Service Innovation in the sanitation sector
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This presentation describes innovations in the sanitation sector. We highlight whether sanitation services occurr in isolated or integrated sanitation services.
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Service Innovation in the sanitation sector
- 1. Service innovation in the sanitation sector Heiko Gebauer & Caroline Saul Business Innovation Environmental Social Sciences (EAWAG), Zurich, Switzerland Center of Service Research, Karlstad University, Sweden International Research Symposium in Service Management 5
- 2. Sanitation remains a pressing millennium development goal Open defecation Unimproved pit latrine Improved sanitation Sources: globalpressjournal.com, www.flickriver.com, learn1.open.ac.uk, and Western standard
- 3. Organic growth How does sanitation business approach the scaling-up processes? Replication Isolated Integrated How does the sanitation business approach the sanitation chain? (3) Growing supplier of sanitation systems (1) Growing specialists for single sanitation activities (2) Multiple sanitation businesses replicate the success of the initial specialist (4) Multiple sanitation businesses replicate the success of the initial system suppliers
- 4. Sanitation chain Usage Transport Treatment Reuse / Disposal
- 5. Qualitative, theory-building research method has been applied Empirical setting Sanitation services Exploratory case study research Screening for case leads Evaluation of the case leads Building and analyzing the case studies In-depth case study research Primary data collection and analysis through the assistance of local partners (Ethnographic approach) Direct participation in workshop, meeting, interviews and discussions with consumers Data analysis Pattern matching logic Within and cross-case analysis
- 6. Integrated versus isolated businesses along the sanitation chain Isolated Integrated • Organizations identify and exploit the service opportunities of single sanitation activities • Incremental improvements due to more efficient services • Organizations identify and explores the service opportunities along the whole sanitation chain • Radical leap in the sanitation improvements to more efficient services Usage Transport Treatment Reuse / Disposal Usage Transport Treatment Reuse / Disposal Sanitation chainSanitation activities
- 7. Honeysuckers - Isolated sanitation services 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 micro-honeysucker businesses, instead of growing the individual businesses
- 8. Isolated sanitation services benefit from business eco-system Truck manufacturers Honeysuckers FarmersGovernment Commercial customers Vacuum pump manufacturers Toilet suppliers Households
- 9. x-runner integrated sanitation services x-runner provides sanitation services, operates treatment facilities, and sells composts Costs Time Existence & survival • Start to explore new sanitation solutions Success • Financial sustainability of one integrated sanitation system Scale-up • Replication of integrated sanitation systems
- 10. Integrated sanitation services orchestrate the business eco-system Donors x-runner Compost customers Government Households Research institutes Suppliers NPOs Households
- 11. Summary Improvements in sanitation services are a key concern (millennium development goals, 2.8 billion people without access to improved sanitation, health concerns) Sanitation services can be either isolated or integrated Both rely heavily on the business eco-system to get innovations going (isolated – benefits from the business eco-system, integrated – orchestrated the business eco-system) Isolated sanitation services grow through the replication of micro-enterprises Integrated sanitation services grow through establishing a system and decreasing the costs throughout the system provisions
- 12. Thank you very much for your attention … Doing well by doing good …
- 13. Thank you very much for your attention … Doing well by doing good …
Hinweis der Redaktion
- Now, lets take a last example on the issue of scaling-up business model. The examples are taken from septage sludge management. So, it is in the wastewater business. A good illustration for septage sludge management is Manila with the company called Manila Water. Manila Water used a organic scale-up. It means in extended stepwise the coverage of their households desludge. So, it was about 37 to 188’000 households desludge per year between 2004 and 2008. Overall 900’000 households benefit from that model It started by setting-up a few trucks, innovating the tariff system. Desludging costs for households was fixed to the water volume used. The tariff system create access for poor people to the desludging services. Because poor people use less water volume, so they would pay less money for desludging. Business model is changing from a poor tariff-driven to a resource recovery and reuse driven business model. Manila Water creates biosolids, which are by-product of the treatment. These by-products are now used as soil conditioners for renewing fertilitiy. Biosolids has been tested for their efficacy in promoting the growth of the Jatropha plant, which is a source of biofuels. Even more interesting business model can be found in Bangalore. This business model, I would say is even counterintuitive, to most of the conventional business knowledge. Normally, you would believe that companies would grow bigger by moving along this trajectory. This honeysucker businesses show something different. These businesses emerged when the Indian government was sponsoring the setting-up of toilets with pit latrines. What the Indian government did not define was the emptying of the pit latrines. Some smart entrepreneurs recognized this lack of regulation and started that is called a honeysucker businesses. So, they set-up a phone number, build a first vaccum truck and than started as micro-business. Micro-business means that it was one enterpreneur, one driver, and one helper. 3 persons. Micro-business did not grow, but other mirco-businesses popped-up. You quickly had certain number of micro-honeysucker businesses. Normally you would not predict that such single micro-businesses would be very innovative, however as a collective action, the micro-honeysucker businesses innovated quite a few things. They innovated a specific vacuum truck, the drove cost reduction of this truck from 10 to 1, they customized a specific pump, they specialized their offerings. Special offers actually means that they innovate desludging services for appartment building, pricing mechansims. They innovated compost fields were the sludge could be placed. Farmers would give their land for these fields, which, in turn, gives them access to dry sludge, which can be used as fertilizers. In other words, they even innovated the whole business model Honeysuckers charge Rs 1500 per trip. They can do 5 trips per day, which would lead to an income of Rs 7500 a day. The yearly income is about Rs 27 lakhs. Pit latrines have to be emptied every two years. Thus, customer charges of Rs 1500 every 2 years would correspond with Rs 60 per month. Cost structures Cost structures include salary costs and investment cost in the truck and other equipment. Salary costs for honeysucker costs are estimated to be Rs 13.50 lakhs per year. The expenditure for operation and maintenance is estimated to reach Rs 4.0 lakhs per year. One truck can service a population of 20,000 assuming a 2 year pit emptying cycle. Against most of the traditional business research assumptions, these firms stayed small, with an average of 3 employee, There are now 300 micro-honeysucker businesses, which somehow get the desludging done. Within the whole model you find evidences of dynamic capabilities. I will explain one. This one is entrpreneurial alertness. People from the lowest cast with a limited education seem to be able to recognize the business opportunities. They seem to be able to do a quick cost estimation. They understand and create their own market, They are creative to drive innovations, and as a collective action they seem to align costs and revenues in such a way that the whole business model works, that there is no incentive to dump the sludge, to enable farmers to use the sludge. The last counterintuitive thingis that the replication seem to show positive marginal return. So, it is a J-shape. By adding another micro-business to the network, the existing micro-network benefits from it. Normally, you would say that another mirco-business would mean another competitor. In this example, it means that the new micro-business brings in innovation, hinders other micro-businesses to grow by keeping the prices at a certain level. But this certain price level seems to balance the whole business model with the revenue and cost structures,