BUSINESS MODEL INSIGHTS FOR COMMUNITY AND PUBLIC … · 2019-02-14 · BUSINESS MODEL INSIGHTS FOR...

The Sanitation Technology Platform

This report is a good faith effort by RTI International to accurately represent information available via secondary and primary sources at

the time of the information capture. The report is confidential and proprietary and only for internal uses and not for publication or

public disclosure. Cover photo from Unsplash.

BUSINESS MODEL INSIGHTS FOR COMMUNITY AND PUBLIC TOILETS IN INDIA Innovating for enhanced accountability, service provision, and financial sustainability

February 2019

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Contents

About the Partners:

The Bill and Melinda Gates Foundation (BMGF) supports the development of transformative non-sewered sanitation technologies through the Reinvent the Toilet Challenge (RTTC) and

broad Water and Sanitation Sector support.

The Sanitation Technology Platform (STeP) serves as a platform to de-risk and accelerate novel sanitation technologies to market. STeP provides a full range of

services including field testing, market intelligence and user insights for technology development and commercial partners.

4 Background

14 Exploring Market-Based Sanitation Solutions for Community andPublic Toilets (CPTs) in India

30 Learning from the Sector: Creative CPT Business Models in Action

44 Learning from Others: Adjacent-Sector Business Models

59 Inspiring Further Business Model Innovation: Key Takeaways

71 Acknowledgements

73 Appendix

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3

Abbreviations

BM Business Model

BMGF Bill and Melinda Gates Foundation

BOP Base of the Pyramid

CPT Community and Public Toilet

SBM Swachh Bharat Mission

STeP Sanitation Technology Platform

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44

Background

55

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Background The Government of India increasingly relies on and facilitates market-based sanitation solutions. The government exhibits growing recognition that the financial and human resources required to manage and upgrade the country’s vast sanitation infrastructure outstrips available public resources: private sector represents a valuable partner in this effort (Colin, 2007). Moreover, awareness is growing of the economic power residing at the Base of the Pyramid (BOP) where market-based sanitation solutions often focus (Groeber et al., 2012).

The case of Community and Public Toilets (CPTs) illustrates how the government actively engages private-sector entities, nongovernmental institutions, and community-based organizations to build, operate, and maintain shared toilet infrastructure. However, despite increased government investment and private- and civil-sector engagement, ample room for improvement in CPT quality and service delivery still exists. The full potential of CPTs often remains unfulfilled due to ongoing management and service delivery challenges. Evidence points to several chief constraints: lack of accountability between users and service providers, planning for long-term service provision, and financial sustainability (Groeber et all, 2012).

The lack of financial sustainability of many CPTs – and their challenges in providing a high-quality user experience over time – calls into question the prevailing business models underlying CPT investment (Gebauer & Saul, 2014). Sparse evidence of sustainable CPT business models limits the sector’s knowledge of how business model innovation could transform the future of CPTs in India. Multiple organizations — five of which are featured in this report — are actively innovating their business models to address these three persistent challenges. These organizational examples offer important lessons and inspiration for the sanitation sector in India and other contexts that rely heavily on shared sanitation infrastructure.

Additionally, these challenges are not unique to the sanitation sector, as other development sectors – such as water, renewable energy, and agriculture – face similar challenges targeting users and creating new markets at the BOP. As with CPTs, some organizations are creatively overcoming challenges by using integrated business model innovation, which can provide further lessons and inspiration for sanitation-sector actors.

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What’s new about CPTs?

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In 2015, STeP published a report on the Communityand Public Toilet (CPT) Market Landscape in India,which focused on a central question: What is thecurrent state of play for CPT construction andmanagement in India?

Building on this background, this new STeP reportgoes beyond “what is” to explore “what might be”realized in the future for CPT performance in India.

Specifically, it takes an aspirational look at forward-leaning CPT and adjacent-sector organizationsinnovating their business models to create greateraccountability with users, long-term serviceprovision, and financial sustainability in BOP marketsegments.

This new effort aims to inform and inspire variousactors to take steps to bring about a new future forCPTs in India.

Although the CPT cases here derive from India, theseexamples and insights are poised for broaderapplication.

Tips for Navigating this Report If you are…

A subject-matter expert

New to the topic of CPTs in India

Consider reading the report sequentially. This will behelp you understand the CPT landscape (page 14)and will provide helpful context for the issuesdiscussed in the case studies that follow.

Consider going straight to the CPT case studies (page30) to see what’s new and relevant to you. Then go tothe adjacent-sector case studies (page 44) to learnabout examples from the water, renewable energy,and agriculture sectors.

http://stepsforsanitation.org/resources/market-intelligence-business-models/public-community-toilets-an-indian-market-landscape/

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This report focuses on the outputs of business model

innovation, rather than on the process to get there

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Separating the content (the “What”) from the process (the “How”) is fundamental for innovation and design professionals. Why? Because it allows for fully unpacking and building on ideas before evaluating them.

Consequently, this report presents the “what”: What business model innovations have organizations pursued to address key challenges of accountability, long-term service provision, and financial sustainability and promote market-based solutions at the BOP? It focuses on the outputs of the featured organizations’ business model innovation processes to understand these insights to overcome persistent market barriers and illustrate the business model innovations generated to overcome them.

The questions surrounding “how” — How did these organizations come to these business model innovations? How did they overcome failed business model experiments in the past? How do they embed learning and adaptation along their journey? — will be examined later. Although these are critical questions that merit exploration, t is important first to delve into the “what” of business model innovation, as presented in the featured case studies.

“What” versus “How”

Photo from BMGF

Research Process

60+Sources reviewed, including

primary interviews

9 Case studies featured

3 Adjacent sectors

highlighted

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▪ STeP combined primary and secondary research to understand the role of CPTs in the Indian sanitation system and identify relevant BOP business model concepts.

▪ STeP engaged subject-matter experts on CPTs in India and BOP business models to inform broader insights delivered through this effort.

▪ Based on the initial research findings, STeP identified CPT and adjacent-sector case studies poised to offer unique perspectives on the business model innovations to increase accountability, long-term service provision, and financial sustainability. The criteria for CPT and adjacent-sector case study selection can be found on pages 75 and 76, respectively.

▪ STeP distilled high-level insights to inform further CPT business model experimentation.

8 Photo from Unsplash

These key takeaways aim to inform the CPT landscape broadly

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▪ Against a backdrop of increased investment by the Government of India via the Swachh Bharat Mission (SBM), public and private sector actors recognize that a robust network of CPTs represents a vital feature of a well-managed sanitation system; even still, ample room for improvement in CPT quality and service delivery exists.

▪ If and when CPTs fail to achieve optimal results, evidence points to three reinforcing causes (Cardone et al., 2018):

• absence of accountability between service providers and users;

• insufficient planning for long-term service provision; and

• lack of financial sustainability.

▪ These challenges are not unique to the CPT case nor the Indian sanitation landscape more broadly. Organizations pursuing market-based solutions at the BOP in adjacent development sectors—such as renewable energy, water, and agriculture—face similar barriers to long-term impact and sustainability.

▪ Case studies of business model innovation within India’s CPT landscape and within adjacent development sectors highlight waysthat organizations are actively experimenting to overcome these three persistent challenges. At-a-glance guides mapping challenges, business model innovations, and the organizations pursuing them are provided on pages 11‒13.

▪ Shared elements cutting across the case studies demonstrate “best practices” for pursuing market-based solutions at the BOP. This initial list (starting on page 60) merits further elaboration and refinement based on others’ experiences.

▪ To date, limited knowledge of how business model innovation might transform BOP sanitation markets hampers efforts to pursue and scale market-based sanitation solutions. More focused study and additional resources to support experimentation and learning are needed to develop a robust body of knowledge on which to build.

▪ These case studies demonstrate that momentum is already building and a better future is on the horizon for CPTs in India and the broader sanitation sector. Achieving this transformation will require larger-scale, more coordinated, and more sophisticated support for organizations pursuing market-based sanitation solutions.

▪ Continued efforts to create inclusive business ecosystems will help innovative business models (and the organizations behind them) achieve greater impact than they would achieve in isolation of broader ecosystem transformation.

These key takeaways aim to inform organizations pursuing market-based sanitation solutions at the BOP

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▪ Business models and the innovations they encompass are context and organization specific. Consequently, key takeaways from this report will depend on an organization’s specific needs, value proposition, capacities, culture, and market context. This material needs to be filtered and synthesized to answer the what this means for a specific organization and how can this information be applied.

▪ The business model “innovations” featured here are not new per se, but rather may be new to the organizations featured and their market contexts. Being innovative means having a mindset for experimentation, an appetite for risk and failure, and a desire for continual improvement and outsized impact.

▪ No single business model innovation can unlock all market opportunities at the BOP. These case studies highlight the importance of integrated innovation, which emphasizes the interaction between multiple, reinforcing business model innovations to produce transformative impact.

▪ The true innovation here is how organizations are bringing together various approaches to tackle systemic challenges in complex environments. As the complexity of the market environment and the systemic nature of the challenges being addressed increase, so does the value of integrated innovation strategies.

▪ Common elements shared across case studies highlight key lessons for pursuing market-based solutions at the BOP, include the following:• Providing pre-revenue investment to understand customers’ values and local market contexts;• Creating hybrid business models that leverage subsidy to extend impact;• Diversifying revenue streams to target different customer segments and/or offerings;• Integrating digital technologies as a core business strategy, not just a “nice to have”;• Establishing an ongoing commitment to experimentation and improved performance over time;• Having a dedicated leadership team that invests deeply and empowers ownership among others; and• Establishing a clearly defined role in the value chain, augmented by smart leveraging of partners.

This at-a-glance guide illustrates business model innovations

featured in the CPT case studies

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Absence of accountability between service providers and users

Insufficient planning for long-term service provision

Lack of financial sustainability

• Implementing a multifaceted needs/market assessment when entering new communities (Gramalaya, page 40)• Using a networked community partnership model to engage self-help groups, local WASH committees, etc. (Gramalaya)• Developing aspirational toilet design, customized to users’ diverse needs (CAYA Constructs, page 34; Eram Scientific, page 36)• Having full-time community engagement teams on staff (CAYA Constructs)• Using a 24/7 customer service hotline for quick response to maintenance needs (GARV, page 38; 3S Saraplast, page 42)• Engaging users on issues beyond sanitation, such as educating on hygiene and health (Gramalaya)

• Employing “Cleanliness Soldiers” to raise the profile and reduce the stigma of sanitation workers (CAYA Constructs)• Planning for correct demand by including informal populations not represented in 2011 Census (Caya Constructs)• Designing a fully automated toilet system that cleans itself and reduces reliance on human workers (Eram Scientific, GARV) • Using remote monitoring of CPT cleanliness with on-demand response teams (Eram Scientific, GARV)• Having long-term operations managed by local entrepreneurs and/or community-based organizations (Gramalaya)• Using fully integrated value chain operations that span toilet manufacturing, installation, management, and waste collection,

treatment and disposal (3S Saraplast)• Designing toilets with simple maintenance requirements that can be performed by onsite managers (3S Saraplast, Gramalaya)

To reduce Capital Expenditure (CAPEX): • Using a modular design that can be easily broken down and moved (CAYA Constructs, Eram Scientific)• Achieving economies of scale at production facilities (CAYA Constructs, Eram Scientific)• Designing durable, low-maintenance toilets that hold up well over time (GARV, 3S Saraplast)• Retrofitting old infrastructure, such as buses and old toilets, to house CPTs (GARV; 3S Saraplast)

To reduce Operational Expenditure (OPEX): • Integrating the Internet-of-Things and sensor technologies to reduce reliance on human labor (Eram Scientific; GARV)

To diversify/ boost revenue: • Providing microfinance support to users (Gramalaya; CAYA Constructs is considering on the horizon)• Using advertisements as an additional revenue stream (GARV; Eram Scientific is considering on the horizon)• Testing franchise models as an additional revenue stream (GARV)• Utilizing the sale of maintenance plans (Eram Scientific)• Exporting toilets with higher margins to other regions, such as the Middle East, to offset lower margin sales in other market

segments, such as slum communities) (Eram Scientific)• Offering other WASH services – such as showers, and laundering facilities – alongside CPTs (GARV, 3S Saraplast)

Achieve financial sustainability

Plan for long-term service provision

Improve accountability

between service providers and users

Keep in mind: These business model innovations are not necessarily new per se, although some are. However, they may be new to the organizations and context of application. The value of these innovations comes from their integration because they are more powerful operating in concert than in isolation, as the case studies reveal.

