IIM Calcutta Hult

Slide 1

Indian Institute of Management Calcutta, IndiaParticipants:Soubhik ChatterjeeDavid TouthangBrij Bhushan GargJoyjit GorainMadhur Agarwal

BRINGING WATER TO THE DOORSTEP of BoP

CONTENTSEXISTING PRACTICES & KEY PROBLEM AREAS

WHAT SHOULD A SUSTAINABLE BUSINESS MODEL ADDRESS?

OUR PROPOSED BUSINESS MODEL: OVERVIEW

ANALYZING KEY COMPONENTS OF OUR BUSINESS MODEL & ASSESSING SUSTAINABILITY

PHASED IMPLEMENTATION THROUGH A PILOT PROJECT AND ESTIMATED TIMELINEXFR-AAA123-20090227-2Reduce demand13Off-shoring and outsourcingLean optimization45Enable IT6Optimize organizational structure and governanceConsolidate and centralize support services27Develop capabilities and mindsetsReduce demand1Consolidate and centralize support services23Off-shoring and outsourcingLean optimization45Enable IT6Optimize organizational structure and governance

Bottled water companies currently distribute water @ Rs. 12 per litre. For eg. Kinley, Bislery etc.Bottled Water1The municipal currently provides water at economic ratesHigh cost of extension of in-home pipes makes it an unsustainable modelCurrent single water pipes create congestion in water sharingCorporation Supply2Largely depends on the factor that slum dwellers collect dirty and non-drinkable waters from other easy sourcesProvides point-of-use treatments to that low quality water collected by villagers themselvesA dependant model and hence unsustainable3Point-of-use water treatmentEssentially provides free water if stored in an informal wayDifficulty in formalizing the model owing to storage & distribution issuesRainwater harvesting45Water MafiaA class of merchants buy water from the corporation or other sources in bulkSubsequently they sell it to inconvenienced slum dwellers at high premiumToo small a source to handle community based demandLack of effort to scale up bore wells or increase the numbersPond water is unhygienic6Bore wells & pondsExisting Methods Unsustainable for All Stakeholders Financially & Infrastructure WiseThe good (but insufficient) and bad ways of current water infrastructure in slumsCredits extended to entrepreneurs and small organizations to build infrastructure or directly distributeUnsustainable due to insufficient demand generation and lack of later stage funding7Private credit model

Quantity of waterNumbers speak for themselves. The problem is grave and escalating!!! (1/2)QuantityWater per capita per day(in litres)3050BOP consumptionWHO standardsQuantity of waterOn an average, 30% of the city population are currently without access to in-home piped waterAbout 60% do not have access to home sanitation; lack of water being a principal reasonOnly 30% of slum population manage water from community taps, the rest manages it from other sourcesRural population manages water from unsafe bore-wells and unprotected ponds/lakes which run the risk of getting dried in extreme summersMany slum dwellers have to walk for hours to collect and bring back drinking water to their homes.Deep wells in villages provide intermittent supply as the depth of water is erratic in maintaining the right levels4No text for this slide

MANAGEMENTPopulation density makes it difficult to efficiently distribute water to all householdsCost recovery practices are poorSignificant percentage of water theft and pilferage happensPresence of illegal water middle-men who poses a competitive threat to any existing modelDifficult to switch rural consumption patterns and generate consumer base

ACCESSIn most slums, only about 5 hours of water services is provided per dayHence women & children who line up are forced to wait in long queuesResults in loss of work time for women and education for childrenVillages do not suffer from such access problems, but face crisis during summersQUALITYAbout 13% of slum taps are probably contaminated with disease vectors like viruses and bacteriaEvery year, water borne disease causes 6,300,000 cases of illness which leads to 5,600 deathsSlum dwellers manage other activities with highly polluted waterRural ponds/lakes are unprotected, tube-well water is ridden with arsenicIssues with the existing model of water supply are large difficult to ignore (2/2)Quality, Access & Management5No text for this slide





PHASED IMPLEMENTATION THROUGH A PILOT PROJECT AND ESTIMATED TIMELINEXFR-AAA123-20090227-6

Help address the lost opportunity cost due to large wait times for water in urban slumsAvg. of 5 Hrs. lost daily, equivalent to an earning opportunity of ~INR 100/- for urban womenChildrens education suffers due to such large wait timesReplace illegal water supply method s (e.g. water mafia) at high premiumReplace the currently unhygienic water collected from different sourcesUrban slums are largely unstructured and unplanned in nature making distribution of water a complex taskA proposed model should therefore look for an optimal strategy that would help address the large wait time issues at minimal cost for the businessFocus should be on door-to-door water distribution as that would help address the wait time issues the bestDoor-to-door distribution should however at minimal cost for the service providerExtending pipelines not a solution as that would involve large capital costs and recurring maintenance costsAppropriate division of labour to separate water harvest from transportation to households as that would increase stakeholder interestsThe water should come at an optimal price for the slum dwellers compared to existing water facilitiesA systematic collection method from slum dwellers so as to avoid default risk for the businessAn established cycle of cash-flow generation from consumers as well as other financing methods to enable scaled up solutions and further investments

