Sie sind auf Seite 1von 14

The CASE Journal

WaterHealth International in India: crafting sustainable solutions for potable water


Hristina Kostadinova Dzharova Sudheer Gupta Jai Ganesh
Article information:
To cite this document:
Hristina Kostadinova Dzharova Sudheer Gupta Jai Ganesh , (2016)," WaterHealth International in India: crafting sustainable
solutions for potable water ", The CASE Journal, Vol. 12 Iss 2 pp. 156 - 168
Permanent link to this document:
http://dx.doi.org/10.1108/TCJ-08-2014-0056
Downloaded on: 12 January 2017, At: 08:03 (PT)
References: this document contains references to 34 other documents.
To copy this document: permissions@emeraldinsight.com
Downloaded by Swinburne University of Technology At 08:03 12 January 2017 (PT)

The fulltext of this document has been downloaded 9 times since 2016*
Users who downloaded this article also downloaded:
(2016),"Between righteous legacy and Pyrrhic victory – an administrator’s dilemma", The CASE Journal, Vol. 12 Iss 2 pp.
133-143 http://dx.doi.org/10.1108/TCJ-05-2014-0043
(2016),"Plum Island Coffee Roasters: a perfect blend of coffee, business and community", The CASE Journal, Vol. 12 Iss 2
pp. 179-188 http://dx.doi.org/10.1108/TCJ-12-2014-0069

Access to this document was granted through an Emerald subscription provided by emerald-srm:215423 []
For Authors
If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service
information about how to choose which publication to write for and submission guidelines are available for all. Please visit
www.emeraldinsight.com/authors for more information.
About Emerald www.emeraldinsight.com
Emerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of
more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online
products and additional customer resources and services.
Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication
Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation.

*Related content and download information correct at time of download.


WaterHealth International in India: crafting
sustainable solutions for potable water

Hristina Kostadinova Dzharova, Sudheer Gupta and Jai Ganesh


Downloaded by Swinburne University of Technology At 08:03 12 January 2017 (PT)

Hristina Kostadinova Dzharova Although the widely celebrated Holi festival was approaching, Mr Vikas Shah, Chief Operating
is PhD Student at Beedie Officer for WaterHealth International (WHI), was preoccupied with expansion and scaling
School of Business, challenges awaiting WHI in India. He knew the societal need for safe-drinking water was pressing
Simon Fraser University, – nearly 100 million people in the country lacked access to potable water and 1.5 million children
Vancouver, Canada. died from water-borne diseases annually (UNICEF, 2014). Women and young girls were primarily
Sudheer Gupta is Associate charged with the responsibility to fetch water in the majority of poor Indian households, which
Professor and Director at typically required walking long distances and took on average 1.8 hours/day. To Mr Shah, this
Beedie School of Business, represented tedious work and valuable time that could be spent with family, working, studying,
Jack Austin Centre for
or simply relaxing. He wondered how he could help scale WHI’s footprint in India in order to have
Asia-Pacific Business Studies,
a large-scale social impact and prove the financial viability of its business model.
Simon Fraser University,
Vancouver, Canada. WHI was setup as a for-profit social enterprise with a mission to serve people in developing
Jai Ganesh is based at countries that were put at risk due to lack of clean drinking water. The company aimed at
Business Technology creating long-lasting social impact among underserved communities via a sustainable business
Innovation and Services model that combined a unique business strategy, advanced off-the-shelf technologies, and
Science, Mphasis, efficient process execution (WHI, 2014a). WaterHealth International India (WHIN) was founded in
Bangalore, India. 2006 as a fully owned subsidiary of WHI.
In 2009 the International Finance Corporation (IFC)[1] financed WHI’s expansion in India through
a US$15 million loan. WHI had to use the funding to scale its water-purification centers (water
health centers, WHCs) up to 800 by 2010, adding to the 175 already started in 2009 (Stein,
2009). While the funding provided validation of the company’s approach and business model,
Mr Shah was aware of the enormous challenges in scaling up a social enterprise. He understood
India’s socio-economic environment as well as the opportunities and challenges inherent in the
large scale of the Indian market. He needed to establish a value for the company’s product – dr.
water™, in addition to tackling other concerns both internal and external to the company. Mr
Shah had to rethink WHIN’s resources and capabilities and identify salient points in the
company’s business model to enable scalability and sustainability. Additionally, he needed to
assure community acceptance and adoption of the service, and establish a willingness to pay in
the targeted communities. The latter seemed particularly challenging, as he recalled the example
of Mrs Dhana Lakshmi, a villager in her mid-40s who had a household of five and a total income
of 80 rupees a day (equivalent to about $1.33). When approached with the idea of paying for
clean drinking water, Mrs Lakshmi, as most of her co-villagers, strongly opposed it (Wonacott,
Disclaimer. This case is written
solely for educational purposes 2007). She preferred to walk kilometers to the nearest community tap instead of paying less than
and is not intended to represent a penny for purified water sold in her village close to home. Mr Shah realized that for WHIN to be
successful or unsuccessful
managerial decision making. The
sustainable, it would have to find a way to overcome such resistance to paying for clean water,
author/s may have disguised which was rooted perhaps in expectations that clean water should be a basic right of every
names; financial and other citizen, and provision of clean water should be a basic service provided by governments.
recognizable information to protect
confidentiality. Moreover, lack of education and awareness among many communities regarding water-borne