Business Model Innovations Being Pursued by Organizations Featured in CPT Case StudiesRoot Cause of

CPT Failure

Innovation Opportunity


featured in the adjacent-sector case studies

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• Implementing a multifaceted needs/market assessment when entering new communities (Safe Water Network, page 50; WaterHealth International, page 52; Hello Tractor, page 56)

• Using ongoing, robust demand-generation activities (Safe Water Network, WaterHealth International)• Establishing criteria that define a go/no-go decision point when evaluating new communities (Safe Water Network) • Codifying support between sponsor, local government, and local operator (Safe Water Network)• Engaging the local community to identify and select local operators (Safe Water Network)• Implementing long-term arrangements – 20 to 25 years – with local communities and operators (Safe Water Network;

WaterHealth International) • Establishing a Water Board to ensure smooth transfer of local operation (Safe Water Network)• Providing public demonstrations of the water purification process in action (Safe Water Network)• Using ongoing water testing to ensure quality of output (WaterHealth International)• Providing exceptional customer service via robust network of sales agents and multilingual call centers (Fenix International,

page 54)• Providing incentive structures for sales agents that prioritize customer satisfaction and understanding of repayment

commitments (Fenix International)• Developing cobranding with trusted brands – such as MTN Mobile – to boost community awareness and trust (Fenix

International) • Testing of value proposition with non-early adopters to understand what they need and want to get to ‘”yes” (Fenix

International) • Customizing the mobile platform to meet various users’ data and information needs, allowing direct communication

between relevant actors (Hello Tractor)• Investing in blockchain to increase transparency in transactions and introduce advanced analytics (Hello Tractor)

• Implementing long-term operations managed by local entrepreneurs and/or community-based organizations (Safe Water Network, WaterHealth International)

• Using remote monitoring of facility operations with on-call technical support teams (Safe Water Network)• Using automatic set aside of sales revenue to address maintenance and service needs (Safe Water Network)• Specifying full-cycle maintenance and service costs, with a clear understanding of what can and cannot be covered by

ongoing sales revenues (Safe Water Network) • Applying sector engagement to enhance standardization to enable more effective reporting of impact (Safe Water Network)• Using/experimenting with water waste and discharge reduction to improve environmental impact (WaterHealth

International)• Using information derived from mobile application to allow asset owners to better plan maintenance and asset downtime

(Hello Tractor)

Keep in mind: These business model innovations are not necessarily new per se, although some are. However, they may be new to the organizations and context of application. The value of these innovations comes in their integration because they are more powerful operating in concert than in isolation, as the case studies reveal.


Business Model Innovations Being Pursued by Organizations Featured in CPT Case Studies


Root Cause of CPT Failure



Improve accountability between service

providers and users


featured in the adjacent-sector case studies (continued)

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To reduce Capital Expenditure (CAPEX): • Using standardized, centrally managed construction of water stations prior to handing off operations locally (Safe Water Network,

page 50; WaterHealth International, page 52) • Aggregating demand for use of underutilized assets compared with paying for new asset purchase (Hello Tractor, page 56)• Partnering with sector actors to make more assets available to increase availability and drive down costs (Hello Tractor)

To reduce Operational Expenditure (OPEX): • Integrating digital technologies – such as the Internet-of-Things and sensor technologies – to reduce reliance on human labor (Safe

Water Network; WaterHealth International; Fenix International, page 54; Hello Tractor)• Using/experimenting with solar power to run facilities instead of grid power (Safe Water Network)• Using/experimenting with automated vending machines (Safe Water Network)• Using/experimenting with prepaid smart cards to replace cash payments (WaterHealth International)• Using a mobile/digital payment platform to reduce/remove cash transactions (Fenix International, Hello Tractor)• Using plug-and-play systems that allow self-installation by users (Fenix International)• Using booking agents to aggregate demand based on location and subsequently concentrating operations (Hello Tractor)

To diversify/boost revenue: • Using hybrid business models to combine different sources of capital (government and donor grants for CAPEX, sales revenue for

OPEX) (Safe Water Network, WaterHealth International, HelloTractor)• Using/experimenting with new forms of capital to cover CAPEX , such as blended finance (Safe Water Network, Water Health

International)• Ensuring right sizing of price specific to target customers and market context, balancing affordability for BOP segments and cost

recovery (Safe Water Network, WaterHealth International)• Ensuring product diversification that emphasizes what is desirable and aspirational for different customer segments, such as “Dr

Water” branding) (WaterHealth International)• Diversifying sales and marketing strategies – such as centralized as compared with decentralized; and to different customers – to

cover the full scope of needs/opportunities (Fenix International, Hello Tractor)• Ensuring right sizing of payment via multiple lease-to-own options that map to customer ability to pay (Fenix International)• Using a system lock-down option once payment period expires (Fenix International)• Ensuring full ownership status (no system lockouts) once lease-to-own period is completed (Fenix International)• Using/experimenting with new product bundles – such as ReadyHome 2020 – with various power and lighting upgrades available

(Fenix International) • Creating financial credit scores for customers via a mobile payment platform that can be used to unlock new opportunities, such as

additional products available via the same platform (Fenix International)• Using/experimenting with new financial services and products – such as education and crop loans – to leverage credit score (Fenix

International)• Developing revenue sharing between asset owners, booking agents, and platform operators (Hello Tractor)

Keep in mind: These business model innovations are not necessarily new per se, although some are. However, they may be new to the organizations and context of application. The value of these innovations comes in their integration because they are more powerful operating in concert than in isolation, as the case studies reveal.




CPT FailureInnovation

Opportunity

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Exploring Market-Based Sanitation Solutions for Community and Public Toilets in India

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Market-based sanitation solutions are gaining traction globally, showing a growing potential for impact

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▪ Globally, evidence is building that “sanitation can be a viable business opportunity and has the potential to provide multiple benefits to the poor” (Groeber et al., 2012).

▪ Such approaches offer positive upsides by

• addressing the challenges of financial sustainability that have plagued subsidy-driven infrastructure investments in the past (Groeber et al., 2012);

• empowering community and individual ownership over sanitation choices, and help change people’s awareness from ”getting something for ‘free’ to receiving something ‘valuable’” (Gebauer& Saul, 2014);

• strengthening the role of the local private sector in achieving development objectives; and

• serving as a means for revenue and employment generation in local communities (Groeber et al., 2014).

▪ Tapping the economic BOP – the 4 billion people globally that live at or below the poverty line – proves central to these approaches because

• BOP markets include not only the poorest of the poor, but also individuals with increasing economic mobility and engagement in formal markets (Groeber et al., 2014); and

• translating BOP consumers’ unmet needs into market demand is a key requirement for scaling market-based sanitation solutions (Gebauer et al., 2017).

Photo from Unsplash

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Yet, organizations operating in Base of the Pyramid sanitation markets face hard realities

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Organizations targeting BOP sanitation markets are not penetrating existing markets; rather, they are creating new markets. This type of complex undertaking involves experimentation, and it is an inherently high-risk, long-term investment that requires a lot of internal and external support (Gebauer et al., 2017).

These organizations face pressures on both sides of the profit equation – challenging revenue and cost structures persist. They often face inconsistent revenues because of variable usage rates and high costs due to large upfront capital investments and dispersed distribution channels (Gebauer et al., 2017).

BOP consumers are a very diverse, dynamic subset of the broader population. Not only do these individuals have widely distinct and culturally specific behaviors, norms, perspectives and values, they also exhibit differing levels of purchasing power and engagement in the formal economy (Gebauer et al., 2017)

Delivering Value In-Context:

Addressing Dual Pressures on the

Profit Equation: Creating New Markets:

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Sector actors point to the need for sustainable business models that address these and other market barriers

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▪ Business models represent the “holistic logic” of an organization, bringing together various components and activities into a cohesive framework (Teece, 2010).

▪ Business model innovation involves making “fundamental changes in one or multiple components of the business model” (Lecocq & Demil, 2010).

• This may involve creating a new model or reconfiguring an existing model.

▪ Importantly, “business models and business model innovations can allow new products, services and technologies to be converted into business opportunities” (Gebauer et al., 2017).

Who is our customer/user?

What does our customer/user value?

How can we deliver value at an appropriate cost?

For what value is our customer/user willing to pay?

What problem are we helping our customer/user solve?

How do we sustain and grow our impact over the long term?

Source: Osterwaler & Yves, 2010

Business models answer essential questions, including but not limited to:

Business model defined:

How an organization creates and delivers value while remaining financially viable

(Magretta, 2002)

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Lack of evidence for how business model innovation can

transform Base of the Pyramid sanitation markets slows progress

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• Generally, there is a “lack of awareness into how business model innovations can overcome barriers in the BOP market”(Gebauer et al., 2017).

• This report seeks to reduce the evidence gap by delving into business model innovation specific to one use case: CPTs in India (as detailed in the following sections).

“The challenge is still to identify effective, scalable, and sustainable sanitation solutions with economic potential and to allocate investment capital and funding to implement these solutions on a large scale.”

— Groeber et al., 2012

Why focus on CPTs in India as a use case?

India’s network of CPTs represents one of the most visible parts of the country’s sanitation system. Yet, persistent challenges mean CPTs consistently fall short of users’ expectations and consequently their expected impact.

However, the challenges CPTs face are solvable, and numerous organizations engaged in business model innovation are demonstrating what is possible. Lessons from their experiences merit a closer look.

About Community and Public Toilets in India

“[The] availability of a clean and hygienic toilet even when the person is away from his residence is a basic right of the citizens. Keeping in mind India’s growing urbanization, vast geographical area, prevailing systems and practices, this aim becomes a humongous task for Urban Local Bodies.”

– Durga Shanker Mishra Secretary, Ministry of Housing & Urban Affairs, Government of India (2018)

1919

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People in all contexts need access to clean, safe, convenient, and affordable toilets outside their homes

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No matter where you are from, what walk of life, or what income level, people are on the move and need access to toilets wherever they happen to be

(Cardone et al., 2018).

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The child on the way to school

The professional in transit from work

The family visiting friends on the other side of town

The elderly couple going to the market

CPTs represent a vital part of a well-managed sanitation system.

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CPTs are vital for the millions of people without household toilet access

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What is the difference between Community and Public Toilets? (Ministry of Housing and Urban Affairs, 2018)

Community toilets are provided for a defined group of residents or an entire settlement/ community. Typically, they are located in or near the community area and used by almost all community members.

Public toilets are provided for the floating population/general public in places such as markets, train stations, or other public areas and used mostly by undefined users.

In both cases, the government typically provides capital for construction or rehabilitation of shared toilet facilities (though companies via CSR, donors, or others may provide as well). Usually, community toilets are managed by the communities themselves after installation, often with community members paying membership fees to cover operating costs. More information on prevailing management models for public toilets follows on page 22.

Photo from iStock

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The Government of India has invested heavily in enhancing CPT infrastructure and services via SBM

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There are

Source: Hindustan Times, 2018

A total of

450,000 shared toilets have been built

between 2014 and 2018 under SBM

(Hindustan Times, 2018)

Creative public-private partnerships are underway to enhance CPT quality and

service deliver.

For example:

The Government of India and Google partnered in thelaunch of ‘Loo Review’ designed to ‘encourage all localguides in India to rate and review public toilets onGoogle Maps. Additionally, the campaign enablescitizens to find public toilets via Google Maps. Over30,000 public toilets across 700 cities in India can nowbe found using this tool (Hindustan Times, 2018).

Photo from STeP

Multiple authorities and contract mechanisms mean that

responsibility and oversight for CPTs are widely distributed

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▪ Urban Local Bodies are responsible for providing and managing public sanitation.

▪ The Ministry of Housing and Urban Affairs oversees implementation of Swachh Bharat Mission and Smart Cities Mission (and published a national “Advisory on Public and Community Toilets” in November 2018).

