This presentation shows some preliminary results of our re-invent the toilet challenge. For further information, please contact Heiko Gebauer (heiko.gebauer@eawag.ch)

1. Business model innovation
Market-based approaches for sanitation services
Ullrike Messmer& Heiko Gebauer
Sandec& Environmental Social Sciences
EAWAG
Zurich, 12-09-2013

2. Diversion concept

3. „The poor“
“Victims and supplicants for aid”
towards being “value conscious
consumers and resilient entrepreneurs”

4. Key objectives
1) Understanding the role of business model innovation for
sanitation services
2) Presentation of the business model of Eoos/Eawag and Xrunner
3) Current status of business model work among grantees
4) Discussion and further steps

5. Business model thinking providing business
knowledge
Business models as the top of
the iceberg of business
knowledge
KA
Business
models
CR
VP
KP
CS
DM
KR
C
R
Leadership
Business
knowledge
Business strategy
Process management
…
Pricing
Supply chain management
Organizational change
Marketing
KP – Key Partner, KA – Key Activities, KR – Key resources, VP – Value
proposition, CR - customer relationship, DM – distribution & marketing,
CS – customers, C – Cost structure, R - Revenues

6. Key factors for doing business with the poor
• Affordability, accessibility, acceptance, and awareness (Anderson
and Markides, 2007)
• Pay-per-use, no frills service, paraskilling, distribution networks,
contract production & deep procurement (Karamchandani,
Kubzansky, and Frandano, 2009)
• Adapting products and processes, investing in removing constraints,
leveraging poor people’s strengths, combining capabilities and
resources with other organizations, engaging in policy dialogue with
governments (UNDP, 2010)

7. Examples of supply chain management at
Waste concern in Bangladesh
Urban poor
Waste
production
Waste concern
Waste
separation &
collection
Compost plant
MapAgro& waste
concern baraka
agro products
Demand creation
Marketing &
distribution
Enriching compost
Non-profit approach
Rural farmers
Compost
application
Profit approach
Supply chain contract
Visualizing supply chain management activities
Disaggregation of supply chain activities into material,
information, and financial flows
Contractual arrangements between supplier and buyers
Incentives for each supply chain actor and consistency
among the incentives

8. Example of pricing and financialflows at Sarvajal
Installed water
systems
...
Micro-credit
institute
Bank
4000
3500
3000
2500
Sarvajal
(Franchisor)
(5000 $ /
2600$)
Microentrepreneurs
(Franchisees)
1:n
1:m
500 $ (40% of
revenue)
Communities
(Villages –
3’000)
0.12 $ for 20
liters
2000
1500
1000
500
0
2008
2010
2012
Source: own interpretation and interviews. Based on Macomber and Sinha (2012)
2014
2016

9. Business model innovations drive market creation
Creating needs where markets exist Creating markets where needs exist
Traditional (narrow) perspective
concentrating on product and
service innovations
Grameen‘s
phone ladies
illustrate the
power of
business
model
innovations
More open (holistic) perspective
driving business model
innovations
Developing a cheap and affordable
phone, distributing it to low-income
people, and charging appropriate
air time prices (pre-paid)
Providing a micro-credit to village
person for buying a phone
Training village phone operators in
entrepreneurship
Renting out phone minutes (payas-you-use) to village people
+ Pre-paid
services
Village Phone Operator
Villagers

10. There are four reasons why business model
thinking is beneficial
1. Business model is a holistic concept, which integrates socialand profit-oriented motives into consistent, overarching
strategic goals
2. Business model can create revenue structures that match the
volatile cash-flows in the low-income segment
3. Business models can make markets more inclusive for the poor by
clearly depicting different value creation options
4. Business model thinking considers organizations not as isolated
actors, but rather as integrated into business eco-systems, in
which actors integrate resources to create value

11. Combing traditional growth thinking and
business model innovations
Market
penetration
Creating needs
where markets exist
KA
CR
VP
KP
KR
C
CS
DM
4 - Scale-up
R
3 - Success
Market
creation
Creating markets
where needs exist
5 - Maturity
Business model
innovation
2 - Survival
1 - Existence
Time

12. Different degrees of scope in the pro-poor solutions
can be scaled-up
Market penetration
(Scale reached by
pro-poor solutions)
Incremental BM
BM customization
BM replication
FIRST
ENERGY
Scaling-up
cooking stoves
Radical BM
BM diversification
BM customization
BM replication
DESIPOWER
Energy
solutions for
villages
Low
High
Scope
(Complexity and heterogeneity of needs addressed
by pro-poor solutions)
BM – Business model