PAGE 156 j THE CASE JOURNAL j VOL. 12 NO. 2 2016, pp. 156-178, © Emerald Group Publishing Limited, ISSN 1544-9106 DOI 10.1108/TCJ-08-2014-0056
diseases and related adverse health and economic impacts made it difficult for WHIN to establish
a value for its product.
WHI’s for-profit structure and commitment to social mission required the company to
simultaneously generate economic profits and social impact. This duality left Mr Shah thinking
about various options to establish and scale a profitable social enterprise and create shared value
(CSV) for WHI stakeholders in India. Additionally, he was aware of various forms of public-private
partnerships (PPPs) that had the potential to support successful business models and wanted to
examine and evaluate them.

Base of the Pyramid (BoP) market assessment


The population at the BoP constituted nearly four billion people with annual incomes below
$3,000, the largest but also the poorest socio-economic group. Although large segments of this
population remained underserved and disconnected from the global economy, the collective
purchasing power of BoP consumers was estimated at $5 trillion (WRI, 2007).
Over the decade spanning 2004-2014, business interest in serving the BoP consumers had
been growing. Initial interest in BoP markets was driven by the seductive idea of seemingly
unlimited growth in market shares and profits while helping solve some of the societal
Downloaded by Swinburne University of Technology At 08:03 12 January 2017 (PT)

challenges and needs (seeking the “fortune at BoP”). Many, however, struggled to successfully
tailor their products and services to match the needs of the BoP segments. To be successful,
organizations needed to create capacity for consumption and the ability to scale, as profitability
was often based on low-margin, high-volume sales. Building a consumer base, however, did
not simply pertain to coming up with a cheap, low-cost solution – the eco-system also needed
to be created. This included establishing distribution channels, value for the product/service, as
well as making it accessible and affordable (Polak and Warwick, 2013; Prahalad and
Hammond, 2002).
Indian BoP market consisted of 114 million households which accounted for 75 percent of the
total rural population (Shukla and Bairiganjan, 2011). Although, the individual purchasing power in
the Indian BoP market was weak, the aggregate purchasing power presented a significant
opportunity for multi-national corporations and small- and medium-sized businesses alike.
However, despite the opportunities, the Indian BoP segment remained underserved, inefficient,
and non-competitive (Prahalad, 2005).
The BoP market in India was very diverse, as customers had deeply ingrained cultural values and
beliefs that varied across geographical regions. Consumer adoption typically required a high
degree of product customization, mostly in making the product/service easily understandable
and accessible to the end-user. Meeting these requirements, however, was a challenging task
that necessitated a lot of education and awareness creation activities on the ground, thus slowing
growth and scaling of business ventures.
In addition, organizations and entrepreneurs faced other barriers to operating in the Indian BoP
markets, including lack of regulations, poor execution of government programs, infrastructure
constraints, and geographical challenges (Shukla and Bairiganjan, 2011). Overcoming these
challenges often required collaboration between businesses, communities, government
agencies, and non-governmental organizations. Thus, managers and entrepreneurs had to
develop a broad set of capabilities and relationships in order to penetrate the BoP markets.

Global water crisis at a glance


Water scarcity had long been a serious challenge and affected almost every continent on Earth.
A recent United Nations report indicated that one-fifth of the world’s population or an
approximate 1.2 billion people lived in areas where access to water was scarce (UN-Water,
2012). Water scarcity was both a natural and a man-made phenomenon as water was unevenly
distributed, much of it wasted and unsustainably managed. Ineffective water management led to
an outburst of water-borne diseases such as cholera, malaria, and diarrhea. In fact, estimates
indicated that three million people in the world died of water contamination and water-related

VOL. 12 NO. 2 2016 j THE CASE JOURNAL j PAGE 157


diseases (WHO, 2013). Thus, the provision of water, and particularly safe-drinking water, had
become an enormous global challenge. Availability of safe-drinking water was most challenging in
rural areas where approximately 1.7 billion people relied on community taps, wells, hand-pumps,
springs, and rain water (UNICEF & WHO, 2014).