• Multiple state governments publish guidelines and standards for managing CPTs.

▪ A growing number of for-profit businesses, nongovernmental organizations, civil society organizations, and individual “sanipreneurs” engage with government to build/rehabilitate, operate, and maintain CPTs on a daily basis.

▪ Currently no national law or enforceable regulatory policy mandates specific requirements for managing CPTs.

See Appendix 1 for more information on CPT contract mechanisms

Prominent Management Models for Public Toilets (Colin, 2007)

• The municipality builds, owns, and manages the public toilets

• Usually no charge is paid by users• Require improved incentives for

providing quality service by caretakers / non-governmental organizations

• Third-party operators build the public toilets on land provided by the municipality

• Third-party operators are also responsible for ongoing operations, maintenance and repairs, and can charge user fees

• Contracts typically last 10 years and can be renewed based on performance

• The municipality builds the public toilets (or uses existing infrastructure)

• Third-party contractors undertake regular maintenance and can charge user fees

• Contracts typically last 3 to 5 years and can be renewed based on performance

Public-Sector Management Operate, Maintain, Transfer Build, Operate, Transfer

Source: Ministry of Housing and Urban Affairs, 2018

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Despite CPT utility and progress being made, challenges in service delivery and the user experience persist

2424

1 23 4

5

Cleanliness: Poorly managed CPTs can contribute to poor health outcomes because of unsanitary conditions. Users also point to smelly, unclean facilities as a deterrent to CPT use (Cardone et al., 2018).

Safety: Dark, unattended facilities located in sparsely populated areas represent a serious safety risk, especially for women and children (WaterAid, 2018).

Convenience: User studies indicate long wait times and distances from users’ homes as key barriers to CPT use (Intellecap, 2013).

Affordability: Fee structures often keep the poorest or most excluded populations from using CPTs (WaterAid, 2018).

Responsiveness: Many CPTs are designed and constructed without user input, and are not well equipped to respond to user needs over time (Cardone et al., 2018).

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These issues become more pronounced for women, children, the elderly, and people with disabilities

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Prioritizing Inclusive Design

Women, children, the elderly, and people with disabilities have specific needs that often go unmet by prevailing CPT models.

Women, for example, have multiple distinct needs (Jones, 2016):

• Biological (such as menstrual hygiene);

• Social and cultural (such as expectations for privacy and modesty); and

• Safety (such as avoiding harassment and violence while using shared facilities).

Failing to address these unique needs “restricts the movement of women and girls, as well as older people and people with disabilities, and limits their ability to participate in public life.” (WaterAid, 2018).

For additional resources on this topic see page 74.

Photo from Unsplash

Realizing the new future of CPTs in India will require

addressing the root causes of challenges, not the symptoms

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“Most often, sanitation models fail in their operations and management after a couple of years due to inadequacies in one or a combination of the planning, financing, operations and management of [shared] toilets.”

‒ Susana, n.d.

26 Photo from Bing via Creative Commons license

Three main root causes characterize poor CPT performance

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Root Cause of CPT Failures


Manifested by nonexistent or weak feedback loops between users and service providers; limited or no engagement of users in design; limited knowledge of user needs and desires; and difficulty translating need into demand among BOP users.


Manifested by policies and incentives that prioritize building over managing CPTs; inadequate desludging that contributes to dirty facilities; negative stigma of sanitation jobs; and lack of robust incentives for keeping toilets clean and functioning.


Manifested by high land and infrastructure costs; high threat of theft or vandalism; ongoing maintenance driving high operational costs; weak revenue streams relying on inconsistent CPT usage patterns; and low wallet share of BOP users.



With the right mindset and appetite for experimentation, root causes of CPT failures can become fertile sources of business model innovation.

Source: Cardone et al., 2018

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Although the challenges can seem daunting, a more impactful future for CPTs in India is within reach

28

Imagine a future where …

28

CPTs set the standard for

well-managed public

infrastructure

International visitors travel

to India to marvel at the

network of exceptionallymaintained

CPTs

Women and children look

forward to using CPTs in

their daily routines

Public offices are filled with

new CPT businesses

eager to join the sanitation

economy

Creativity and Collaboration Are Key Positive trends indicate that India is poised to counteract the prevailing CPT reality. Swachh Bharat is mobilizing thousands of new CPTs across India. New CPT business models are being tested and replicated by innovative organizations, such as those featured in this report. Innovations such as fully integrated, off-grid sanitation technologies are being developed. Advances in digital and other enabling technologies are disrupting business as usual. Read on to find out more!

CPTs are in the vanguard

of “safely managed

sanitation,” ensuring robust

collection andtreatment of

waste

Off-grid, auto-cleaned CPTs

enable convenient access to

clean toilets where people

need them most

Photos from Unsplash and USAID Flickr

29

For example, an emerging class of non-seweredsanitation solutions are poised for transformative impact

29 Photos from STeP

Reinvented Toilets

Omni-Processors

Omni-Ingestors

Closed loop, off-grid toilets that greatly collapse the sanitation value chain, such that containment equals treatment

Reinvented fecal sludge treatment plants that achieve complete pathogen destruction while generating useful byproducts such as energy and clean water

Truck-mounted dewatering systems designed to make it easier and cheaper to safely empty latrine pits – both wet and dry – and septic tanks

A new catalyst for CPT business model innovation

These off-grid sanitation solutions hold potential to change CPT business model paradigms by opening new value propositions, revenue streams, cost structures, and other advantages to be explored as these opportunities mature.

Alongside these emerging solutions, India’s CPT actors exhibit a strong appetite for business model innovation, as highlighted in the next section.

3030

Learning from the Sector: Creative CPT Business Models in Action

Business Models are Highly Context-Specific.

Generalizable, idealized business models might be useful to discuss in the abstract, but the success of a business model is directly tied to an organization’s comparative value, specific product or service offering, core skills and resources, organizational culture, customer needs, market context, and other factors.

Case Studies are an Important Vehicle to Explore Business Model Innovation.

Case studies allow us to probe what organizations did to overcome specific market barriers or amplify their value proposition and what factors drove them to do so. They offer us the chance to unpack what is relevant to our own experience or use case, and what might not translate given our own realities. More than anything, they give us a chance to learn from others and contemplate what’s possible.

31

Whether a business model works or not is inextricably linked to an organization’s core capabilities and context

3131 Photos from Unsplash

These case studies feature five organizations innovating to overcome the root causes of CPT failure in India

32

How to Read the Case Studies

When reviewing these case studies, ask yourself these questions with the understanding that business models and context are inextricably linked:

▪ If faced with a similar opportunity or challenge in my context, would this approach work?

▪ What alternatives might my organization pursue given our realities?

▪ What wholly new innovations might be needed to position our business model for success?

Five Featured CPT Case studies

Keep in mind: This is not a comprehensive list. Other organizations are actively innovating business models for CPT management. See page 75 for the criteria STeP used to select these case studies among the many candidates available.

Photo from Eram Scientific

Mission: To provide value-based, cost-effective, scalable and sustainable solutions for people at the base of the pyramid

Mission: To constantly innovate and apply science and technology to develop solutions against the pressing needs of the society

Mission: To serve one million users daily through state-of-the-art, well-maintained toilet infrastructure by 2020 through integration of smart technology and generation of user insights

Mission: To achieve emancipation through entrustment, entitlement, and empowerment

Mission: To supply and service portable restrooms from the most visited to the remotest areas of the globe, and to constantly improve on it

Overall, the CPT case studies reveal organizations’

multifaceted efforts to innovate their business models

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• Implementing a multifaceted needs/market assessment when entering new communities (Gramalaya, page 40)• Creating a networked community partnership model that engages self-help groups, local WASH committees, etc.

(Gramalaya)• Developing an aspirational toilet design, customized to fit users’ diverse needs (CAYA Constructs, page 34; Eram Scientific,

page 36)• Creating full-time community engagement teams on staff (CAYA Constructs)• Providing a 24/7 customer service hotline that enables quick response to maintenance needs (GARV, page 38; 3S Saraplast,

page 42)• Engaging users on issues beyond sanitation, such as educating on hygiene and health (Gramalaya)

• Employing “Cleanliness Soldiers” aimed at raising the profile and reducing the stigma of sanitation workers (CAYAConstructs)

• Planning for correct demand by including informal populations not represented in 2011 Census (Caya Constructs)• Developing a fully automated toilet system that cleans itself and reduces reliance on human workers (Eram Scientific, GARV) • Providing remote monitoring of CPT cleanliness with on-demand response teams (Eram Scientific, GARV)• Establishing long-term operations managed by local entrepreneurs and/or community-base organizations (Gramalaya)• Developing fully integrated value chain operations that span toilet manufacturing, installation, and management , and

waste collection, treatment, and disposal (3S Saraplast)• Developing toilets with simple maintenance requirements that can be performed by onsite managers (3S Saraplast,

Gramalaya)

To reduce Capital Expenditure (CAPEX): • Developing a modular design that can be easily broken down and moved (CAYA Constructs, Eram Scientific)• Achieving economies of scale at production facilities (CAYA Constructs, Eram Scientific)• Designing durable, low-maintenance toilets that hold up well over time (GARV, 3S Saraplast)• Retrofitting old infrastructure—such as buses qnd old toilets—to house CPTs (GARV; 3S Saraplast)

To reduce Operational Expenditure (OPEX): • Integrating the Internet-of-Things and sensor technologies to reduce reliance on human labor (Eram Scientific; GARV)

To diversify/ boost revenue: • Providing microfinance support to users (Gramalaya; CAYA Constructs is considering on the horizon)• Using advertisements as an additional revenue stream (GARV; Eram Scientific is considering on the horizon)• Testing franchise models as an additional revenue stream (GARV)• Facilitating the sale of maintenance plans (Eram Scientific)• Exporting toilets with higher margins to other regions, such as the Middle East, to offset lower margin sales in other market

segments, such as slum communities (Eram Scientific)• Offering other WASH services—such as showers and laundering facilities—alongside CPTs (GARV, 3S Saraplast)


Plan for long-term service provision?


providers and users

Keep in mind: Some of these business model innovations are not new per se, although some are. In some cases, they are new to the organizations and context of application. The value of these innovations comes in their integration because they are more powerful operating in concert than in isolation, as the case studies reveal.

Business Model Innovations Being Pursued By Organizations Featured in CPT Case StudiesRoot Cause of CPT failure


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Key Information:

Location: New Delhi

Website: www.cayaconstructs.com

Sector: Water and Sanitation

Operating since: 2016

Number of employees: 60

Impact: 10,000+ toilets

CAYA Constructs

Mission: Aligned with the Sustainable Development Goals and Swachh Bharat Mission, CAYA’s mission is to provide value-based, cost-effective, scalable, and sustainable solutions for people at the base of the pyramid

34Note: all case studies were informed by primary interviews and secondary data derived from the organizations’ websites and public documents.

Business Model Features:

Customization Scalability Service Provision

Sanitation solutions can be customized using modular concepts to meet customer needs and budget. Upwards of 80% of the superstructure can be salvaged and moved to a new location.

Achieving economies of scale in their production factories has allowed CAYAConstructs to scale fast. Within 2.5 years they have installed thousands of toilets in over 300 locations.

CAYA employs and trains “Cleanliness Soldiers” using a military-style approach to daily cleaning and regular maintenance services for CPTs, which are led by cleaners called “SwachhtaSainiks.”Photos from CAYA Constructs website

3535

Addressing Constraints:

▪ Users not included in design process. CAYA’stoilets are customized and designed according to the needs and budgets of customers. The designed are aspirational and appropriate for all climates, settings (including slums), and mass use. They are well-ventilated to remain comfortable during extreme heat, compact yet spacious, and easy to clean.

▪ Stigma in sanitation jobs. Swachhta Sainikshelp to remove the stigma around sanitation jobs. The military-style approach has restored dignity and improved the livelihood of toilet cleaners by providing training and well-paid jobs.

CAYA Constructs

35Note: all case studies were informed by primary interviews and secondary data derived from the organizations’ websites and public documents

Key Lessons

▪ Experiment with multiple revenue models. CAYA is experimenting with different revenue models and thinking about the circular economy, rather than selling toilets as the only revenue model.

