1. Innovation in water and wastewaterindustriesHeiko GebauerDbendorf, 27-08-2012

2. Gettyimages 3. Business research has to decide on the way we take atthe cross-roadBusiness at its cross-road Base of the Pyramid (BOP)1.2 Billion ( $2000 annum)1.6 Billion ( $ 725annum)1.2 Billion ( $ 365 annum)< $2,000 4,000ExchangemarketBOP(Submergeand poverty)market$2,000-$20,000 2,000> $20,000 100IndustrializedmarketsEmergingmass marketsPPPPPP1 Population1 PPP Purchasing power paritySource Rangan, 2009: 4. Traditional business growth thinking .MarketpenetrationTime (or cumulative investments)1 - Existence2 - Survival3 - Success4 - Scale-up5 - Maturity 5. is limited when it comes to low-income segmentsBOP marketpenetration1 - Existence2 - Survival3 - Success4 - Scale-up5 - MaturityBOP marketcreationBusiness modelinnovationCreating needs wheremarkets existCreating marketswhere needs existTime (or cumulative investments) 6. Why are market creation and business model innovationimportant to the water & wastewater sector?BOP marketpenetration1 - Existence2 - Survival3 - Success4 - Scale-up5 - MaturityBOP marketcreationInnovatingBusiness modelMobile phonesMobile paymentMicro-creditsWater & wastewaterTime (or cumulative investments) 7. What drives business model innovation? A capability perspective or resource-based viewSource: Fischer, Gebauer&Fleisch (2012), based on Grant (1996), Teeceet al. (1997), Teece, (2007) Stefano et al. (2010)MarketpenetrationBusiness model (t2)Business model (t1)InvestmentsIndividual skillsSensing Seizing ReconfiguringRoutinesInvestmentsIndividual skillsSensing Seizing ReconfiguringRoutinesDynamic capabilitiesOperational capabilitiesFunctional capabilitiesActivities & tasksIndividual skillsFunctional capabilitiesActivities & tasksIndividual skillsDynamic capabilitiesOperational capabilities 8. Empirical examplesBOP marketpenetration1 - Existence2 - Survival3 - Success4 - Scale-up5 - MaturityBOP marketcreationBusiness modelinnovationCreating needs wheremarkets existCreating marketswhere needs existTime (or cumulative investments)Re-invent thetoiletchallengeOSHO Bonechar filters forfluorideremovalSarvajal HoneysuckerbusinessesUnilever 9. The re-invent the toilet challenge illustrates thebusiness model innovationBOP marketpenetrationExistenceSurvivalSuccessBOP marketcreationRent-a-toiletEnd-product salesScaling-upMicro-franchisingTime (or cumulative investments) 10. OSHO goes from a charity-based to project-basedand, finally, to a profit-based business modelNo recovery ofinvested capitalRepayment of investedcapital (self-sustainability)Financial profit maximizationSocial profit maximizationNon-for-profitorganizationSocialbusinessProfit-maximizingbusinessesN/ASource: Yunus et al. (2010) 11. Non-for-profitorganizationSocialbusinessProfit-maximizingbusinessesN/AOSHO goes from a charity-based to project-basedand, finally, to a business-based business modelNo recovery ofinvested capitalRepayment of investedcapital (self-sustainability)Financial profit maximizationSocial profit maximizationB1-4CABusiness models (B1-4)Flexibility between project-base,high-volume productionbusiness model and so onBusiness model C)Extending thebusiness modelscopeSource: Workshop HEKS and OSHO 20-22-08-2012 12. 05001000150020002500300035004000Business model innovation at sarvajal affordable, accessible, and pure waterInstalled watersystems2008 2010 2014 20162012...Source: Sarvajal (2012) 13. 05001000150020002500300035004000Business model innovation at sarvajal affordable, accessible, and pure waterInstalled watersystems2008 2010 2014 20162012...Holistic extension of the business modelSarvajal(Franchisor)(5000 $ /2600$)Micro-entrepreneurs(Franchisees)500 $ (40% ofrevenue)Communities(Villages 3000)0.12 $ for 20liters1 : n 1 : mOperational capabilities: maintaining and monitoring thesystemsDynamic capabilitiesIndividual skills bright brains to repetitive gainsRoutines Franchisee strategy tool / approach tobalance own / borrowed capitalBankMicro-creditinstituteSource: own interpretation and interviews. Based on Macomber and Sinha (2012) 14. Septage sludge management can be scaled-up throughdifferent business model innovationHoneysucker businesses in BangaloreSuccess throughinnovationExistence & survivalScale-upmicro-networkreplicationPenetrationSeptagesludgeemptyingTimeExistence & survival Micro-honeysuckers start toemerge after setting-up pitlatrinesSuccess Innovating the vacuumtruck, pumps, compositefield, use of fertilizers, &special applicationsScale-up Extending the number ofmirco-honeysuckerbusinesses, instead ofgrowing the individualbusinesses 15. Re-considering corporate social responsibility enablemultinational enterprises to be more innovativeCorporate social responsibility (CSR) Philanthropy - Outside of the corebusiness CSR Integration Integration withthe core business CSR innovation Expansion of thecore business Grameen Veolia - surface-watertreatment systems Procter&Gamble PUR Hindustan Unilever - Pureit WaterPurifierReverse Innovation Previous transnational strategiesturn towards innovation in emergingmarkets and bringing theseinnovations back to the industrializedmarkets Reverse innovation could disruptexisting technology paths. But itfaces similar hurdles as disruptiveinnovationSource: Halme and Laurila (2009) Source: Govindarajan and Rmamurti (2009), Immelt, Govindaraja andTrimble (2009) 16. BOP market facilitates a giant leap for all clean-techbusinessesSource: Hart and Christensen (2003)Example: centralized and onsite wastewater treatment in uncontested market spacesin newly-industrialized or developing countriesPerformanceTimeLow marketHigh marketSustaining technologyDisruptive technologyBOPMarket 17. Thats one (small) step for a man, one giant leap formankind Business model innovations enable growth inwater and wastewater businesses Dynamic capabilities enhance, but operationalcapabilities could limit business model innovation Holistic view of business models support localfirms to overcome production and transactionconstraints Multinational firms reconsider their CSRapproaches and supplement the transnationalinnovation strategy to reverse innovation strategy 18. Thank you very much for your attentionIf you have any further questions, please contact me:heiko.gebauer@eawag.ch