What business model for home – scale water and waste water reuse in Kenya?

By Edwin Baimpwi

I’ve been working to commercialize a waste water treatment system that’s inexpensive and works at the homeowner scale in Kenya.   What suggestions do classmates have?

Some context: In the US, the person who drains septic tanks in residential areas that are not connected to the grid is called a “honey dipper” and their fancy truck a “honey wagon”. Some rather sweet sounding names for an occupation that very few of us would countenance. The “honey wagons” usually deliver their contents to municipal sewage treatment plants where it is treated and disposed of appropriately. This service is not available everywhere in the world.

The Mexico City Water Shortage case highlights some of the water problems that the city is grappling with. As one of our colleagues mentioned in class, the poor tend to build in the city’s surrounding areas. We can infer from this, that these structures are not connected to the grid. The case confirms this by stating that city’s poor residents pay the most for the water, seeing that it has to be trucked to them.

The intro to the case discussion questions mentions that, “the water gap is of increasing prominence all over the world. On a global scale water issues rival energy, land, air quality, and carbon as over-arching problems – and opportunities.” We are challenged to consider the frameworks and concepts from the case that could be extended to other continents.

The city of Nairobi in Kenya, suffers a similar problem. There is sufficient precipitation, but the quantities of potable water are low due to pilferage, meter tampering and leaks. The suburbs of the city are mostly off the grid, but the wealthy neighborhoods have community wells. This ground water source is depleting fast. Most of these homes deal with their septic waste by digging 30 to 60 foot holes that act as septic tanks and outhouses during plumbing emergencies. Since there are no honey dippers, the waste lies in situ and is usually treated with chemicals to keep the sewage levels low. These chemicals do eventually leach into ground water. It is only a matter of time and the contamination will start diminishing available potable water.

In 2010, I was commissioned to design a zero footprint residence with a waste water and sewage management system. The house had a two pipe system to separate sewage water and grey water. The recycled grey water was then used for flushing toilets. The sewage was directed to a bio-digester that provided biogas for cooking and energy. This amounted to 60% in water savings and the use of purchased propane gas for emergencies only. (See appended images here).   The first cost to install the system is about 5% of the total cost of building the home. The operation costs are negligible since maintenance of the system is more than offset by savings in purchase of potable water and in treatment of the former outhouses.

What business model could scale this up? I’m thinking of options ranging from

  • Installing, owning, and leasing back the whole system
  • Being the installation contractor for the whole system, using proprietary technologies
  • Being a franchiser or distributor of all the components
  • Focusing on the invention of several key connector and small container components that make the system much safer and more reliable, then selling just these parts.

The success of this project and the environmental concerns associated with the status quo make scaling this up to reach more homes imperative. What do you think?

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About macomberjohnd

HBS Finance faculty interested in sustainability in the built environment including devices, structures, townships, and cities.

5 Responses to “What business model for home – scale water and waste water reuse in Kenya?”

  1. This is potentially a very high leverage project. Thank you for sharing your work. For the IB2E course, this post would be stronger if you set out to analyze and respond to some of the questions that are posed, and if you connected the analysis more directly to insights from the cases cited. Future cases will touch on going to market with solutions in waste and in addressing the rural operations problem, so those will be useful.

    With respect to the solution, the ability for homeowners to a) manage their own waste water and b) use potable water much more efficiently – both without relying on big centralized public sector investment and distribution – will be highly important in adding several billions of urban dwellers to the planet’s population. One can also imagine this solution for potable water and waste water being done at the community or district level – 10 to 1000 homes – and being cost effective in sharing capital costs. The business question of how to attack the issue seems to involve choices between competing with a lot of capital (leasing), with operational skill (contracting) or with design and manufacturing (the connectors). It will be interesting to see the pros and cons of these approaches weighed in light of skills, desires, and current resources.

    • Thank you for your comments. I’m looking forward to the upcoming cases that you have mentioned. Please allow me shed some more light on the situation on the ground:

      The target residents are generally established in their current locations or have bought these properties with a view of living there long term. These properties are on the outskirts of the city and the residents have been managing their own waste, albeit inefficiently and in a manner that is deleterious to the environment and ground water sources.