▪ Fully engage the community. CAYA has full-time community engagement teams on the ground holding regular discussions with communities throughout the entire process from design to implementation.

On the Horizon

▪ Microfinance: Experimenting with microfinance loans through bank partnerships to reach more people.

▪ Planning for correct demand: To avoid overburden on toilets, planning takes into consideration the informal population not included in formal census data.

▪ Recognition: CAYA was awarded the 2018 TiE Lumis Partners Entrepreneurial Excellence Award and Spirit of Manufacturing Award for Social Impact.

CAYA undertakes needs assessment to identify gaps

1

CAYA creates customized solutions based on need and budget

2

Scale up • CAYA has installed toilets in more than 300 cities in 2.5 years• CAYA is partnering with government and private-sector entities

that can provide access to a maximum number of people

3

CAPEX is covered by donor funding, CSR, the government, and/or the private sector

OPEX is covered by advertisements and pay per use

Build-operate-transfer (BOT)

Public-private partnership (PPP)

Business to business (B2B)

Business to consumer (B2C)

CAYA has adopted various business models:

Business to government (B2G)

Partners

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Key Information:

Location: Kerala

Website: www.eramscientific.com

Sector: Sanitation



Impact: More than 3500 eToiletsdeployed across 23 states in India and in Kuwait

Eram Scientific

Mission: To constantly innovate and apply science and technology to develop solutions against the pressing needs of the society


Business Model Features

Customization Accountability

The eToilets are both completely automated and unmanned. With automated flushing, self-cleaning, and a sterilization mechanism, the eToiletrequires little to no ongoing maintenance.

These easy-to-install prefabricated toilets are available in multiple variants. The eToilets are customized depending on the need of the targeted segment, such as for women and the disabled.

The eToilets have a dedicated mobile/web app for 24/7 remote monitoring. Integrated Internet-of-Things technology allows Eram to monitor their eToilets from a central location and deploy service teams as needed.

Automation

Photos from Eram Scientific website

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Addressing Constraints

▪ Weak revenue streams: Eram’s business model is proving profitable in India, with break-even achieved. The export of eToilets to different countries helps subsidize lower-margin market segments such as eToilets for slum environments. Eram’s sale of maintenance plans helps ensure both ongoing revenue for Eramand high-quality service delivery for users.

▪ “Fixed” nature of physical infrastructure: Typically, Eram’s eToilets can be installed in a public space within 2 to 4 hours using limited manpower. Additionally, the toilets can be easily moved to a new location as needed, allowing flexibility for eToilet buyers.

Eram Scientific


Key Lessons

▪ Leverage digital innovation: India’s sanitation system has untapped potential for digital innovation. Automation, remote monitoring via sensors, and other capabilities are poised to help address multiple ongoing issues facing CPTs.

▪ Understand your market: Solutions come over time using trial and error. Understanding your market and the specific problems you seek to address proves essential.

On the Horizon

▪ Continued sector engagement: Educating decision-makers and raising public awareness about the potential for transforming sanitation through technological solutions proves an ongoing priority.

▪ Integrated waste treatment capability: Eram is experimenting with partners to create an integrated eToilet with an embedded fecal sludge management system. The closed loop system will enable resources such as water to be captured and reused and waste to be treated onsite.

CAPEX covered by the selling/leasing eToilets to:▪ Government buyers▪ Private customers ▪ Businesses for

CSR/charitable purposes

▪ Buyers in export markets such as the Middle East

1

Incorporates full-cycle approach in sustainable sanitation by integrating electronic and digital innovation with portable, hygienically maintained, and eco-friendly eToilets.

2

Customizes different variants for different users, such as schools and colleges, tourist places, public spaces, for export purpose, ladies toilet, etc.

3

OPEX covered by: ▪ Pay per use ▪ Sale of maintenance plans

such as an annual maintenance plan

▪ Cross-subsidization from toilets sales with higher margins—such as the sale of toilets for export subsidizes toilets in slum environments

4

Provide 24/7 monitoring. At each cluster there is a service engineer available.

5

3838

Key Information:

Location: New Delhi

Website: www.garvtoilets.com

Sector: Sanitation



Impact: 663 toilet installations

GARV Toilets

Mission: To serve one million users daily through state-of-the-art, well-maintained toilet infrastructure by 2020 through integration of smart technology and generation of user insights



Designed to Last IT-Enabled Service Provision

Sustainability

Toilets are indestructible, as they are made as a single structure of prefabricated stainless steel, thereby preventing theft and discouraging vandalism.

Integrated Internet-of-Things technology provides real-time updates on use (flushing), hygiene behavior (hand washing), and operations (malfunctions), making operations and maintenance planning more efficient.

“WaSH Hubs” provide access to more than just toilets as other revenue-generating services available, including bathing facilities and laundry facilities.

Photos from GARV Toilets website

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▪ Theft and vandalism: GARV’s toilet is designed to be indestructible and is outfitted with modern technology (RFID-IoT) that can detect tampering.

▪ High CAPEX: To compensate for high CAPEX, GARV is continually driving down OPEX through Internet-of-Things integration, which helps to reduce operations and maintenance costs, such as auto flush and floor clean technology.

▪ Difficulty achieving sustainability: The average time to reach break-even is 20 months. Continually striving to keep OPEX low through technology integration, coupled with a longer lifespan, ensures continued revenue for expanding operations.

GARV Toilets


Key Lessons

▪ Identify the right price point for your target customers: To do this requires understanding the willingness-to-pay of the target population and ensuring that a price can be set such that revenue will be enough to cover OPEX.

▪ Continually adapt your business model: Initially, GARV was only engaged in selling toilets, whereas now they are focusing on a public-private partnership revenue model.

On the Horizon

▪ Experimenting with franchising. GARV is testing local franchise models where local entrepreneurs operate the WaSH Hubs and revenue sharing is done in partnership.

▪ Retrofitting old toilets. GARV is exploring how to refurbish old toilet complexes and retrofit old toilets with smart technology to reduce CAPEX.

Long-term public-private partnerships are established:▪ Government provides land for

constructing toilets▪ Private sector, donors, and

revolving fund provide CAPEX

1 Integrated WaSH Hub services include:

3

OPEX is covered by revenue from:▪ Pay per use▪ Advertisements▪ Kiosk services

4

Percentage recovered from revenue is used to cover CAPEX at a new location

5

Po

st b

reak

-eve

n (a

pp

rox.

20

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nth

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Smart Toilets

WATER ATM

Bath facilities

Launderette

Community Kiosk

Advertisements

Demand is generated through:

Word of Mouth NGO Partnerships

OPEX is kept low with the use of smart technology, low overhead cost, and quick turnaround time from the maintenance team

GARV constructs toilets and WaSH Hub

2

4040

Key Information:

Location: Tiruchirapalli, Tamil Nadu

Website: www.gramalaya.org

Sector: Water and Sanitation



Impact: 375 slums

Gramalaya

Mission: Emancipation through Entrustment, Entitlement and Empowerment. Gramalaya ensures that all its projects reflect the above core values that encourage people to be emancipated from the cycle of poverty and deprivation through participation. Consequently, communities are entrusted to work on the project by being part of its implementation process and its continued success.



Local women’s self-help groups manage all aspects of community toilets, from operation and maintenance to financial supervision, helping to empower local women and engage communities.

Gramalaya or a local NGO builds the infrastructure and provides training to women’s self-hlp groups on how to operate the structure, after which ownership is transferred to the community.

Women from the same community manage the complete operations of toilets, which leads to improved ownership and accountability toward maintenance of the toilets.

Photos from Gramalaya website

Gender Mainstreaming Capacity Building Accountability

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▪ Covering O&M: Pay-per-use is working as a financially viable revenue model to cover OPEX and maintenance. As a community-led initiative, monthly meetings are held and financial accounts are checked regularly through social auditing to ensure funds are accounted for.

▪ Keeping toilets clean: By engaging women to manage the toilets and applying social-auditing principles, the toilets are routinely cleaned and kept to a high standard of cleanliness.

▪ Creating awareness and generating demand: During community mobilization, issues such as open defecation, health, and hygiene are addressed using social and behavioral change communication.

Gramalaya


On the Horizon

▪ Refined community engagement model: It can be challenging to generate interest in the community to pay for the use of the toilets. Gramalaya overcomes this challenge by regular and sustained community interactions, and continually refining how they do this for improved outcomes.

Key Lessons

▪ Total sanitation in slums is possible when coupled with participation from the community and support from urban local bodies.

▪ Inclusivity with users—especially women—is crucial for a successful business model.

4141

Gramalaya enters the community

1

Conducts a needs

assessment survey and

WASH status in slums

Develops key partnerships:▪ Urban local bodies▪ Women's Action for

Village Empowerment (WAVE) Federations

▪ Sanitation and Hygiene Education-Team (SHE-Team) of self-help group members

▪ Community ▪ AWASH

Committees (Association for Water, Sanitation and Hygiene)

▪ Forms women’s self-help groups and provides access to financial services

▪ Trains and develops women from self-help groups

▪ Mobilizes the community and builds awareness

2

Gramalaya builds

community toilets

3

CAPEX is covered by donor funding

OPEX is covered by user fees

Gramalayatransfersownership to the community

5

Self-help group women operate and maintain the toilets and circulates the funds

4

4242

Key Information:

Location: Pune

Website: www.3sindia.com

Sector: Sanitary Ware



Impact: 5000+ toilets

3S Saraplast

Mission: To supply and service portable restrooms from the most visited to the remotest areas of the globe. And to constantly improve on it.



Accountability Technology Retrofitting

3S Saraplast provides services across the sanitation value chain for their portable CPTs in India, including capture, containment, emptying, transport, treatment, and disposal of fecal waste.

3S Saraplast provides a toll-free helpline where customers can register complaints 24/7, ensuring that maintenance-related issues are rectified quickly.

3S Saraplast retrofitted old buses into public toilets, which are is known as “Ti” (toilet integration). This model has been replicated at multiple locations in Pune.

Service Provision across the Value Chain

Photos from 3S Saraplast website

4343


▪ Lack of planning for long-term service provision: 3S Saraplast’s toilets are sturdy and need repairing only 2 or3 times in total over their 10-year lifetime. Maintenance is done in the warehouse by the installation/collection team where each toilet is dismantled, cleaned piece by piece, and verified between uses. If a problem happens onsite, site supervisors can conduct basic maintenance themselves. Offsite, customers have access to a maintenance helpline 24/7.

▪ Working in silo: 3S Saraplast covers every step of the sanitation value chain, including manufacturing, installation, cleaning and evacuation, maintenance, and disposal.

▪ “Fixed” nature of public infrastructure: Toilets are portable and can be commissioned and decommissioned quickly, making them well suited for sanitation rental services, such as for a big social gathering.

3S Saraplast


Key Lessons

▪ Boosting CPT acceptance among users means focusing on mindsets not just toilets: People remain hesitant to use CPTs because they are generally considered dirty. 3S Saraplastfocuses on creating awareness and changing mindsets within the communities where they work.

On the Horizon

▪ Experimenting with franchising: Testing local franchise models where local entrepreneurs operate the CPTs and revenue sharing is done in partnership.

▪ Offering free trials: Marketing cabins with free trials, whereby they provide toilets and services for free for a month when customers are hesitant to use them.

▪ Expanding services: Looking to replicate the Unilever Community Hygiene Centre model (Suvidha Center) with launderette and bathing facilities for customers.

CAPEX covered by government / donor funding

1

Manufactures and assembles various parts and products of public and community toilets at their factory

Delivery and installation at various locations

2

Products available for rent: ▪ Portable toilets ▪ Containerized toilet

solutions ▪ ‘Ti’ toilet integration ▪ Handwash stations ▪ Urinals ▪ Biotoilets▪ Septic tanks

3

OPEX is covered by:▪ Pay per use ▪ Advertisements ▪ Selling products at

kiosks

Renting of toilets for various events, such as construction sites and refugee camps.

Sale of toilets to various clients , including government and private sector.

