social business
Profit-maximizing businesses
N/A
Key Non-program partners
Key Non-program Activities
Key Non-Program
Resources
Donor-focused Value
proposition
Donor Relationship
Donor Segments
Distribution & Marketing
Revenue Streams
(Donations)
Non-program Costs
Donor model canvas Key
partners Key
Activities
Key Resources
Mission offering (Benefit
proposition)
Beneficiary Relationship
Beneficiaries Segments
Distribution & Marketing
Impact metrics
Costs
Beneficiary model canvas
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endevaGoing from pilot to scale?
Penetrating markets
Creating markets where needs exist
Business model innovation
Time
Pilot
Scaling-up
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endevaPilot phase for business models
Value capture (How do you finance the pilot?) - Social goals >> Economic goals Customer identification (What customers do we target?) - Many, lowest to low-income and well-known
Value creation (How do you deliver value to the customers (beneficiaries)? - Network-based & orchestration Customer engagement (How do you engage with the customers?) - Passive, homogenous, and standardized
Source: Water for people
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endevaExperiment with different business model options!
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endevaIs it reasonable to sell/rent to existing businesses?
Gulper Maker
Existing emptying
businesses
Households
Technical skills
Business skills
Wastewater treatment
plant
- Sell - Rent
- Manufacturing costs - Sales costs
- More households - More revenue
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Technical skills
Business skills
New emptying
businesses - Rent - Capacity building
(technical & business skills)
- Emptying fees (ê)
Gulper Maker
Existing emptying business
Households
Wastewater treatment
plant
- Manufacturing costs - Sales costs (é)
How would you start new emptying businesses?
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Technical skills
Business skills
New emptying
businesses - Emptying fees (ê)
Gulper Maker
Existing emptying business
Households
Wastewater treatment
plant
- Manufacturing costs
Support organization
- Rent - Capacity building
(technical & business skills)
Water for people develops new emptying businesses …
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Technical skills
Business skills
New emptying business
- Emptying fees (ê)
Gulper Maker
Existing emptying business
Households
Wastewater treatment
plant
- Manufacturing costs (ê)
Support organization
- Rent (ê) (give it away for free
- Capacity building (technical & business skills)
Donor
- Technical advice
Water for people relies on a funding model …
- Funding
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endevaExperiments lead to a pilot business model
Donor-driven business model
Profit-oriented business model
Profit-oriented business model
MC (+ Margin): $150
Two latrines per day: Income: $120 (200l for $10) Expenses = $4 (dumping) + $40 (truck) + $16 (fuel) +$32 (wages) = $92 Profit = $120 – $92 = $28 Payback period = $150 + $120 (barrels)] / $28 = 10 work days
Source: Water for people
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endevaScaling-up needs continuous business model innovations
Business model innovation
Scaling-up
Value capture - How do you finance the scale-up? Customer identification - What customers do you target? Value creation - How do you deliver value to the
customers (beneficiaries)? Customer engagement - How do you engage with the
customers?
Scaling-up
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New emptying businesses
Gulper Maker
Existing emptying business
Households
Wastewater treatment
plant
Support organization
Donor
Shared transportation
Optimizing value creation through shared transportation …
- Truck financing - Intermediate
storage - Capacity building
(technical & business skills)
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endevaPilot phase concentrates on the lowest-income segment, ….
Manu-facturer
Distribution & marketing
Customers
NPOs
Door-to-door
Retailers
Micro-Finance Institute
Door-to-door
Retailers
Commu-nities
2/3
1/3
3‘500 per month $20 MC
$12.5
For free or highly subsidized <<$12.5
1-5 $ / person (daily income) Market penetration 3.5%
MC – Manufacturing costs NPO – Non-profit organization
Source: Various PATH reports
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endeva… but scaling-up needs more valuable customer segments
Manu-facturer
Distribution & Marketing
Customers
NPOs
Door-to-door
Retailers
Micro-Finance Institute
Door-to-door
Retailers
Commu-nities
$17 MC
$22
≈$5 / person (daily income) Customer referrals
MC – Manufacturing costs
When offered together with a finance solution Super Tunsai outsells Tunsai by 7:1
Source: Various PATH reports
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endevaChanges in customer identifications …
Sanergy Sanitation Franchisee
Users
Pay-per-use
Investment Franchising fee
Marketing, branding
Manufacturing
Transportation
…
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0
500
1000
1500
2000
2500
3000
3500
4000
Externalize the operation and water sales
Installed water systems
2008 2010 2014 2016 2012
...
Sarvajal (Franchisor)
(5000 $ / 2600$)
Micro- entrepreneurs (Franchisees) 500 $ (40% of
revenue)
Communities (Villages –
3’000) 0.12 $ for 20
liters 1 : n 1 : m
- Maintaining and monitoring the systems - Bright brains to repetitive gains - Franchisee strategy tool / approach to balance own /
borrowed capital
Bank Micro-credit institute
Source: own interpretation and interviews. Based on Macomber and Sinha (2012)
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endevaIs it possible to change from non-profit to profit?
Scale-up phase
$-
$500
$1'000
$1'500
$2'000
0
50
100
150
200
250
Aug
-09
Sep
-09
Oct
-09
Nov
-09
Dec
-09
Jan-
10
Feb-
10
Mar
-10
Public toilets Communal toilets
Household toilets Contracted toilets
Revenues (Toilet fee) Revenues (Compost)
Total revenue
Initial: SOIL as a non-profit relies on a fully donor-driven & beneficiary business model Ongoing: Partly donor and customer driven business model
Business model
Non-profit organization
Social business
Profit-maximizing businesses
N/A
0
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endevaWhat additional sales and administrative costs would you have to cover?
Direct manufacturing costs Sales and administrative costs
...
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endevaIT can reduce costs dramatically
… to the Russian space pencil ...
From a Nasa Astronat pen …
… reaching the smart phones, tablets, and
apps
Picture: Thanks to x-runner
Source: Nextdrop.org
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endevaLessons learned in the scaling-up
Scaling-up Phase
Value capture - How do you finance the scale-up? Customer identification - What customers do you target? Value creation - How do you deliver value to the
customers (beneficiaries)? Customer engagement - How do you engage with the
customers?
Lessons Learned
Diversify – Multiple income streams - economic = social Costs & revenues - IT, payments, micro-credits Extend customer segments - new markets, middle income,
aspirational Externalize marketing & internalize manufacturing - Franchising, NPOs, customer referrals Actively manage your customers - Customize, share of wallet, IT
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endevaAgenda – Afternoon
Time Content 13:30 Group Work:
Developing solutions for the business model challenges 14:30 Group presentation:
Key findings from group work 15:15 Coffee Break 15:45 Presentation:
Business ecosystems for creating social and economic value 16:15 Group discussion:
Business ecosystems for water and sanitation services 16:45 Individual Reflection & Feedback 17:15 Summary 17:30 Apéro