This presentation shows different innovations in the water sector. It shows examples of business model innovations for household water treatment devices, water treatment plants, or sanitation services. It continues the discussion on business strategies for poverty alleviation within the context of water and sanitation.

1. Innovation in water and wastewater
industries
Heiko Gebauer
Dübendorf, 27-08-2012

2. © Gettyimages

3. Business research has to decide on the way we take at
the cross-road
Business at its cross-road Base of the Pyramid (BOP)
1.2 Billion (≈ $
2000 annum)
1.6 Billion (≈ $ 725
annum)
1.2 Billion (≈ $ 365 annum)
< $2,000 4,000
Exchange
market
BOP
(Submerge
and poverty)
market
$2,000-$20,000 2,000
> $20,000 100Industrialized
markets
Emerging
‘mass’ markets
PPP
PPP1 Population
1 – PPP – Purchasing power parity
Source Rangan, 2009:

4. Traditional business growth thinking ….
Market
penetration
Time (or cumulative investments)
1 - Existence
2 - Survival
3 - Success
4 - Scale-up
5 - Maturity

5. … is limited when it comes to low-income segments
BOP market
penetration
1 - Existence
2 - Survival
3 - Success
4 - Scale-up
5 - Maturity
BOP market
creation
Business model
innovation
Creating needs where
markets exist
Creating markets
where needs exist
Time (or cumulative investments)

6. Why are market creation and business model innovation
important to the water & wastewater sector?
BOP market
penetration
1 - Existence
2 - Survival
3 - Success
4 - Scale-up
5 - Maturity
BOP market
creation
Innovating
Business model
Mobile phones
Mobile payment
Micro-credits
Water & wastewater
Time (or cumulative investments)

7. What drives business model innovation?
– A capability perspective or resource-based view
Source: Fischer, Gebauer&Fleisch (2012), based on Grant (1996), Teeceet al. (1997), Teece, (2007) Stefano et al. (2010)
Market
penetration
Business model (t2)Business model (t1)
Investments
Individual skills
Sensing Seizing Reconfiguring
RoutinesInvestments
Individual skills
Sensing Seizing Reconfiguring
Routines
Dynamic capabilities
Operational capabilities
Functional capabilities
Activities & tasks
Individual skills
Functional capabilities
Activities & tasks
Individual skills
Dynamic capabilities
Operational capabilities

8. Empirical examples
BOP market
penetration
1 - Existence
2 - Survival
3 - Success
4 - Scale-up
5 - Maturity
BOP market
creation
Business model
innovation
Creating needs where
markets exist
Creating markets
where needs exist
Time (or cumulative investments)
Re-invent the
toilet
challenge
OSHO – Bone
char filters for
fluoride
removal
Sarvajal Honeysucker
businesses
Unilever

9. The re-invent the toilet challenge illustrates the
business model innovation
BOP market
penetration
Existence
Survival
Success
BOP market
creation
Rent-a-toilet
End-product sales
Scaling-up
Micro-franchising
Time (or cumulative investments)

10. OSHO goes from a charity-based to project-based
and, finally, to a profit-based business model
No recovery of
invested capital
Repayment of invested
capital (self-sustainability)
Financial profit maximization
Social profit maximization
Non-for-profit
organization
Social
business
Profit-maximizing
businesses
N/A
Source: Yunus et al. (2010)

11. Non-for-profit
organization
Social
business
Profit-maximizing
businesses
N/A
OSHO goes from a charity-based to project-based
and, finally, to a business-based business model
No recovery of
invested capital
Repayment of invested
capital (self-sustainability)
Financial profit maximization
Social profit maximization
B1-4
C
A
Business models (B1-4)
Flexibility between project-base,
high-volume production
business model and so on
Business model C)
Extending the
business model
scope
Source: Workshop HEKS and OSHO 20-22-08-2012

12. 0
500
1000
1500
2000
2500
3000
3500
4000
Business model innovation at sarvajal
– affordable, accessible, and pure water
Installed water
systems
2008 2010 2014 20162012
...
Source: Sarvajal (2012)

13. 0
500
1000
1500
2000
2500
3000
3500
4000
Business model innovation at sarvajal
– affordable, accessible, and pure water
Installed water
systems
2008 2010 2014 20162012
...
Holistic extension of the business model
Sarvajal
(Franchisor)
(5000 $ /
2600$)
Micro-
entrepreneurs
(Franchisees)
500 $ (40% of
revenue)
Communities
(Villages –
3’000)
0.12 $ for 20
liters
1 : n 1 : m
Operational capabilities: maintaining and monitoring the
systems
Dynamic capabilities
Individual skills – bright brains to repetitive gains
Routines – Franchisee strategy tool / approach to
balance own / borrowed capital
Bank
Micro-credit
institute
Source: own interpretation and interviews. Based on Macomber and Sinha (2012)

14. Septage sludge management can be scaled-up through
different business model innovation
Honeysucker businesses in Bangalore
Success through
innovation
Existence & survival
Scale-up
micro-network
replication
Penetration
Septage
sludge
emptying
Time
Existence & survival
• Micro-honeysuckers start to
emerge after setting-up pit
latrines
Success
• Innovating the vacuum
truck, pumps, composite
field, use of fertilizers, &
special applications
Scale-up
• Extending the number of
mirco-honeysucker
businesses, instead of
growing the individual
businesses

15. Re-considering corporate social responsibility enable
multinational enterprises to be more innovative
Corporate social responsibility (CSR)
• Philanthropy - Outside of the core
business
• CSR Integration – Integration with
the core business
• CSR innovation – Expansion of the
core business
• Grameen Veolia - surface-water
treatment systems
• Procter&Gamble – PUR
• Hindustan Unilever - 'Pureit' Water
Purifier
Reverse Innovation
• Previous transnational strategies
turn towards innovation in emerging
markets and bringing these
innovations back to the industrialized
markets
• Reverse innovation could disrupt
existing technology paths. But it
faces similar hurdles as disruptive
innovation
Source: Halme and Laurila (2009) Source: Govindarajan and Rmamurti (2009), Immelt, Govindaraja and
Trimble (2009)

16. BOP market facilitates a giant leap for all clean-tech
businesses
Source: Hart and Christensen (2003)
Example: centralized and onsite wastewater treatment in uncontested market spaces
in newly-industrialized or developing countries
Performance
Time
Low market
High market
Sustaining technology
Disruptive technology
BOP
Market

17. “That's one (small) step for a man, one giant leap for
mankind”
 Business model innovations enable growth in
water and wastewater businesses
 Dynamic capabilities enhance, but operational
capabilities could limit business model innovation
 Holistic view of business models support local
firms to overcome production and transaction
constraints
 Multinational firms reconsider their CSR
approaches and supplement the transnational
innovation strategy to reverse innovation strategy

18. Thank you very much for your attention
If you have any further questions, please contact me:
heiko.gebauer@eawag.ch