4 5

6

Provides services across the sanitation value capture, containment, emptying, transport, treatment and disposal. Sludge is transported to treatment facilities for treatment and disposal

4444

Learning from Others: Adjacent-Sector Business Models

Sectors adjacent to sanitation—such as water, energy, and

agriculture—offer business model insights poised to add value

45

The challenges of improving accountability between users and services providers, planning for long-term service provision, and achieving financial sustainability are not unique to the case of CPTs in India.

However, the reasons why these challenges manifest and the symptoms they create may be unique. But organizations pursuing market-based solutions in BOP markets the world over face similar challenges.

Consequently, it is helpful to step back from the sanitation sector and ask:

▪ What can we learn from adjacent development sectors—such as water, renewable energy, and agriculture—about achieving accountability, long-term service provision, and financial sustainability in BOP markets?

▪ What lessons from other “shared asset” cases can be applied to the CPT case in India?

Safe Water Network provides communities with safe drinking water through decentralized water treatment stations, where water is sold at an affordable price to consumers. This organization has been operating for 10 years, reaching over 1 million people in over 300 communities in India and Ghana.

WaterHealth International sells safe drinking water to customers through a network of decentralized water health centers. This organization has been operating for 12 years and has reached 10 million people globally, with 450 centers in India and 57 in Ghana and Nigeria.

Fenix International provides pay-as-you-go solar power access to households through their ReadyPay mobile payment system and solar products. Fenix has been operating for less than 10 years and has reached over 220,000 households and over 1.1 million beneficiaries.

Hello Tractor is a tractor-sharing application operating in Africa. This organization’s platform enables farmers to request equipment while providing enhanced security to tractor owners through remote asset tracking and virtual monitoring. This organization has been operating for less than 5 years and has reached over 250,000 farmers in Africa.

Four Featured Adjacent-Sector Case Studies

Photos from Unsplash

• CPTs present a unique use case because they are shared assets, which means that usage is shared among community members rather than purchased and used at the household level. Shared assets experience different market dynamics (such as buyers often are distinct from users) and long-term management challenges (such as unclear incentives for maintaining the asset) than assets bought, purchased, and managed by individual households.

• Three of the four featured cases here share assets: Safe Water Network, WaterHealth, and Hello Tractor. However, even these cases exhibit distinctions from the CPT use case that merit mention (see table below).

• The case of Fenix International focuses on household-level purchases; consequently, it exhibits significant distinctions from the CPT case. However, STeP found the business model innovations in this case to be very compelling and instructive, even with these distinctions. Consequently, we included one pay-as-you-go solar example here.

46

Adjacent-sector case studies share multiple features with CPTs,

but with some caveats

4646

Drinking water▪ Financial Sustainability: Revenue comes from sale of a product (drinking water) not just provision of

a service▪ Accountability/Community Engagement: In some cases, water quality may be visible or NGOs have

already educated on water quality, so people may be more willing to change behavior and pay for clean water as compared with sanitation

▪ Long-term Service Provision: No stigma associated with operating and maintaining water treatment station

Agriculture

Features Shared with CPT Use Case Features Distinct from CPT Use Case

Pay-as-you-go solar

▪ Financial Sustainability: High cost shared asset (drinking water kiosk) with CAPEX not fully recovered through user-based revenue; Distinction between buyer and user means hybrid business models (subsidy plus revenue) often used; Ongoing tension between setting a cost to cover OPEX but still affordable to BOP consumers; Partnership with local government required to gain access to resources (land, water)

▪ Accountability/Community Engagement: Awareness building and demand-generation activities required to change mindset around a traditionally “free” resource

▪ Long-Term Service Provision: Training of local operators/maintenance staff a key constraint; Aligning incentives for providing high-quality service over the long term remains a challenge

▪ Financial Sustainability: Ongoing tension between setting a cost to cover OPEX but still affordable to BOP consumers; Innovations in microfinancing and codifying financial transaction history pointing to future opportunities; Increased use of digital technologies—such as mobile payment options—increases the need for digital literacy among service providers and users

▪ Accountability/Community Engagement: User-centered design a critical feature of scalable models

▪ Long-term Service Provision: On-demand, reliable maintenance and troubleshooting support is a must

▪ Financial Sustainability: Revenue comes from sale of a product (solar panel system) not just provision of a service; Sales and marketing emphasize household purchase rather than community-based asset sharing

▪ Accountability/Community Engagement: Growing evidence is revealing pay-as-you-go solar as a highly desirable product bundling (by offering electricity and connectivity) and thereby “sells itself”, requiring less demand-generation activity compared with BOP sanitation market solutions

▪ Long-term Service Provision: Products come with guaranteed warranty and the burden is on individual to seek repair/service

▪ Financial Sustainability: High-cost shared asset (heavy agricultural equipment such as tractors) with CAPEX outstripping resources of individual households;

▪ Accountability/Community Engagement: Multiple entities accountable for shared asset▪ Long-Term Service Provision: Increased use of digital technologies to address ongoing

logistics, maintenance, and support issues

▪ Financial Sustainability: Revenue comes primarily from sales of an information technology product and some transaction-based fees

▪ Accountability/Community Engagement: Demand is typically high because it is a revenue-generating product

▪ Long-term Service Provision: Asset has individual owner responsible for maintenance

47

Other innovative organizations not featured in this report

can provide additional insights

4747

Airtel Green SIM is a packaged service offering providing mobile phone connectivity and access to voice-and SMS-based agricultural information to help farmers improve their farming practices. It is managed by IFFCO Kisan Sanchar Limited (IKSL), a joint venture between the Indian Farmers’ Fertiliser Cooperative Ltd (IFFCO) and Bharti Airtel mobile network provider. A revenue-sharing agreement between Airtel and IKSL allows IKSL to generate sufficient profit margins to sustain the business, including the agricultural messaging component. Airtel is motivated by new subscribers and subscriber loyalty. By conducting surveys, Airtel found that farmers are interested in learning about other subjects, including health, education, and employment. GSMA case study: https://www.gsma.com/mobilefordevelopment/programme/magri/case-study-airtel-green-sim/.

M-KOPA is a pay-as-you-go solar company that relies on mobile payments and an embedded technology in their solar product to track payment and usage, similar to Fenix International. M-KOPA Labs, their research and development arm, is exploring new ways for customers to save, earn, learn, and invest. M-KOPA shares knowledge on their model and off-grid consumer behavior to help grow the industry and improve the lives of low-income, off-grid households. M-KOPA website: http://www.m-kopa.com/.

Punjab Silos is a public-private partnership model—supported by the World Bank Group—for shared grain storage to enhance food security in India,. The partnership includes the government of India, the International Finance Corporation (IFC), Punjab State Grains Procurement Corporation (PUNGRAIN), and a private-sector entity selected to finance, construct, operate, and maintain the grain storage facility under a 30-year concession, after which they will be able to use the facility for private purposes. World Bank case study: https://library.pppknowledgelab.org/documents/1979/download.

https://www.gsma.com/mobilefordevelopment/programme/magri/case-study-airtel-green-sim/

http://www.m-kopa.com/

https://library.pppknowledgelab.org/documents/1979/download

Adjacent-sector case offer insights into how organizations

are tackling similar issues as the CPTs

48

▪ Implementing a multifaceted needs/market assessment when entering new communities (Safe Water Network, page 50; WaterHealth International, page 52; Hello Tractor, page 56)

▪ Providing ongoing, robust demand-generation activities (Safe Water Network, WaterHealth International)▪ Establishing criteria that define go/no-go decision points when evaluating new communities (Safe Water Network) ▪ Codifying tripartite support between sponsor, local government, and local operator (Safe Water Network)▪ Engaging local communities to identify and select local operators (Safe Water Network)▪ Implementing long-term (20 to 25 year) arrangements with local communities and operators (Safe Water Network;

WaterHealth International)▪ Establishing a Water Board to ensure smooth transfer of local operation (Safe Water Network)▪ Providing public demonstrations of water purification process in action (Safe Water Network)▪ Conducting ongoing water testing to ensure quality of output (WaterHealth International)▪ Providing exceptional customer service via a robust network of sales agents and multilingual call centers (Fenix

International, page 54)▪ Developing incentive structures for sales agents that prioritize customer satisfaction and understanding of repayment

commitments (Fenix International)▪ Cobranding with trusted brands, such as MTN Mobile, to boost community awareness and trust (Fenix International)▪ Testing value proposition with non-early adopters to understand what they might need and want to get to “yes” (Fenix

International) ▪ Customizing a mobile platform to meet various users’ data and information needs, allowing direct communication

between relevant actors (Hello Tractor)▪ Investing in blockchain to increase transparency in transactions and introduce advanced analytics (Hello Tractor)

▪ Ensuring that long-term operations are managed by local entrepreneurs and/or community-base organizations (Safe Water Network, WaterHealth International)

▪ Conducting remote monitoring of facility operations, with on-call technical support teams (Safe Water Network)▪ Creating automatic set aside of sales revenue for addressing maintenance and service needs (Safe Water Network)▪ Specifying full-cycle maintenance and service costs, with a clear understanding of what can and cannot be covered by

ongoing sales revenues (Safe Water Network) ▪ Engaging sectors to enhance standardization and to enable more effective reporting of impact (Safe Water Network)▪ Using/experimenting with water waste and discharge reduction to improve environmental impact (WaterHealth

International)▪ Deriving information from mobile application that allows asset owners to better plan maintenance and asset downtime

(Hello Tractor)

Keep in mind: Some of these business model innovations are not new per se, although some are. In some cases, they may be new to the organizations and context of application. The value of these innovations comes in their integration because they are more powerful operating in concert than in isolation, as the case studies reveal.


Business Model Innovations Being Pursued by Organizations Featured in CPT Case Studies


Root Cause of CPT Failure




providers and users

Improving financial sustainability is a priority across the

adjacent-sector cases

49

To reduce Capital Expenditure (CAPEX): ▪ Standardizing the centrally managed construction of water stations prior to handing off operations locally (Safe Water Network, page 50;

WaterHealth International, page 52) ▪ Aggregating demand for use of underutilized assets compared with paying for new asset purchase (Hello Tractor, page 56)▪ Partnering with sector actors to make more assets available to increase availability and drive down costs (Hello Tractor)

To reduce Operational Expenditure (OPEX): ▪ Integrating digital technologies—such as the Internet-of-Things and sensor technologies—to reduce reliance on human labor (Safe

Water Network; WaterHealth International; Fenix International, page 54; Hello Tractor)▪ Using/experimenting with solar power to run facilities instead of grid power (Safe Water Network)▪ Using/experimenting with automated vending machines (Safe Water Network)▪ Using/experimenting with prepaid smart cards to replace cash payments (WaterHealth International)▪ Using a mobile/digital payment platform to reduce/remove cash transactions (Fenix International, Hello Tractor)▪ Developing plug-and-play systems that allow self-installation by users (Fenix International)▪ Using booking agents to aggregate demand based on location and concentrate operations (Hello Tractor)

To diversify/boost revenue: ▪ Using hybrid business models to combine different sources of capital (government and donor grants for CAPEX, sales revenues for OPEX)

(Safe Water Network, WaterHealth International, HelloTractor)▪ Using/experimenting with new forms of capital to cover CAPEX, such as blended finance (Safe Water Network, Water Health

International)▪ Right sizing of price specific to target customers and market context, balancing affordability for BOP segments and cost recovery (Safe

Water Network, WaterHealth International)▪ Creating product diversification that emphasizes what is desirable and aspirational for different customer segments, such as “Dr Water

branding” (WaterHealth International)▪ Diversifying sales and marketing strategies—such as centralized versus decentralized to different customers—to cover the full scope of

needs/opportunities (Fenix International, Hello Tractor)▪ Right sizing of payment via multiple lease-to-own options that map to customers ability to pay (Fenix International)▪ Developing a system lock down option once the payment period expires (Fenix International)▪ Transitioning to full ownership status (no system lockouts) once lease-to-own period is completed (Fenix International)▪ Using/experimentating with new product bundles, such as ReadyHome 2020 with various power and lighting upgrades available) (Fenix

International)▪ Creating financial credit scores for customers via a mobile payment platform that can be used to unlock new opportunities—such as

additional products available via the same platform (Fenix International)▪ Using/experimenting with new financial services and products—such as education and crop loans—that leverage credit score (Fenix

International)▪ Revenue sharing between asset owners, booking agents, and platform operators (Hello Tractor)

Keep in mind: Some of these business model innovations are not new per se, although some are. In some cases, they may be new to the organizations and context of application. The value of these innovations comes in their integration because they are more powerful operating in concert than in isolation, as the case studies reveal.