13. Strategy canvases for business model
visualization
Key partners
• Who are our key
partners?
• Who are our key
suppliers?
• Which key resources
are we acquiring from
our partners?
• Which key activities
do suppliers and
partners perform?
Key activities
• What key activities
do our value
proposition require?
Value proposition
• What value do we
deliver to the
customer?
• Which one of our
customer problems
are we helping to
solve?
• What bundles of
products and services
are we offering to
each customer
segment?
• Which customer
needs are we
satisfying?
Key resources
What key resources
Key resources
• What key resources
doare required?
our value
proposition require?
Cost structure
• What are the most important costs for our business
model?
• Which key resources are most expensive?
• Which key activities are most expensive?
Customer
Customers
relationships
• For whom are we
• What relationship
creating value?
does each customer
segment expect us to
establish?
Marketing
• How do we reach our
customer segments
(awareness,
evaluation,
purchasing, and
using)
Revenue streams
• For what value are customers really willing to pay?
• For what do customers currently pay for?
• How are they currently paying?
• How would they prefer to pay?
Source: Johnson et al. (2007)

14. Customer experience cycle for exploring
customer needs
Customer
experience cycle
Utility layers
Productivity
Awareness
Referral
Acquisition
Simplicity
Convenience
Risks
Retention
Satisfaction
Fun & image
Conversion
Environmental
friendliness

15. X-Runner‘s customer segmentation

16. Short summary
Business model thinking providing business knowledge
Various key factors (e.g., affordability, accessibility, acceptance,
and awareness) need to be considered in doing business with
the „poor“
Business model innovations drive market creation
Scale and scope needs to be considered for pro-poor solutions
Combining traditional growth thinking and business model
innovations leads to incremental and radical business model
innovations, business model customization, diversification,
and replication
Business practices offer a broad range of tools to support
business approaches for the poor

17. Key objectives
1) Understanding the role of business model innovation for
sanitation services
2) Presentation of the business model of Eoos/Eawag and Xrunner
3) Current status of business model work among grantees
4) Discussion and further steps

18. How did we get to the existing business model?
1. Imagining actor relationships
2. Describing business model elements for actor relationships
3. Create morphological boxes with different options
Factor
Specifications (Options)
Intended buyers
Landlords
Tenants
“Rent a Toilet (Service)”
Responsibility of
maintenance (not
cleaning)
Only users
User and
service
person
Only
service
persons
Removal & conveyance
of fecal containers
Individuals
(users)
Individuals &
service
Frequency
4. Selectionofconsistentcombinationofoptions
Twice a week
Depends on
maintenance
activity
Only service
Once a week

19. What is our existing business model?
Key partners
• Local toilet
manufacturer
• Ultrafiltration
membrane
manufacturer
• Treatment equipment
provider
• Local contractors
• Local community
• Mobile phone
operator
Key activities
• Renting
• Installing
• Using
• Maintaining
• Collecting
• Treatment
• Selling end-products
Value proposition
• Access to a clean
and comfortable toilet
• Reliable and safe
emptying of the toilet
and collection of
separated feces and
urine
• Affordable weekly
fixed service fee
(including toilet rent,
emptying toilet,
transportation costs,
and maintaining the
toilet)
• Retrofit
Key resources
What key resources
Key resources
• Logistic skills
are required?
• Operational skills
(RRP)
• Management skills
Cost structure
• Investment costs for toilets and RRPs
• Operational costs for toilets, RRPs, and logistics
Customer
relationships
• Twice a week visits
by the collector
• Mobile payment of
the service fees
Customers
• Families with five
persons including
landlords and tenants
• Wholesalers for endproducts
Marketing
• Community events
Revenue streams
• Service fee
• Sales of end-products

20. What is our existing business model?
Demand
creation
Toilet part
production
Toilet
assembly
Installation
Toilet
Operation
Collection/
Transport
Treatment
Technology
Production
Treatment
Technology
Installation
Payment
Operations
Resource
Recovery
End-product
Sales &
Distribution

21. How do we see the growth of the business
model? (1)

22. How do we build the business plan?

23. What are key issues in the business model
we are currently working on?
• Reduce break-even time
• Exploring more on the end-product market
• Reconsidering the logistic approach for the
collection
• Working on different options for each step in
the sanitation value chain

24. Cost, revenue & profit calculation

25. Resources
http://blog.business-model-innovation.com/
http://www.growinginclusivemarkets.org/
Hystra (2009), Access to energyforthebase of the Pyramid. Research Report.
Hystra (2011), Access to safewaterforthebase of thepyramid. Research Report.
Karamchandani A., M. Kubzansky and P. Frandano (2009). Emerging Markets,
Emerging Models: Market-based Solutions to theChallenges of Global Poverty.
Cambridge, MA, Monitor 2009.
Karnani A. (2007), “The mirage of marketing to the bottom of the pyramid: How the
private sector can help alleviate poverty”, California Management Review, 49
(4), 90-111.
London, T. and Hart, S.L (2010), Next Generation Business Strategies for the Base
of the Pyramid: New Approaches for Building Mutual Value. Upper Saddle
River, NJ: Financial Times Press.