Water scarcity in India: challenges and opportunities


In India access to adequate water was cited as one of the primary factors that imposed limits on
development. The average availability of water had been deteriorating steadily with the growing
population and it was estimated that by 2020 India would become a “water stressed” nation
(WorldBank, 2011). The country’s rural population of nearly 700 million people resided in over 15
diverse ecological regions, and nearly 70 percent lacked access to safe-drinking water supply,
relying instead on ground water not fit for drinking (see Exhibit 1). Due to topographic constraints
and distribution issues, only 58 percent of the available water sources in the country were
classified as “usable water” (Ernst & Young, 2014). Increasing pollution rates and inefficient water
use and management exacerbated a growing decline in water supply.
Provision of safe-drinking water to a large population was hindered by the absence of regulations
on usage and wastage of water, and asymmetries in the level of awareness, education, poverty,
Downloaded by Swinburne University of Technology At 08:03 12 January 2017 (PT)

and religious beliefs. As a result, each year nearly 37 million people in India reported infections
from water-borne diseases. The economic impact of such diseases was estimated to be
73 million working days lost per year with a fiscal burden of approximately $600 million a year
(WaterAid, 2009).
Many entrepreneurs and organizations saw this loss in productivity and water-related challenges
as opportunities to try out new ideas and new business models. Water-related investments in
developing countries were growing at a rate of 100-200 percent of the respective countries’ GDP
growth (Ernst & Young, 2014). According to a World Bank report, more than US$900 billion in
investments were needed worldwide to maintain and upgrade deteriorating water infrastructure.
Nearly 25 percent of those investments were expected to come from the private sector
(WorldBank, 2011). Additionally, increases in urbanization led to a need for development of new
business models that could meet clean water demands of both the rural and the urban poor.

Water solutions in India


There were several alternatives for provision of potable water to India’s large and diverse
population. One option was piped water through taps, which was the government’s
responsibility, as access to safe-drinking water had long been considered a basic right of
citizens in every country. However, the initial capital expenditures required for setting up a central
processing plant and a distribution network coupled with the operating costs, were very high,
limiting the ability of resource-constrained governments to ensure piped water to all the citizens,
especially in rural areas. Moreover, in many areas, piped water was still contaminated and did not
meet the international World Health Organization (WHO) standards for potable water (WHO,
2008). Second option was water from the bore wells. This was not a viable solution in many areas
as water quality was highly dependent on the ground structure of the community’s location.
Additionally, bore wells’ pumps had a tendency to break down mechanically after six to nine
months of use and required regular maintenance. A third option was water delivered via tankers
to the communities. However, water quality was again questionable as it could be difficult to
monitor and assure that water came from a reliable source every time (WaterAid, 2009). As a
result, safe water access had not been substantially improved as resources and capacity-building
activities were limited. To address water-related economic hurdles, India needed more holistic
and people-centric water management business models.

WHI Inc. company background


WHI Inc. was founded in 1996 by a Ghana-based entrepreneur, Mr Tralance Addy, with the goal
to “invest in business that aid society” (LBNL, 2009). He was driven to the idea as he often

PAGE 158 j THE CASE JOURNAL j VOL. 12 NO. 2 2016


recalled his childhood days when he had to walk long distances until he could reach the
community water tap. The technology that Mr Addy planned to incorporate in the business
involved an ultraviolet (UV) light to effectively kill bacteria, viruses, and other water-borne
microorganisms. The UV light technology was easily adaptable to the needs of the poor, relatively
accessible, and simple to use. The initial business model incorporated direct sales of the
technology to entrepreneurs in developing countries, but this approach had proven unsuccessful
as the company had not been able to break-even (Wonacott, 2007). In 2002, WHI underwent a
restructuring headed by Mr Addy’s venture management company, Plebys International LLC[2].
Plebys also provided US$2 million of capital to enable WHI to overhaul its business strategy
toward offering a water-purification service using its technology as opposed to selling the
technology itself. WHI acquired the status of a for-profit social enterprise, with a mission to “be the
leader in providing scalable, safe, and affordable water solutions to underserved populations
through an innovative business model.” In the period 2004-2009, the company raised additional
capital from investors such as the Acumen Fund[3] and the IFC to support and expand its
operating activities. In the following years, WHI attracted more funds from Dow Chemical
Company[4], Sail Venture Partners[5], and Tata Capital[6]. Most recently, in 2014, the Coca-Cola
Company and Vital Capital became shareholders with the latter investing US$10 million in WHI.
Exhibit 2 provides an overview of key investors in the company. While WHI had been developing,
installing, and operating water-purification systems for poor communities in Mexico, the
Downloaded by Swinburne University of Technology At 08:03 12 January 2017 (PT)

Philippines, and Ghana, India was a large and important market for the company to test and
prove its business model (IFC, 2012).