How might we achieve financial

sustainability?


CPT FailureInnovation

Opportunity

5050

Key Information:

Location: India, Ghana, NYC (HQ)

Website: www.safewaternetwork.org

Sector: Drinking water


Number of employees: 21 (India), 16 (Ghana), 12 (NYC)

Impact: More than one million people in 300+ communities

Safe Water Network

Mission: With a mission to develop and demonstrate affordable, economically viable solutions, share sector knowledge, and build partnerships to reach millions in need, Safe Water Network brings safe, reliable, and affordable water to those who need it most through small water enterprises.



Service Provision 24/7 Monitoring Focus on convenience

Safe Water Network secures capital and builds the safe water station. In consultation with the community, they identify a local entrepreneur or community-based organization to operate the station.

All water stations are equipped with a remote monitoring system that enables 24/7 monitoring of plant performance. Technical support staff are ready to address issues immediately.

Safe Water Network’s research has shown that proximity to a water station is the biggest driver of use. Consequently, they are focused on making the stations more convenient, while still guaranteeing high quality.

Photos from Safe Water Network website

http://www.safewaternetwork.org/

5151


▪ Access to finance for CAPEX: Because capital costs cannot be recovered through revenue, access to finance is limited to government grants and donors, which is proving a barrier to scale. Safe Water Network is working to advance the overall sector to show combined impact and unlock access to more investment.

▪ Digital literacy: Unlike East Africa, digital literacy in India and elsewhere is still very low. Safe Water Network is investing substantial resources to improve digital literacy in their communities.

Safe Water Network

51Note: all case studies were informed by primary interviews and secondary data derived from the organizations’ websites and public documents; Photo from Safe Water Network website.

Key Lessons

▪ Clearly define costs and determine what can be covered by revenue:Costs can easily fly under the radar and it is not always possible to cover all costs with revenue. Consequently, be clear about what can—and cannot—be covered up front.

▪ Clearly define the customer base and set a price that is affordable to them:This may mean that everyone cannot be reached. However, clearly defining this up front will drive the business model.

On the Horizon

• Decreasing OPEX and increasing convenience: Switching from grid to solar, experimenting with mobile payments and automated vending machines.

• Collaborating across the sector: Working with other water enterprises to bring standardization to the sector in an effort to more effectively report on impact and gain more government investment.

Market and community assessment: Criteria for new water station:▪ Minimum 400

households 75% likely to participate

▪ Local elected body willing to sign tripartite agreement with Safe Water Network and local operator giving right to operate and access to water source

Government grant/donor covers CAPEX

Safe Water Network buildswater station

Safe Water Network works with community to identify alocal entrepreneur or NGO to operate the station

Operator

▪ Covers OPEX through water sales

▪ Sets aside funds for maintenance

▪ Earns fixed fee from water sales

Balance returned to Safe Water Network and used as revolving fund to invest in new communities

Water priced to be as affordable as possible while still covering OPEX

1

2

3 4

5 6

7

5252

Key Information:

Location: India, Ghana, Nigeria, California (HQ)

Website: www.waterhealth.com

Sector: Drinking water


Number of employees: 1000+

Impact: 10 million people globally; 450 centers across 36 districts in India; 50 centers across 7 regions in Ghana; 7 systems in Nigeria

WaterHealth International

Mission: Through decentralized community water systems, WaterHealth’s vision is to be a global leader in providing scalable, safe, and affordable water solutions to the underserved through innovative products and business models. Their mission is to serve over 100 million consumers globally by the year 2020.



Community Engagement

Product Diversification Focus on Desirability

After WaterHealth builds a center, it contracts with a local community or agency to operate for 20 to 25 years, after which ownership is transferred to the community. A Water Board is set up to ensure smooth operation and transfer.

Offering different drinking water products at different price points allows WaterHealth to explore new customer segments and increase revenue.

With their “Dr. Water” brand, which is associated with high-quality and health, WaterHealth’s design sets them apart. Water is sold at WaterHealth Centers, where people can experience water purification in action and seethe results.

Photos from WaterHealth website

5353


▪ Access to capital: WaterHealth relies on blended finance, government grants, donors, and/or private donations to cover CAPEX.

▪ Access to skilled labor: WaterHealthemploys and trains staff who run the centers, investing resources in labor needed to scale up.

▪ Access to land: As part of prelaunch assessment, the local authority must agree to provide access to the land and water source.

WaterHealth International


Key Lessons

▪ Prelaunch work is critical to ensuring sustainability:

• Assessing need and technical feasibility

• Assessing ability of customers to pay

• Generating awareness and demand through behavior change communication activities.

▪ People are willing to pay for a product/service that is highly desirable: It takes effort up front to figure out what is desirable to each customer segment.

On the Horizon

▪ Innovating on environmental sustainability involves taking measures to ensure compliance, such as low water discharge/low water waste.

▪ Integrating IT for monitoring units, understanding consumer behavior, and introducing prepaid smart cards to replace cash payments.

Prelaunch work:▪ Need and

technical feasibility

▪ Willingness to pay

▪ Demand-generation

1Blended finance and grants cover CAPEX

2Local authority provides access to land, water, and electricity

3

TransferOperateBuild

WaterHealth buildsWater Health Center

4WaterHealth contracts with local community/ agency to operate for 20 to 25 years

5

WaterHealth transfersownership to community

8

WaterHealth employs and trains staff to run the center and helps the community set up a Water Board to liaise between the community and the operators

6Revenue from sales of water covers center maintenance and water testing

7

5454

Key Information:

Location: Uganda (HQ), Zambia, Cote D’Ivoire, Benin, USA, China

Website: www.fenixintl.com

Sector: Pay-as-you-go solar


Number of employees: 700+

Impact: 300,000 households with clean energy; 1.5 million beneficiaries impacted; 8 million mobile payments processed

Fenix International

Mission: Fenix’s mission is to improve the quality of life of their customers through inclusive energy and financial services. Their flagship product, ReadyPayPower, provides households with an affordable solar home system financed through affordable installments using mobile money.



Right-Size Payments Multifaceted Offering Accountability

Recognizing that upfront costs often are a barrier to access for many customers, Fenix offers multiple lease-to-own payment options that are right-size for the user through their ReadyPaymobile payment platform.

Fenix’s financial product allows them to create a credit scoring system for their customers, opening doors to a world of opportunity through access to new products to improve livelihoods at the BOP.

Given the challenges with operating both the technical and financial products, Fenix focuses on exceptional user experience, including a network of sales agents and multilingual call centers.

Photos from Fenix website

http://www.fenixintl.com/

5555


▪ Access to financing for Fenix and for their customers. Fenix relies on other sources for capital to help keep costs low for customers, and designed a ReadyPay mobile platform for customers to pay in installments.

▪ Barriers to technology adoption: Fenix provides a high level of customer service and convenience to ensure questions are answered and issues are addressed quickly. Local sales agents work on commission and are incentivized to ensure customers fully understand—and complete—their ongoing repayment commitments. They also partner and cobrand with MTN mobile, a trusted mobile provider in their target markets.

Fenix International


Key Lessons

▪ Test with non-early adopters:Convincing no-early adopter likely means that everyone will be convinced.

▪ Pricing has a tremendous effect on customer uptake: Figure out what margins are acceptable and work backward to figure out sales required and price. Do no lose focus on what the customer wants.

On the Horizon

▪ ReadyPay Home in 2020: As Fenix expands product lines with a variety of power and financial upgrades, the ReadyPay home in 2020 will be brightly lit, well connected, and smoke-free.

▪ New financial upgrades will offer financial products—such as education or crop loans—to customers who have established a creditworthy repayment history.

Fenix takes a two-pronged approach to sales:

Centralized – in MTN mobile stores or market kiosks

Decentralized – through a local sales force embedded in villages

1Customer makes down payment and is approved

2

Plug-and-play system allows for customer self-installation, reducing costs

3

System locks after payment period expires. Customer makes payments via ReadyPay mobile platform to unlock more days via SMS code

4

Customer pays off loan in 24 to 30 months and the system unlocks permanently

5With good repayment history, customer unlocks access to more products, which they can purchase through the ReadyPay system

6

Financial products

Power products

5656

Key Information:

Location: Nigeria, Senegal, Mozambique, Kenya, Tanzania

Website: www.hellotractor.com

Sector: Agriculture



Impact: 250,000 farmers serviced

Hello Tractor

Mission: Working to bring mechanization to Africa, Hello Tractor offers an internet-of-things solution to help connect tractors with farmers and increase their productivity. Hello Tractor’s platform allows tractor owners and manufacturers to expand their markets, reaching new customers who were previously inaccessible.



IT Integration Partnerships

Focus on Customization

Hello Tractor’s product is a technology solution, so seamless IT integration and reliability are critical business model features. Their device is built to withstand the elements and is able to store data off network that transfers to the cloud once connected.

Several partnerships are critical to Hello Tractor’s success with generating demand in a new market, including tractor manufacturers and dealers and community-based farmer groups.

Working with various customer segments and across different geographies, Hello Tractor is able to customize the technology product’s outputs to meet unique data and information needs.

Photos from Hello Tractor website

http://www.hellotractor.com/

5757

Addressing Constraints:

▪ Access to valuable assets: Rather than providing financing for more farmers to purchase tractors, Hello Ttractorfocuses on increasing access to existing tractors that are sitting idle, at an affordable cost.

▪ Aggregating demand: Aggregating enough demand in a defined area to justify deploying a tractor is challenging. Hello Tractor trains and incentivizes brokers to do it for them.

▪ Operations and maintenance: Hello Tractors’s internet-of-things solution provides valuable data on usage and feedback from farmers, so tractor owners can better plan for maintenance and reduce downtime.

Hello Tractor


Key Lessons:

▪ Know when to pivot: Hello Tractor sold tractors in the beginning before several factors caused them to pivot to focus just on selling the technology to fit existing tractors on the market.

▪ Know your customers: Everyone wants something a little different with a data product. Customization allows Hello Tractor to provide excellent user experience across diverse customer segments.

On the Horizon

▪ Developing blockchain will provide greater transparency and advanced analytics between customers.

▪ Digitalizing payments through their app.

▪ Partnering with private sector—including John Deere—to bring more tractors to Africa.

Grants cover overhead for market assessment:

1

Initiate pilot in new market

2

Hello Tractor recruits and trains booking agents

3

Agents aggregate demand for tractors: identify 25 hectares of serviceable land within a 5 km radius

5

Agent submits booking request for tractor service through agent app

7

Desk research

Identify partners

Understand how to reach “last mile” target customers

Hello Tractor sells monitoring devices to tractor manufacturers and owners

4

Owners make tractor available for booking through owner app

6

Platform connectsavailable

tractor with farmers

Data transmits to cloud

Dashboard display for remote asset tracking and virtual monitoring

8

Agent paid 10% per completed service

Owner earns fee for service

Farmers pay fee for service

9

58

Ideas abound for translating adjacent-sector case study

insights to the CPT use case

5858

Credit History: CPT users unlock access to health insurance and other opportunities by building a credit history through monthly CPT subscriptions.

Real-time Messages: CPT operators receive real-time messages of unclean facilities, long wait times, and equipment failures directly from CPT users.

Just-in-time Support: Just-in-time maintenance support teams get paid more based on how well and how fast they respond to users’ needs.

Cobranding: Customers buying products and services from cobranding partners—such as grocery stores or mobile providers—gain CPT access at a discounted rate.

Demand Campaigns: Campaigns to generate and aggregate demand for new CPTs should be located where people want (not just need) CPTs the most.

Health and Wellness: Health and wellness packages bundle CPT access with the purchase of complementary hygiene and sanitary goods, gym memberships, etc.

Remote Monitoring: Remote monitoring of CPTs tracks usage and allows operators to conduct scheduled maintenance off peak times.

Imagine the possibilities!