Holistic approachThe right distribution methodologyPractical, actionable and scalable underlying infrastructureSustainable / self serving modelA sustainable and acceptable solution would be the one that addresses the following social, moral and business obligations7NYO-AAA123-20090206-





PHASED IMPLEMENTATION THROUGH A PILOT PROJECT AND ESTIMATED TIMELINEXFR-AAA123-20090227-8Source and Purification are not the bottlenecks. Focus on distribution, market creation and financing.

Summarizing the 5 implementation parameters of our proposed business model Distribution being the key value addition towards a sustainable business modelSourcePrimary sources of water rain, ground, and lakesNot a big bottleneck in our proposed modelSources might be altered based on seasonal availability or on hydro -geographic nature of the land and meteorological patterns (e.g. Desert regions may not always have rain water)

PurificationOne time investment in infrastructure to purify water to be supplied to cluster of slums; Technology available readily

DistributionDoor-to-door supply in bottles of 20 litresEnsure optimal supply to reduce reversal costCentral to local distribution agency to consumers model

Market & PricingTo be priced at 50 paisa per litre and made available in 20 lt bottlesDemand Pull system: Water Card (Kanban) systemIncremental charges to ensure consistent usage & demand

FinancingInitial financing through USD 1 Bn from Water.orgRevenue generated from consumers to fund subsequent growth via revenue bonds

9NYO-AAA123-20090206-

DistributionMarketInvolving local entrepreneurs in the distribution via FRANCHISE modelDistributor would make 20 L cans of purified water available right at the doorstepPlanned truck routes to maximize distribution system potentialWater to be priced at 50 paise per liter (a cent a liter)Incremental charges for consumption above the pre-fixed benchmark to ensure judicious use of water; Water (Kanban) Cards to be issued to the consumers Demand Pull system: Each family to be assigned a fixed number of 20 L cans (say 2) per month. As and when a can empties out, it can be exchanged with a filled one from the distributor truck

Distribution, Market and FinancingFinancingIf the distributor faces excessive default risk, Water.org can enter into commodity swaps with the distributorsWater.org to issue REVENUE BONDS; revenues collected from distributor to used to service the interest payments of the bonds; Practiced by City Municipal CorporationsRevenue bonds can be swapped with LIBOR bonds to increase liquidityPrincipal from the bonds used to SCALE UP the modelScalability via replicability10No text for this slide

Summarizing the overall flow of our model: distribution is the focus againFlow of waterFlow of moneyA Pilot effort will help get a better understanding of our model!11No text for this slide

Location: Slum in MumbaiTarget population: 10, 000

Source Mapping: Since the area receives plentiful rainfall and possess a already depleted ground water reservoir, choice of source: RAINWATER

Purification: Rainwater needs to be purified; Initial investment (Bottling machine, Rain water harvesting, Purifying machine; ~5 year life): 1 Million USD

Distribution System: 300 Thousand liters of water to be supplied every day; ~24 Trucks needed

Suggested pricing: Rs. 0.50 / litre = 33 cents / dayNet Revenue generated (considering distribution costs, private player margin, initial fixed costs, operation and maintenance costs):~ 0.5 million USD / year (cost computations / assumptions in slide 19)

Financing: If used to service interest of the revenue bonds, can generate 10 million USD (5% coupon rate) which will fund 10 more such projects

Results: RoI of ~ 52%Pilot effort: Get a better feel for our model12






Analyzing the key steps of the model14No text for this slide

STAKEHOLDERS How do they interact with the system?






Secure finances from marketSecure land with a high water table and in proximity to a potential customer basePurchase machinery/build storage tanks at minimal cost (get Govt. Help if necessary)Create a demand pull with local consumer base by advertising on abundant but cheap waterWork on word-of-mouth publicity about easy waterOnce the first wave of water is harvested, transfer it to local distribution centres through trucksInvolve local community based youth to increase direct participation and promote saleStress on cleanliness and easy availability as the main USPIdentify city based consumer base and also clusters of villages with pure water demandDistribution has to be expanded from just bottle based sale to pipe extended household facilitiesArrange for local agencies for handling water distribution and sale

Transformation journeyInitial considerations(start-up)Revenue in the short span(

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