WHIN
WHIN was founded in 2006 as a fully owned subsidiary of WHI. Its major focus was on
rural India where lack of access to safe-drinking water had been most acute. WHI initially tested
its service via a pilot project in Bomminampadu, Andhra Pradesh. It initiated marketing
campaigns to familiarize people with the benefits of purified water. In 2007, as part of its
marketing initiatives, WHIN helped launch the “Blue Revolution” initiative together with several
local private companies, NGOs, and governmental institutions (PRwire, 2007). The initiative
was inspired by the success of India’s “Green Revolution” that took place back in the 1960s
when India used high-yielding varieties and improved technology to more than double its
output of wheat.
The “Blue Revolution” campaign yielded results as the water disinfection service was well
received by the communities. Its impact became evident by the positive feedback provided by all
parties involved in the initiative – the community, the government, the NGOs, and the donors.
Encouraged by its early success, WHIN proceeded with the installation of its WHCs throughout
India and by early 2009, WHIN had 175 site installations (Stein, 2009). In 2009, the company
received a US$15 million financing from the IFC to further grow its installation sites in the country.
The funds came in the form of a long-term, ten-year loan, with requirements for a sustainable,
scalable business model that would enable expansion (a target of 800 new WHCs) and a sizable
social impact. Meeting these objectives required leveraging WHI’s technological, managerial, and
organizational capabilities.

The UV Waterworks™ (UVW) technology – from idea to innovation


WHI’s water-purification system utilized UVW technology initially developed by Dr Ashok Gadgil.
While working at the Lawrence Berkeley National Laboratory at the University of California,
Dr Gadgil developed the idea of using UV light to purify contaminated water (Interview, 2013b).
The technology, called UVW, had been very efficient in disinfecting water as it destroyed 99.9
percent of harmful microorganism without the use of any chemicals. There were many
advantages: the UV light system avoided chemical by-products, and did not change the taste,
the odor, or the color of the water. Moreover, the technology had many operational advantages
as it was accessible, cost-effective, and easy to maintain (WHI, 2014b).
WHI incorporated UVW into a nine-step water-purification process. The multi-stage process
treated a wide variety of physical and chemical contaminants such as fluoride, iron, arsenic, and

VOL. 12 NO. 2 2016 j THE CASE JOURNAL j PAGE 159


microbiological contamination (see Exhibit 3 for a summary description of the process). Further,
the system could be customized based on the availability and quality of water in the targeted area.
However, the system required grid-based electricity. Despite its grid dependency, WHIN claimed
that its technology was three to four times more effective than any other UV-based system
available on the market. Moreover, the process was designed and assembled in a manner that
could reduce water wastage to 30 percent as opposed to other available units where the water
wastage could be anywhere from 40 to 60 percent (Coon, 2008). The water residue was further
utilized for plantation and agriculture.

The competitive environment


The advantages and affordability of the system had the potential to lure other players into the
water market. The technology was available to competitors and entry barriers appeared to
be low. For example, WHIN executives thought capital investment requirements to enter the
business were very low (“anyone with an investment of 2-2.5 lakhs[7] could set up a water plant”),
though their estimates for setting up their WHCs were much higher (Interview, 2013a).
The Bureau of Indian Standards (BIS)[8] had drafted regulations for community water
systems under a water-quality standard known as IS10500. However, these were weakly
Downloaded by Swinburne University of Technology At 08:03 12 January 2017 (PT)

enforced and practically impossible to monitor. The lack of regulatory enforcement was
reflected in the continuously increasing expenditures on water-borne diseases. A drinking water
quality report showed that rural population in India spent at least 100 INR per person
per year treating water-borne diseases (in a rural setting this represented a substantial amount)
(WaterAid, 2009).
The virtual absence of regulations and the affordability of the technology in the community
water-purification setting intensified competition, as several players emerged in geographically
dispersed markets throughout the country. Competition in the form of individual market players
numbered around 1,500-2,000 in addition to other organized players within the water sector in
India. Cumulatively, they represented nearly 70 percent of the country’s water purifier market
(WaterAid, 2009). Mr Shah was familiar with the major competitors and had identified two
clusters of competition. On one side, there were the local NGOs, and on the other side were
private companies that were also equipment manufacturers. Notable examples across
both clusters were the Naandi Foundation, S.R. Paryavaran, Sarvajal, and Doshion Veolia
(Interview, 2013a).
The Naandi Foundation was a local NGO that relied on donations to set up a community
safe-drinking water system. The donated amounts accounted for 20-40 percent of the plant cost
depending on its capacity. The NGO encouraged village inhabitants to match their contribution,
and worked toward assuring a bank loan for the remaining share of the plant financing so that the
project would be successfully completed (Naandi, 2014).
S.R. Paryavaran had been operating since 1992 and was well-known among many communities.
The company was praised within the water sector for its strict adherence to quality standards and
promised delivery as it had established reliable distribution channels. Its services included supply
of a wide-range of water pollution control systems, manufacturing of water equipment, operation,
and maintenance of water plants (S.R. Paryavaran, 2014).
Sarvajal was founded in 2008 with the aim of providing safe-drinking water to the BoP segments
in India. It operated under the franchising principle but also provided equipment, training,
payment solutions, and marketing services to its franchisees. Additionally, the company
connected its franchisees with banks to ensure financing for their operations (Sarvajal, 2014).
Doshion Veolia was yet another competitor in the market. The company was founded in 2006 as
a joint venture between Doshion Limited (India) and Veolia Water Solutions & Technology
(France). It aimed to increase efficiency in water usage by providing support in coordinating,
managing, and maintaining water-purification processes. It was also a distinguished
manufacturer of technologically superior water pipes in the country. The company engaged in
diverse areas such as project development, water source identification, technology development,
distribution, and networking (Doshion, 2014).