Photo from the Bill and Melinda Gates Foundation

5959

Inspiring Future Business Model Innovation: Key Takeaways

60

Common elements shared across case studies highlight key

lessons for Base of the Pyramid business model innovation

6060

Hybrid Business Models

Diversified Revenue Strategy

Robust Partnership

Strategy

Ongoing Experimentation

Pre-revenue Investment in

Customers and Market

Committed Leadership,

Shared Ownership

Active Sector

Engagement

Digital Technology Integration

Integrated Innovation

61

Shared Element: Invest pre-revenue time and resources to

understand the local market and what customers value

6161

▪ Organizations targeting BOP market opportunities are engaged in creating new markets rather than penetrating existing markets. Creating new markets for an organization requires convincing potential customers that what the organization is offering is something they value and something they are willing to paying for.

▪ Before making that claim, organizations must answer some key questions: What do potential customers value? What motivates them? What concerns them? What are they willing and able to pay for?

▪ To answer these questions, organizations will need to invest significant pre-revenue time and resources and design business models that respond accordingly.

▪ Importantly, this is not a one-and-done effort. Organizations will need to replicate this pre-revenue investment every time they enter a new market or target a new customer base.

Gramalaya invests extensively in understanding the community through customers and local needs assessment in the pre-revenue investment phase. Before designing and implementing their program, they hold extensive discussions with the community.

WaterHealth conducts extensive prelaunch work in each community before entering the market. They partner with local organizations who are deeply integrated in the community to help assess the need and technical feasibility and customers’ ability to pay, and to help generate awareness and conduct sanitation behavior-change communication activities.

Examples from the Case Studies

Note: key takeaways were informed by primary interviews with case study respondents and subject-matter experts

62

Shared Element: Use hybrid business models to help

leverage subsidy to scale impact

6262

▪ Hybrid business models –which leverage payments from BOP consumers with other revenue sources including external funding from donors and governments—enable organizations to make necessary pre-revenue investments and establish beachheads within BOP communities.

▪ Hybrid business models help organizations expand their efforts, at least initially, given that continued pre-revenue investment is necessary to understand the context and users during the process of business model replication and expansion (Gebauer et al., 2017). However, organizations may find that continued reliance on external subsidy presents challenges for scaling business models over time.

▪ Figuring out how to best leverage subsidy from donors and/or government to finance the scaling process—while maximizing the wallet share of existing customers for ongoing operations—should be a high priority for organizations targeting BOP market opportunities (Gebauer et al., 2017).

CAYA Constructs leverages donor, corporate social responsibility, and government funding for CAPEX. Revenue from pay-for-use and advertisements covers OPEX.

Because CAPEX cannot be recovered through revenue, Safe Water Network relies on government grants and donor funding to cover capital costs. Revenue from sales of water covers OPEX.



63

Shared Element: Use diversified revenue streams to

target different customer segments and/or offerings

6363

▪ BOP markets often are characterized by thin margins, inconsistent usage patterns, and variable income. Consequently, organizations targeting BOP markets rarely do just one thing to generate revenue. This is a central strategy organizations use to reduce risk in BOP market entry.

▪ Diversification strategies abound and some organizations choose to diversify revenue by offering complementary products/services to the same customers, some diversify by targeting middle-income customers alongside those in the BOP, and some sell byproducts to completely different segments.

▪ Revenue diversification strategies—similar to like other aspects of the business model—cannot be determined in isolation. These strategies rely heavily on the organizations’ core competencies, their value proposition, and the market context in which they operate.

GARV Toilets has adopted diversified revenue streams like services at WASH Hub—such as launderette, bathing facility, advertisements, kiosks services—to increase revenue and service offerings.

WaterHealth is offering different drinking water products at different price points—such as branded potable water, nonbranded water, and bottled water—which allows them to explore new customer segments and increase revenue.



64

Shared Element: Integrating digital technologies is a

core business strategy, not just a “nice to have”

6464

▪ Increasingly, organizations are turning to digital technologies to help them “circumvent the various obstacles in the BOP markets.” In many instances, digital technologies serve as the “actual foundation for sustaining provision of services to BOP populations” (Saul & Gebauer, 2018).

▪ Within the sanitation sector specifically, digital technologies help organizations tackle key operational challenges such as logistics, payment collection, and asset monitoring, and challenges related to scaling efforts , such asmarketing and sales and partner and team management (Saul & Gebauer, 2018).

▪ Maximizing the impact of digital transformation depends on multiple factors, including market/organizational/technology fit, user acceptance of digital technology, and how well technology developers understand the context of use (Saul & Gebauer, 2018).

GARV has invested in internet-of-things technology as the core focus of their business model. This technology provides real-time updates on usage (flushing), hygiene behavior (hand washing), and operations (malfunctions). This makes operations and maintenance planning more efficient.

Fenix’s ReadyPay system is built on a digital, mobile-based payment platform that processes payments and controls access to the product. If payments are not made on time, the solar panel is turned off via a digital remote until the next payment is made.



65

Shared Element: Foster an ongoing commitment to

business model experimentation and improved impact

6565

▪ BOP markets are constantly changing, sometimes in ways that emerge slowly over time, sometimes in sudden “jolts” such as through a sweeping regulatory change. Accordingly, business models must adapt and evolve to remain effective over time (Lecocq & Demil, 2010).

▪ Organizations that emerge as successful and impactful over time embrace the idea that their business models are in a state of “permanent evolution.” Rather than being fixed, a business model is an ever-evolving “set of relations and feedback loops between variables and their consequences” (Lecocq & Demil, 2010).

▪ Imbuing this appetite for ongoing business model experimentation and innovation into managerial strategy and organizational culture serves as a key opportunity and challenge for organizations serving BOP markets.

3S Saraplast is providing community and public sanitation services via rent and sale. They are experimenting as the market changes, such as retrofitting old buses as public “Ti” toilets.

Initially, Hello Tractor sold tractors. Because of changing market circumstances, Hello Tractor fundamentally changed their business model to focus on the technology rather than the tractors. In the near future, Hello Tractor will seek to partner with the private sector to expand their reach, requiring new business model innovation.



66

Shared Element: Develop a dedicated leadership team

that invests in and empowers ownership among others

6666

▪ The act of engaging in creating new BOP markets is an inherently complex, long-term endeavor. For example, BOP market creation experts often point to the power of “word of mouth” marketing and sales channels as being especially powerful in BOP markets, where robust family and community networks thrive. While effective, relying on word-of-mouth marketing among users tends to take time.

▪ Such efforts require engaged leaders and networked management structures to effect sustainable impact. Trust is essential and takes time to build. Individuals looking to trigger ‘”quick wins” need not apply.

▪ Effective BOP business models—and the organizations that bring them to life—leverage the “power of the crowd” in creative, context-specific ways. Leaders of such organizations know that people—their teams, their users, and their partners—are their most essential asset and invest in them accordingly.

Gramalaya uses a holistic development approach with the aim of empowering communities. Gramalaya promotes participatory community management of toilets and believes that gender equality is important to attain the overall objectives of total sanitation.

One of Fenix’s core values is to invest in a high-performing and passionate team. Fenix launched Fenix Flames, an employee ownership program designed to recognize the impact of all team members from sales managers to chefs to customer service representatives.



67

Shared Element: Clearly define the role in the value

chain and augment it by smart leveraging of partners

6767

Because Hello Tractor is a technology company and not a tractor company, they work with several partners who are critical to their success, including tractor manufacturer, tractor dealers, and farmer groups.


3S Saraplast has a stated commitment to working across the sanitation value chain, from including capture, containment, emptying, transport, treatment, and disposal of fecal waste. This full value chain role serves as a differentiator in the Indian CPT landscape.

▪ Given the diversity in how organizations interact within and across value chains in the sanitation sector and beyond, some organizations engage in end-to-end operations, whereas others focus on one or a few specific functions and leverage partners as needed.

▪ Being explicit about organizational strengths—and where outside support is needed—enables organizations to clearly define roles and maximize efforts in the value chain.

▪ Build robust partner networks, especially those with strong links with user communities, that are strategic and well-resourced. Organizations that understand the importance of cultivating trust and mutually beneficial interactions among partners tend to stand out.


68

Shared Element: Create sector engagement above and

beyond normal business activities

6868

▪ Organizations actively engaged in creating BOP markets understand that “inclusive business models can compensate for some of the gaps in the market environment, or work around them, but only inclusive business ecosystems—spanning a wide range of market players in business, government and civil society—can actually overcome them” (Aqua for All & BOP Innovation Center, 2014).

▪ Sector engagement efforts include raising awareness about the power of innovation in BOP markets to advocating for higher quality standards to informing public policy and governmental regulatory measures.

▪ Consequently, these organizations are not only leading through their creative business models, but also by demonstrating what is possible for full sectors and using that experience to leverage broader change in their operational contexts.

In an effort to more effectively report on impact and gain more government investment, Safe Water Network is working with other water enterprises to bring standardization to the sector.


In addition to deploying eToilets in India, EramScientific actively advocates for pro-innovation efforts within India’s sanitation sector. Specifically, Eram works to educate public decision-makers about the power of integrating high-tech solutions into public sanitation infrastructure.


69

Shared Element: The integrated nature of business

model innovation efforts drives transformative potential

6969

▪ No single business model innovation can fully unlock market opportunities at the BOP.

▪ These business model case studies highlight the importance of integrated innovation, which emphasizes the interactions between multiple, reinforcing business model innovations to produce outsized impact.

▪ The innovative here is how organizations are bringing together various approaches to tackle systemic challenges in complex environments.

▪ As the complexity of the market environment and the systemic nature of the challenges being addressed increase, so does the value of integrated innovation strategies.

Fenix began as a pay-as-you-go solar company, bringing solar-powered electricity to rural villages. The introduction of their ReadyPaymobile payment platform allows them to collect valuable customer data and create a unique credit scoring system for their customers, unlocking new opportunities for pay-as-you-go products. This has enabled them to offer more diverse products and reach more customers.


Eram Scientific is in the vanguard of integrating multiple high-tech innovations into public toilet installations in India, first through automated cleaning capabilities and now by experimenting with incorporating waste processing technology for a closed-loop system.


70

Ample room for experimentation and learning remains, which

represents an exciting leadership opportunity for CPTs in India

7070

▪ The business models featured in this report represent a small fraction of the creative work being done to innovate business models and transform CPTs in India and beyond.

▪ The multiple challenges facing CPTs in India provide fertile innovation opportunities that will lead to even more radical and impactful change.

▪ Given their shared nature, CPTs offer a tremendous use case to demonstrate what is possible for the broader sanitation sector, leading to a new future for safely managed, sustainable public sanitation.

▪ Visionary, bold leadership and dynamic, creative business models are essential tools to achieve this new future for CPTs in India.

The vast possibilities of our great future will become realities only if we make ourselves responsible for that future.‒ Gifford PinochotAmerican Conservationist

Photo from Unsplash

71

Acknowledgements

7171

With gratitude, STeP acknowledges the expertise and ideas that helped shape this report. Specifically, we would like to thank the following individuals for their contributions.

Phil ArscottFenix International

Swapnil ChaturvediSamagra

Ilana CohenGSMA

S. DamordaranGramalya

Noémie de La BrossePractical Action Consulting UK

Nanveet GargCAYA Constructs

Heiko GebrauerSwiss Federal Institute of Aquatic Science and Technology (Eawag)

Jerry HudsonProsperity Innovations LLC

Martha HaleHello Tractor

Nitya JacobIndependent WASH Expert

Jamie JonesRice University

Rajeev Kher3S Saraplast

Madhu KrishnamoorthyWaterHealth International

Mayank MidhaGARV Toilet

Alison ParkerCranfield University

Nat PaynterSafe Water Network

Caroline J. SaulSwiss Federal Institute of Aquatic Science and Technology (Eawag)

Chad SpainWhitten & Roy

Midhu S.V.Eram Scientific

Jitendra RawalNavi Mumbai Municipal Corporation

72

To learn more

72

STeP accelerates innovations insanitation by connecting partners, facilitating field testing, and supporting commercialization.

RTI International is an independent, nonprofit research institute dedicated to improving the human condition. We combine scientific rigor and technical expertise to deliver solutions to the critical needs of clients worldwide. RTI serves as the implementing partner of STeP, funded by the Bill & Melinda Gates Foundation.