      It is generally much easier for the residents to get together to dig a community well to serve several homes than it is to build a community waste processing plant. The moment the waste management venture shifts from the individual to community level it is considered a public works venture with public health implications that only the municipal government is allowed to handle.

      Most of the residents are unwilling to engage the local government because of the red tape involved and the all too common answer, “there no money to do this.” There are plans to expand the grid to reach these communities, but the reality is that it may take a very long time.

  2. Edwin, thank you for your post. This is an ambitious project and I applaud your efforts.

    As I think about turning your solution into a business, a few things come to mind that I would take into consideration.

    1) What is the current behavior of the typical Kenyan with regards to water and how will this installation/invention change that behavior? It is important to think about this because, as we say in the EnerNOC case, a lot of things that are common sense solutions face behavioral change barriers. I would be asking myself – can I implement this solution such that it does not significantly affect human behavior? Or if it does, the value is so clear that people do not mind the chance.

    2) What is the Total Cost of Ownership (TCO) of this system and what kind of payment options can I offer so it resembles what customers are paying for water today? As you well know, significant expenditures are hard to come by in our part of the world where access to credit is not ubiquitous. How can you charge for the system in such a way that it looks like the current situation? For instance, say a family of four currently spends $10/month on water and this system will cut their bill to $3/month (but will require a $300 investment), I would suggest coming up with a financing structure that would allow them pay for the installation in installments. Perhaps they keep paying $10/month for three years after which their water bill drops by 70%.

    Professor Macomber is right that there are few ways to slice this without it being a high leverage project, so I think the implementation has to be creative enough to overcome the leverage issues and human behavior barriers that are bound to arise. Look forward to chatting more about this.

  3. When thinking of developing a business model, the first question that needs to be addressed is how much value is created and for whom? There is a difference between addressing a real customer “pain” and first building something “neat” (from a design/engineering perspective) followed by trying to persuade potential customers that they do, in fact, have a need. It is obvious that the first approach is much more likely to result in a profitable venture due to lower customer acquisition cost and higher willingness to pay.

    This home-scale greywater reuse/wastewater treatment solution clearly addresses a very dire environmental pollution problem – but unfortunately the environment is not a viable target customer as it does not have a bank account or income stream.

    A proxy for the environment in this case could be the government (or Kenya’s equivalent to the US Environmental Protection Agency). For example, a local government can mandate a use of such a system for all new suburban home construction over X square feet, or even fast track (and waive fees on) construction permit review for such homes – this would in turn create or significantly increase customer demand. However, the ability of a startup to influence policy this way is an uphill battle even in the best of cases, and might be even more of a challenge in Kenya – unless members of your team happen to have the right political connections.

    This leaves us with the homeowner as the target customer. How bad is this problem on a day to day basis? Are they willing to pay the full cost of the system in order to not have the nuisance of the currently used alternative of in situ septic tanks?

    If customers do have a need and are willing to pay for the system’s full cost along with your profit margin, next step to address would be the business model and go to market.

    The key consideration will be how unique and defensible your value proposition is. In my opinion as a civil/environmental engineer, the technical innovation in the provided design is very limited. There is nothing here right now that is patentable or at least not easily copied. However this is not necessarily a negative. A simple design with common/local parts is place-appropriate, easier to maintain, and cheaper and simpler to install – making it more likely to be adopted and actually used over a long time period (versus, for example, stopping the use if a rare part breaks and a replacement is not readily available). For this reason, serving as the installer (at least initially until a possible franchise model is both proven and fully developed) is the model that would make the most sense, with the strength of the model being in service delivery.

    A distinguishing feature of your service could be a fast “no hassle” guaranteed turnaround time and arranged micro financing loan through a partner nonprofit entity for homeowners who are looking to add the system to an existing house. By focusing on this single service, for example, the operational model would benefit from staff learning curve and scheduling/staffing/cost/sales efficiency that comes from product/service specialization. Another idea would be to partner with local residential home developers that specialize in single family homes to offer the system as an add-on option (just like upgraded hardwood floors or bathroom fixtures are).

    In short, figuring out the potential customers’ willingness and ability to pay, as well as a business model that relies on operational efficiency and service delivery, seem to be the key elements in launching this idea into a profitable venture.

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