PAGE 160 j THE CASE JOURNAL j VOL. 12 NO. 2 2016


WHIN business model: decentralized production and distribution
To reach more customers, WHIN followed a decentralized model. It operated small- to medium-
sized units at different locations across India. Decentralization entailed a very careful selection of
the geo-locations. Hence, WHIN developed a detailed selection process that involved many
criteria including assessment of the community using the Socio-Economic Classification Grid
(SEC) of India[9] (see Exhibit 4 for details), water availability, need for safe-drinking water,
community acceptance, ability to pay, and population density. Furthermore, locations were
carefully selected in a geographical cluster in order to more effectively coordinate and manage
each WHC (Interview, 2013b).
After a location was selected, WHIN engaged in a PPP where the local community provided the
land and access to the water source. The community was also required to provide an
electricity connection to set up the plant. The land was taken under a concession term of
15-20 years depending on certain financial sustainability parameters. In selected cases the
community further committed to an initial down payment of 60-100 percent of the funding
needed to set up the plant. In general, the capital needed for setting up each WHC came from
one of three main sources. One source was the individual or institutional donors. Another
source was the government, or more specifically the Rural Water Supply Department of a
particular Indian state. A third source could be a local politician or a philanthropist who had a
Downloaded by Swinburne University of Technology At 08:03 12 January 2017 (PT)

particular interest in the village. If funding was only partially provided, the remainder needed to
be financed by a local lending institution. Upon mobilizing the funding, WHIN could construct
the plant in six to eight weeks, as the installation comprised of a modular infrastructure that
was easily transportable and quick to set up (Interview, 2013b) (see Exhibit 5 for WHIN
operations in the natural setting). WHIN would then manage and operate the plant from the
user fees charged for water purification. Moreover, the company employed workers from
the village and trained them to support daily operations of the plant. Depending on
community size, WHCs could be managed by one or more operators. Additional workers were
trained in water quality testing, maintenance, and water dispensing. Upon expiry of the
concession terms, the community had the option of either operating the plant on its own or
extending the maintenance contract with WHIN (IFC, 2012) (see Table I for a summary of
the model elements).
Under this Build-Operate-Transfer (B-O-T) model, the sustainability of the business was highly
conditional on the community familiarity with the service and its associated benefits. WHIN
launched marketing initiatives in an attempt to create awareness, enhance demand for the
service, and educate customers on the benefits of safe-drinking water. Marketing strategies of
WHIN included both social and general marketing activities. To create awareness, the company
organized women groups, conducted activities in schools and hospitals, distributed posters, and

Table I WHIN business model: decentralized production and distribution


Process Description

1. Selection of WHC/plant location Need for safe-drinking water


Community’s ability to pay
Access to water source
2. Initiation of a private-public partnership (PPP) Community provides land and access to water source
Land is taken under a concession term of 15-20 years
3. Initial down payment of 60-100% Option 1: individual or institutional donors
Option 2: state-level government
Option 3: politicians or philanthropists
4. Financing of unsubsidized portion WHIN partners with local lending institutions to secure remaining share of financing
5. Construction of the WHC/plant Construction process initiated and completed by WHIN in 6-8 weeks
6. Operation and maintenance of the WHC/plant Operations are financed by user fees collected for purified water
WHIN educates community members to operate and maintain the WHC/plant
7. Expiration of concession terms Option 1: WHIN transfers operations to the community
Option 2: extend the maintenance contract with WHIN

VOL. 12 NO. 2 2016 j THE CASE JOURNAL j PAGE 161


painted street walls. These campaigns took place around two to three weeks prior to launching
the plant and continued over another couple of weeks after the launch to ensure that most of the
targeted community had been covered (Interview, 2013a). Additionally, in 2013 WHIN recruited
external evaluators to assess its social impact among served communities. The report findings
indicated that WHIN’s consumer households were ten times less likely to experience a water-
borne disease compared to non-consumer households and 1.4 times less likely to experience
any illness (IMRB, 2013).