Task Lead

• Amanda Rose, STeP Market Readiness Lead, [email protected]

Research Team

▪ Sumaiya Maaz, WSH Senior Associate, [email protected]

▪ Katherine Woodward, Research Environmental Scientist, [email protected]

Photo from STeP

mailto:[email protected]



7373

Appendix

74

Key resources on CPTs are worth exploring to learn more

74

Key CPT Resources

STeP report:Public and Community Toilet

Landscape: Quantitative data, user insights, and case studies from urban India

World Bank report:Shared and Public Toilets: Championing Delivery Models that Work

WaterAid, the Water and Sanitation for the Urban Poor, and UNICEF report:Female-Friendly Public and Community Toilets: A Guide for Planners and Decision Makers

http://stepsforsanitation.org/resource-center/reinvented-toilet/all-resources/#public-toilet-india

https://openknowledge.worldbank.org/bitstream/handle/10986/30296/W18035.pdf?sequence=4&isAllowed=y

https://www.wateraid.org/us/media/female-friendly-toilet-guide-wateraid-unicef

75

STeP used the following criteria to identify the innovative

CPT case studies featured in this report

7575

The enterprise or organization appeared reputable, based on reference in multiple sources

Reputation

Information about the enterprise was readily accessible through publicly available sources, such as an organizational website or sector report

Information

Key organizational staff were responsive to a request for interview and were able to be interviewed within the project time frame

Response

The product or service offering was relevant to the CPT sector and BOP market Relevance

Enterprises represented innovation with respect to approaches to business models

Innovation

The organization was not covered in any previous STeP report, such as the Public and Community Toilet Landscape report

New to STeP

76

STeP used the following criteria to identify the innovative

adjacent-sector case studies featured in this report

7676

The enterprise or organization appeared reputable, based on reference in multiple sources

Reputation

Information about the enterprise was readily accessible through publicly available sources, such as an organizational website or sector report

Information

Key organizational staff were responsive to a request for interview and were able to be interviewed within the project time frame

Response

The product or service offering was relevant to the CPT sector, such as another public or shared asset or novel technology for BOP markets

Relevance

Enterprises represented a diversity of sectors, geographies, and approaches to business model innovation

Diversity

The government of India uses various contract mechanisms to

engage third parties in managing CPTs

77

Service contracts are applicable when toilet structure is already constructed and requires only operations and maintenance services. The ownership of the facility and revenue risk lies with the government. 1

Outsource contracts for manpower services for Operations and Maintenance through tenders Government Toilet Facility

Operate, Maintain & Transfer (OMT) contracts are applicable when toilet structure is already constructed and requires only operations and maintenance services. The ownership remains with the government; however, the revenue risks and rewards are borne by the contractor.

2

Private Sector Toilet Facility Outsource contracts for operations and maintenance through tenders



engage third parties in managing CPTs (continued)

78

Maintenance contracts are applicable when toilet structure is to be installed prior to operations and maintenance. These are also known as contracts for installation of prefabricated toilets.3

Rehabilitate, Operate, Maintain & Transfer (ROMT) contracts are applicable when toilet structure is available and is in need of rehabilitation/retrofitting prior to operations and maintenance services. Investment on the asset rehabilitation/retrofitting is borne by the private sector.

4

Private Sector Toilet Facility

ToiletFacility

Outsource contracts for operations and maintenance through tenders

Government procures prefabricated toilets from the private sector

Separate operations and maintenance contract

(OR)

(OR)



engage third parties in managing CPTs (continued)

79

Build, Operate & Transfer (BOT) contracts are applicable when toilet structure is to be constructed and the government provides the land to the operator prior to construction and operations and maintenance services.

5

Contracting for community toilets is applicable when toilet structure is available and is in need of rehabilitation/retrofitting prior to operations and maintenance services. Investment on the asset rehabilitation/retrofitting is borne by the private sector.

6

Government Toilet Facility

Community/self-help group/community-based organization does operations and maintenance

Construct the toilet

CommunityPrivate Sector

Private Sector

Toilet Facility

Land is provided by the government to the private operator

(OR)

Operations andmaintenance contract

Private Sector

Government


References

Aqua for All and the BOP Innovation Center. (2014). Ready for funding: Innovative sanitation businesses. Retrieved from https://aquaforall.org/wp-content/uploads/2014/12/Ready-for-Funding_Innovative-Sanitation-Businesses.pdf

Cardone, R., Schrecongost, A., & Gilsdorf, R. (2018). Shared and public toilets: Championing delivery models that work. Washington, DC: World Bank. Retrieved from http://documents.worldbank.org/curated/en/122091535055956605/pdf/129628-WP-P165603-Shared-and-Public-Toilets-PUBLIC.pdf

Colin, J., & Nijssen, S. (2007). Public toilets in urban India doing business differently. (WSP Field Note). Retrieved from http://documents.worldbank.org/curated/en/251841468042033847/pdf/452000WSP0Box31blicToilets01PUBLIC1.pdf

Dutta, A. (2018). Six million toilets constructed under Swachh Bharat, 30k can be seen on Google Maps. Hindustan Times. Retrieved from:

Gebauer, H., Haldimann, M., & Saul, C. J. (2017). Business model innovations for overcoming barriers in the base-of-the-pyramid market. Industry and Innovation, 24(5), 543‒568. doi: 10.1080/13662716.2017.1310033

Gebauer, H., & Saul, C. J. (2014). Business model innovation in the water sector in developing countries. Science of the Total Environment, 488, 512–520. doi: 10.1016/j.scitotenv.2014.02.046

Groeber, K., Crosweller, D., Schroeder, E., Kappauf, L., Surridge, T., Panchal-Segtnan, A., & Zurbruegg, C. (2012). Sanitation as a business. (Issue brief). Retrieved from https://www.susana.org/en/knowledge-hub/resources-and-publications/library/details/832

India, Ministry of Home Affairs, Office of the Registrar General & Census Commissioner. (2011). National Register of Citizens. Government of India. Retrieved from http://censusindia.gov.in

India, Ministry of Housing and Urban Affairs, Central Public Health and Environmental Engineering Organisation (CPHEEO). (2018). Advisory on public and community toilets. Retrieved from http://164.100.228.143:8080/sbm/content/writereaddata/Advisory on Public and Communuity Toilet.pdf

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https://aquaforall.org/wp-content/uploads/2014/12/Ready-for-Funding_Innovative-Sanitation-Businesses.pdf

http://documents.worldbank.org/curated/en/122091535055956605/pdf/129628-WP-P165603-Shared-and-Public-Toilets-PUBLIC.pdf

http://documents.worldbank.org/curated/en/251841468042033847/pdf/452000WSP0Box31blicToilets01PUBLIC1.pdf

https://www.susana.org/en/knowledge-hub/resources-and-publications/library/details/832

http://censusindia.gov.in/

http://164.100.228.143:8080/sbm/content/writereaddata/Advisory%20on%20Public%20and%20Communuity%20Toilet.pdf

References (continued)

Intellecap. (2013). Slum sanitation: Market landscape and options for business design (Issue Brief). Retrieved from http://www.bifprogramme.org/sites/default/files/attachments/projectresourceslumsanitationmar13.pdf

Jones, J. (2016). Public and community Toilets, an Indian market landscape (Study Report). Retrieved from http://stepsforsanitation.org/resources/market-intelligence-business-models/public-community-toilets-an-indian-market-landscape/

Lecocq, X., & Demil, B. (2010). Business Model Evolution: In Search of Dynamic Consistency. Long Range Planning, 43, 227–246. doi:10.1016/j.lrp.2010.02.004

Magretta, J. (2002, May). Why business models matter. Harvard Business Review. Retrieved from https://hbr.org/2002/05/why-business-models-matter

Osterwalder, A., & Pigneur, Y. (2010). Business model generation. Hoboken, NJ: John Wiley & Sons.

Saul, C. J., & Gebauer, H. (2018). Digital transformation as an enabler for advanced services in the sanitation sector. Sustainability, 10(752). doi: 10.3390/su10030752

Sustainable Sanitation Alliance. (n.d.). Why Public Toilets: Making a case for public toilets. Retrieved from https://www.susana.org/en/community/integrated-content/public-sanitation/why-public-toilets

Teece, D. J. (2010). Business models, business strategy and innovation. Long Range Planning, 43(2-3), 172–194. doi: 10.1016/j.lrp.2009.07.003

WaterAid. (2018, October). Female-friendly public and community toilets: A guide for planners and decision makers. Retrieved from https://washmatters.wateraid.org/publications/female-friendly-public-and-community-toilets-a-guide-for-planners-and-decision-makers

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http://www.bifprogramme.org/sites/default/files/attachments/projectresourceslumsanitationmar13.pdf

http://stepsforsanitation.org/resources/market-intelligence-business-models/public-community-toilets-an-indian-market-landscape/

https://hbr.org/2002/05/why-business-models-matter

https://www.susana.org/en/community/integrated-content/public-sanitation/why-public-toilets

https://washmatters.wateraid.org/publications/female-friendly-public-and-community-toilets-a-guide-for-planners-and-decision-makers

About the Business Model Innovation Process

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The “business model, far from being a quantum of information that is revealed in a flash, is typically a complex set of interdependent routines that is discovered, adjusted, and fine-tuned by ‘doing.’”‒ Winter & Szulanski

(cited in Lecocq & Demil, 2010)

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A brief introduction

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Business model innovation can be approached in two distinct ways

Static Approach▪ Approaches the business model as a blueprint that synthesizes a way of

creating value in a business▪ Emphasizes achieving coherence within core “components” or “building

blocks”—such as value proposition, value creation, and profit equation ▪ Helps clarify the interactions between components, but does not

describe the process of business model innovation/evolution over time

Dynamic Approach ▪ Approaches the business model as a tool to address change and focus

on innovation, helping managers reflect on how they can change their business models

▪ Understands that a sustainable business model is “rarely found immediately, but requires progressive refinements to create internal consistency and/or to adapt to its environment”*

*Source: Lecocq & Demil, 2010

Design

Renewal

Expansion

Diversification

Replication

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Organizations serving BOP sanitation markets must be

prepared to innovate their business models on multiple levels

Barrier: Low and/or inconsistent revenues

Innovation Opportunity: Diversify revenue streams

Barrier: Unsophisticated distribution channels

Innovation Opportunity:Help professionalize suppliers

Barrier: Difficulty securing payments

Innovation Opportunity: Offer different payment options

Barrier: Uncertain cost structures

Innovation Opportunity: Calculate full life-cycle operational costs

At the system level, enable models to emerge and mature over time

At the component level, address specific barriers to sustainability and scale

+ =An integrated approach to

business model innovation

Source: Gebauer & Saul, 2014; Gebauer et al., 2017

This approach demands a creative, experimental mindset

among everyone involved, especially organizational leaders

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Mindset Matters!

Entrepreneurs eager to deliver value and make an impact in BOP sanitation markets are a unique, inspiring cohort of professionals. They are not easily daunted and they share some essential qualities:

▪ Embrace risk and uncertainty

▪ Live by the mantra: Experiment, Learn, Adapt…Repeat!

▪ Know that failure is a great learning opportunity

▪ Understand that progress takes persistence and patience

▪ See opportunities where others see barriers

How you experiment with your business model is often just as (or more) important

than what you test

▪ Start with the riskiest parts of your model to assess where you are most likely to fail

▪ Engage experts from diverse backgrounds

▪ Follow the principle of small batch experimentation

▪ Ask for help!

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Integrated business model innovation, pursued and supported

by many, helps catalyze sector transformation

A New Future for

CPTs in India!

Enabled by:

▪ Progressive policy changes

▪ Creative procurement and contracting mechanisms

▪ Advances in digital technologies, such as mobile payment platforms and internet-of-things applications

▪ Advances in “off-grid” sanitation products and other innovations

▪ And more!

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These efforts are best facilitated by inclusive business

ecosystems that leverage key actors across the sector

“Inclusive business models can compensate for some of the gaps in the market environment, or work around them, but only inclusive business ecosystems---spanning a wide range of market players in business, government and civil society—can actually overcome them.”

‒ Aqua for All & The BOP Innovation Center, 2014

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