A pseudonym ‘Paniwala’ (PW) has been used to disguise the identity of the leading entrepreneur behind ‘Pani Ghar’, a social enterprise established two years ago to provide safe drinking water at affordable prices. The social enterprise as a company was wounded up while the pilot outlet still functions in Lahore.
Mr. Paniwala (PW) looks back to a year ago when his negotiations with a major international social venture fund were almost finalized, before they suddenly collapsed and so did his dream to start a revolutionary social enterprise for providing safe drinking water to the poor in a financially sustainable way.
Potable water in Pakistan is polluted, and the health situation is getting worse. This has been confirmed by National Water Quality Monitoring reports issued by the Pakistan Council for Research in Water Resources (PCRWR). Keeping this in mind, many companies have launched bottled water. However, they are catering to the rich. A liter of bottled water costs Rs. 22; in jumbo packs of 19 liters, this price drops to Rs. 6 per liter: still a price, which the poor and lower income groups cannot afford. The Economist (November 9, 2006) estimates that the spending on drinking water by an average household does not cross over 5 percent of their monthly income. It translates into the fact that to afford clean drinking water through bottled water companies, the monthly household income should be more than Rs. 50,000; whereas according to the Economic Survey of Pakistan, the per capita income of Pakistan is $850 or Rs. 4,250 per month as per 2006 prices.
Pani Ghar: Beginning of an Idea
Concerned about the water situation (for example, lack of potable water) in poor communities, Mr. PW began to think of ways to
provide this precious resource – water – at a large scale to the poor in a for-profit business model. He thus analyzed various options including the government expenditure and compared household costs per annum.
Next, PW undertook professional market research to estimate the demand of drinking water in specified locations while keeping a price point of Re. 1 per liter. The market research yielded several insights and confirmed that a sizable demand exists at the community level for buying clean drinking water regularly. Once PW had determined the demand level in these areas, he explored technologies available in the market. His purpose was to find a ‘medium size ultra violet filtration plant, which could be placed in an exclusive shop and could supply water to a community of around 1,000 households’.
PW also conducted a competitive analysis. He identified that household filters pose an immediate threat to his idea. But his research exposed the inadequacy and uselessness of these filters. Many target customers opt to use boiled water; however, boiling water is recommended only for emergencies and scientifically proven to be counter-productive, if used regularly. A lowcost technology is water purifying crystals. However, while this technology may satisfy social concerns, it does not satisfy commercial requirements. The government has spent 12 billion rupees in its project ‘Clean Drinking Water for All’. The project aims to install more than 6,000 filtration plants – one in each union council of the country – by the end of 2008. Only 600 were installed and this project has unfortunately taken the well-known downward trajectory associated with most government-run projects.
Pani Ghar: Commissioning Phase
PW identified a local manufacturer of water filtration plants, who had developed a prototype. This, for PW was a dream come true. PW signed partnership agreement with him and a company was established: Pani Ghar. Much to the disappointment of this young entrepreneur, a year later, this would prove to be the beginning of an end.
PW assumed charge of this business and managed the sales, operations and quality of the outlet. He also conducted a rapid assessment of Pani Ghar.
Unanticipated Problems in Pani Ghar and PW’s Strategy Pani Ghar was located on Multan road in Ittefaq town, a congested urban area near Mansura, Lahore. Although this outlet was operational for almost a year, the number of customers was low. The management faced various unanticipated problems. These problems included unwillingness of people to buy ‘uncertified water’, slow sales, poor marketing, lack of monitoring and competition from household filters.
When PW assumed charge of Pani Ghar, he took specific steps to address each issue. He appointed a business graduate and delegated sales, quality management and marketing to him. This brought positive results rather quickly. After six months, Pani Ghar’s revenue doubled and the enterprise achieved selfsufficiency. Some sixty plus households became regular customers of Pani Ghar. These households belonged to the lower-middle group and became loyal customers.
Scaling up Pani Ghar
When the house was put in relative order, PW began to work on an investment which would help him scale up the project. He believed in the concept of economies of scale and knew that a well-paid professional management would make sense, once the operations were wide enough. PW prepared a plan to open ten outlets in Punjab and sought the help of a major social investor. Initial response was positive and a long, taxing process of communication ensued. Lack of Internal Coherence While the enterprise was doing well at the operational and business development levels, it faced an internal management challenge. PW’s partner began to
mistrust PW regarding his engagement with the venture fund and spending money on systems and management. The partner was of the opinion that spending money on quality control and management support was not needed at this stage and should be put off. However, PW insisted that for long-term benefit, this short-term expenditure should be absorbed. This conflict left both shareholders in bad taste. PW was asked by his partner to quit and wind up the company. The potential social investor also took note of the internal management conflicts and concluded that it is not a safe investment. Apart from learning several lessons about the marketing of a social enterprise, PW also learnt an important lesson the hard way:
The social entrepreneur should remain independent at least until the pilot phase of the product is successful. Dependency on an external factor, including an organization or an investment in the initial phase can be fatal.
In the last quarter of 2007, Pani Ghar was wound up as a company, though the lone outlet still continues to operate profitably. PW’s dream was not realized but his initiative provided great insights and a useful knowledge base for similar initiatives.