WHIN outlook and strategic alternatives


The company’s main goal was to be a financially sustainable business while serving a major
social need. WHIN’s capital structure included a mix of patient capital and venture capital.
In addition, the loan provided by IFC imposed financial liability on WHI. This created pressures
to generate financial returns and develop a fully operational, scalable, and sustainable
business model.
WHIN estimates indicated that the average upfront investment for each WHC was approximately
US$25-US$30,000. The company’s stock keeping unit was a 20-liter can and Mr Shah
reasoned that “populist pricing” was not a practical approach for WHIN’s target group.
The company’s tariff was set at 0.3 INR per liter or the equivalent of 6 INR (approximately
Downloaded by Swinburne University of Technology At 08:03 12 January 2017 (PT)

10 cents) for a 20-liter can. Mr Shah believed that this price would make the service easily
affordable even among rural communities and at the same time move the company toward
financial sustainability.
Additionally, he acknowledged the need to enhance distribution techniques. The company had
two primary modes of delivering safe-drinking water. One was the direct over-the-counter
(OTC) sales to customers and another was the delivery service providers (DSPs). The latter
targeted customers in remote areas who sought convenience by having water delivered at their
doorstep. These customers paid an additional small fee for the service. WHIN recruited
DSPs from the communities it targeted. While the company provided training and education, it
did not support the villagers’ capital investments (purchase of vehicles to transport water and
cans to store it) (Interview, 2013a). As of 2012, WHIN had 150 DSPs and aimed to have
250 DSPs within the next two years. Moreover, Mr Shah was considering expanding the service
to urban customers, where the role of DSPs as a reliable distribution channel could be
very important.
Though WHIN seemed to have settled for its decentralized, B-O-T model, there were other
PPP models worth considering. One option was the “Operation and Maintenance Contracts”
(O&M) model where the municipality owned the utility and retained the responsibility for capital
improvements, but delegated the day-to-day operations and maintenance to a private
company such as WHIN. The private company was then paid by the municipality, which also
controlled revenues received from end-users. Another option was the “Affermage” contract
where the municipality owned the utility and bore responsibility for capital expenditures.
However, it leased the utility to a private company for day-to-day operations and maintenance.
The private company made lease payments to the municipality but collected revenues from the
customers. A third option was the “Investor-Owned Utility” model where the municipality no
longer owned the utility but all the associated responsibilities resided with the private company.
Lastly, WHIN could alter its existing business model into an “Outright Sale” model where WHIN
would sell its own plants to local entrepreneurs or businessmen to operate independently. In
fact, WHIN was already involved in the latter, which as of 2013 accounted for 5 percent of the
company’s revenue stream.
Mr Shah needed to examine the value proposition of the B-O-T model by assessing its salient
points. How could he assure economic value for WHIN but also maintain the enterprise social
vision of delivering safe-drinking water to underserved communities? What were major
parameters he needed to consider while assessing the model’s scalability and sustainability?
Were alternative PPPs viable mechanisms to enable profitability of the enterprise? Mr Shah
recognized the importance of each decision, as it would have a profound impact on his ability
to scale WHI operations in India.

PAGE 162 j THE CASE JOURNAL j VOL. 12 NO. 2 2016


Notes
1. IFC – a member of the World Bank Group and the largest global development institution focussed
exclusively on the private sector in developing countries.
2. Plebys International LLC – a venture capital firm specializing in incubation and early-stage start-up
financings.
3. Acumen Fund – an incubator for charitable donations used for investments companies that address
poverty issues.
4. Dow Venture Capital – an investment arm of The Dow Chemical Company.
5. Sail Venture Partners – a venture capital firm investing in energy and water technology companies with a
focus on sustainable innovation and exciting growth potential.
6. Tata Capital – an investment company registered with the Reserve Bank of India to offer fund and
fee-based financial services to its customers.
7. Lakh – a unit in the South Asian numbering system equal to 100,000. At current exchange rates (October
2014) 1 Lakh≈US$ 2,000.
8. BIS – the National Standards Body of India, working under the aegis of the Ministry of Consumer Affairs,
Foods and Public Distribution, Government of India.
9. SEC – a methodology developed by the Indian government to divide the general population into
Downloaded by Swinburne University of Technology At 08:03 12 January 2017 (PT)

segments based on their social and economic status.

References
Coon, T.G. (2008), “Reverse osmosis for home treatment of drinking water”, available at: http://msue.anr.
msu.edu/objects/content_revision/download.cfm/revision_id.499716/workspace_id.-4/01500611.html
(accessed October 16, 2014).

Doshion (2014), “Doshion Veolia”, available at: www.doshion.com/ (accessed October 16, 2014).
Ernst & Young (2014), Riding the Wave, New Delhi.

IFC (2012), “WaterHealth International”, available at: www.ifc.org/wps/wcm/connect/935e8c004c


c4ff658eb6bf9ec86113d5/CS_007_WaterHealth%2BCaseStudy%2B0530.pdf?MOD¼AJPERES (accessed
October 16, 2014).
IFC (2014), “WaterHealth International, Inc. (WHI)”, available at: http://ifcext.ifc.org/ifcext/spiwebsite1.nsf/0/
6B03B42AA1A44A50852576BA000E2C6C (accessed October 16, 2014).
IMRB (2013), “WaterHealth India: impact evaluation findings”, IMRB International for IFC.

Interview (2013a), “Follow up interview with Mr. Madhu Krishnamoorthy: Head – Capital Business Unit”,
Vancouver and Hyderabad, October 31.
Interview (2013b), “Initial interview with Mr. Madhu Krishnamoorthy: Head – Capital Business Unit”, Vancouver
and Hyderabad, November 28.
LBNL (2009), “Success stories: WaterHealth International”, available at: www2.lbl.gov/tt/success_stories/
articles/WHI_more_no_Mex.html (accessed October 30, 2013).
MRSI (2011), Socio-Economic Classification: The New SEC System, MRSI, Mumbai.
Naandi (2014), “Naandi Foundation”, available at: www.naandi.org/ (accessed October 16, 2014).

Polak, P. and Warwick, M. (2013), The Business Solution to Poverty: Designing Products and Services for
Three Billion New Customers, Berrett-Koehler, San Francisco.
Prahalad, C. (2005), Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits, Wharton
School Publishing, Philadelphia, PA.

Prahalad, C. and Hammond, A. (2002), “Serving the world’s poor, profitably”, Harvard Business Review,
Vol. 80 No. 9, pp. 48-59.
PRwire (2007), “WaterHealth International announces the launch of the Blue Revolution”, available at: www.
indiaprwire.com/pressrelease/environmental-services/200702091862.htm (accessed October 30, 2013).

Saradar, S. and Rajagopalan, A. (2011), “MRUC and MRSI announce new socio-economic classification
system”, available at: http://mrsi.in/newsec.html (accessed October 30, 2013).

VOL. 12 NO. 2 2016 j THE CASE JOURNAL j PAGE 163


Sarvajal (2014), Sarvajal Company Website, available at: www.sarvajal.com/ (accessed October 16,
2014).
Shukla, S. and Bairiganjan, S. (2011), The Base of Pyramid Distribution Challenge, IFMR, Research Centre for
Development Finance, Chennai.
S.R. Paryavaran (2014), “S.R. Paryavaran engineers”, available at: http://srparyavaran.com/index.asp?pg¼company
(accessed October 16, 2014).
Stein, M. (2009), “IFC eyes larger backing for WaterHealth as it targets developing world”, available at: www.
sailcapital.com/sites/default/files/IFC%20Eyes%20Larger%20Backing%20For%20WaterHealth%20As%
20It%20Targets%20Developing%20World.pdf (accessed October 30, 2013).
UNICEF (2014), “Children dying daily because of unsafe water supplies and poor sanitation and hygiene”,
available at: www.unicef.ca/en/press-release/children-dying-daily-because-of-unsafe-water-supplies-and-
poor-sanitation-and-hygiene- (accessed October 16, 2014).
UNICEF & WHO (2014), “Progress on drinking water and sanitation 2014 update”, WHO/UNICEF Joint
Monitoring Programme (JMP) for Water Supply and Sanitation, available at: www.wssinfo.org/data-
estimates/introduction/ (accessed October 16, 2014).
UN-Water (2012), Managing Water Under Uncertainty and Risk, UNESCO, World Water Assessment
Program. Paris.
WaterAid (2009), “Drinking water quality in rural India: issues and approaches”, in Khurana, I. and Sen, R.
Downloaded by Swinburne University of Technology At 08:03 12 January 2017 (PT)

(Eds), WaterAid, available at: file:///C:/Users/Hrisi/Downloads/drinking-water-quality-rural-india.pdf


WHI (2014a), “Our Solution”, available at: www.waterhealth.com/our-solution (accessed October 16, 2014).
WHI (2014b), “What is the advantage of this technology over other methods of purification?”, available at:
www.waterhealth.com/faq/list (accessed October 16, 2014).
WHO (2008), Guidelines for Drinking-Water Quality, World Health Organization, Geneva.
WHO (2013), “Progress on Sanitation and Drinking Water 2013 Update”, Water-Related Diseases, World
Health Organization, Paris.
WaterHealth International (2014), “WaterHealth in Action”, (accessed October 16, 2014).
WaterHealth Presentation (2010), “Opportunity drivers: lack of safe-drinking water supply in India”,
WaterHealth International Presentation, June 8, 17pp.
WaterHealth Technology (2014), “WaterHealth International is the global leader in providing scalable, safe,
and affordable solutions to underserved populations”, available at: www.waterhealth.com/sites/default/files/
WHI_Brochure_2.pdf (accessed October 16, 2014).
Wonacott, P. (2007), “Behind one effort to tap into India’s water market”, Wall Street Journal, available at:
http://online.wsj.com/articles/SB118704507307696475 (accessed October 30, 2013).
WorldBank (2011), “Water sector in India”, available at: www.worldbank.org/en/news/feature/2011/09/29/
india-water (accessed October 30, 2013).
WRI (2007), The Next 4 Billion, World Resource Institute, Washington, DC.

PAGE 164 j THE CASE JOURNAL j VOL. 12 NO. 2 2016


Exhibit 1

Figure A1 Safe-drinking water supply in India

0%

0%
27%
0% 37% 41%

0%
68%
0%

0%
No drinking
water supply
0%
73% Drinking water
0% 63% supply
59%
Downloaded by Swinburne University of Technology At 08:03 12 January 2017 (PT)

0%
32%
0%

0%
Class I Class II Class III Rural
Cities Cities Cities Areas

Source: WaterHealth Presentation (2010)

Exhibit 2

Table AI Ownership structure and key shareholders: WaterHealth international Inc.


Company/key shareholder % share

Dow Chemical Company (DCC) 35.3


Plebys International 25.7
Sail Venture Partners 17.3
International Finance Corporation (IFC) 5.2
Others 16.5

Source: IFC (2014)

VOL. 12 NO. 2 2016 j THE CASE JOURNAL j PAGE 165


Exhibit 3

Figure A2 WHI Inc. Technology

How we purify water:

7. ULTRAVIOLET DISINFECTION
6. REVERSE OSMOSIS PROCESSING Inactivates bacteria, cysts,
removes total dissolved solids and viruses that can transmit
and other suspended sub-micron illness
particulates
1. SEDIMENTATION
removes heavy UV Disinfection
solids and impurities
Purified Water
R.O. (Reverse Osmosis) Storage Tank
(where needed)

Raw Water
(Sedimentation) 5. ANTI-SCALING DOSING
increases the solubility
Residual
of salts present in the Chlorination
water and reduces risk of (where
scale formation needed)
Anti
Downloaded by Swinburne University of Technology At 08:03 12 January 2017 (PT)

Scalant
Dosing
8. RESIDUAL CHLORINATION
closes purified water with
chlorine to provide residual
disinfection

Transfer
Tank

Dispensing Tap Bank

4. MICRON FILTERS
removes particulates down
Multimedia Advanced Cartridge
Filter Carbon Filter to 1 micron to improve
Filter clarity of water
2. MULTI-MEDIA FILTRATION
3. ACTIVATED CARBON FILTRATION 9. DISPENSING TAP BANKS
removes physical
removes excess chlorine and supply always-pure
impurities such as
organic matter that imparts drinking water for healthy
solids, dirt, dust and other
unpleasant taste, odor or color communities
visible particles down to a
size of 50 microns

Source: WaterHealth Technology (2014)

PAGE 166 j THE CASE JOURNAL j VOL. 12 NO. 2 2016


Exhibit 4

Table AII Socio-Economic Classification Grid (SEC) of India


Education Illiterate Literate but School School SSC/ Some college Graduate/ Graduate/post
no formal upto 4 5-9 HSC but not post graduate graduate –
schooling years years graduate – general professional
Urban SEC
Occupation
Unskilled worker E2 E2 E2 E1 D D D D
Skilled worker E2 E1 E1 D C C B2 B2
Petty trader E2 D D D C C B2 B2
Shop owner D D D C B2 B1 A2 A2
Businessmen
None D C C B2 B1 A2 A2 A1
Industrialist (no. of employees)
1-9 C B2 B2 B2 B1 A2 A1 A1
10+ B1 B1 B1 A2 A2 A1 A1 A1
Self-employed professional D D D D B2 B1 A2 A1
Clerical/salesman D D D D C B2 B1 B1
Downloaded by Swinburne University of Technology At 08:03 12 January 2017 (PT)

Supervisory level D D D C C B2 B1 A2
Officers/executives – junior C C C C B2 B1 A2 A2
Officers/executives – middle/senior B1 B1 B1 B1 B1 A2 A1 A1
Education of chief wage earner Type of house
Pucca Semi-Pucca Kutcha
Rural SEC
Illiterate R4 R4 R4
(Self-learning)/no school R3 R4 R4
Up to Class 4 R3 R3 R4
Class 4 – Class 9 R3 R3 R4
SSC/HSC R2 R3 R3
College R1 R2 R3
Graduation/PG – Gen R1 R2 R3
Professional Degree R1 R2 R3

Notes: The Urban SEC Grid divided the Indian population into three classes: upper most segment of the consuming class – A1, A2, and B1;
middle segment – B2 and C; the lower most segment – D, E1, and E2. The Rural SEC Grid measured the socio-economic status of rural India by
classifying rural Indians under four groups (R1, R2, R3, R4).
Sources: Saradar and Rajagopalan (2011); MRSI (2011)

VOL. 12 NO. 2 2016 j THE CASE JOURNAL j PAGE 167


Exhibit 5

Figure A3 WaterHealth India: operations in the natural setting

(a) WaterHealth Centre (WHC) ready for operations


Downloaded by Swinburne University of Technology At 08:03 12 January 2017 (PT)

(b) Local community members at the new WHC and home delivery

Source: WaterHealth International (2014)

Corresponding author
Hristina Kostadinova Dzharova can be contacted at: hdzharov@sfu.ca

PAGE 168 j THE CASE JOURNAL j VOL. 12 NO. 2 2016