Investing in Scale

How iDE used flexible funding to help solve the sanitation crisis

This is part two in a series highlighting the Lipman Family Prize. Read part one here, and stay tuned for part three.

In 2012, the Barry and Marie Lipman Family Prize named iDE as its inaugural prize winner. Each year, the top award is given to one organization that exemplifies leadership and innovation in the social sector, with a special emphasis on impact and transferability of practices. The Prize recognized iDE’s unique, market-based approach to addressing the global challenge of poor water and sanitation. Two other honorees, Komaza and MedShare, were also recognized in 2012 as game-changing organizations.

iDE’s founder Paul Polak once explained, “If you aren’t able to see a way to reach one million people, then it is not worth doing.”

Prior to iDE’s first interventions in Cambodia, baseline sanitation coverage was around 23 percent, with an annual growth rate of 0.923 percent. At that rate, reaching 100 percent coverage would take over 100 years. Globally, 2.4 billion people — 40 percent of the global population — lack access to safe drinking water and hygienic sanitation solutions. The resulting diarrheal diseases kill more children every year than malaria, tuberculosis, and HIV combined.

When the Lipman Prize was awarded in 2012, iDE had just started scaling up its market-based approach to expand access to hygienic toilets. At this time, iDE had already designed an improved toilet product and trained a network of local businesses to sell 14,000 latrines. In the absence of appropriate sanitation solutions, the local environment and water resources were becoming contaminated with pathogens. iDE responded with a strategy known as sanitation marketing, which takes a marketer’s approach to solving the problem. Instead of the traditional charity model of giving free toilets away, or simply building awareness about the health benefits of having a toilet, iDE sought to make something as taboo and unsexy as a toilet aspirational, affordable, and accessible.

Today, iDE has scaled up the sanitation marketing model to six additional countries in Asia and Africa, resulting in over half a million toilet sales globally and reaching more than 2.5 million people. How was iDE able to make this happen?

iDE’s progress in improving sanitation in five countries. Not shown are Ghana and Burkina Faso, iDE’s two most recent WASH country programs that are still in R&D phase.

Design for scale from the beginning

iDE tapped into a mechanism built to be scalable: the private sector. By designing a product that people actually want and can afford, households decide to pay for their own toilet. By designing a business model that is financially sustainable, businesses and sales agents are motivated to produce and sell toilets. Prior to proving the effectiveness of this market-based approach, other NGOs as well as the local toilet business owners had had difficulty believing that poor people would actually invest their own, limited money into a latrine, especially because it was something that they refused to adopt when it was given to them for free. In the last six years, however, coverage in the Cambodian provinces where iDE is present has increased to more than 60 percent, with an annual growth rate of over 6 percent.

A satisfied customer in iDE's Bangladesh program. While affordability is very important, products must also be aspirational to motivate a household to purchase and use them. iDE conducts deep user research to understand the unique needs and desires of different market segments. While plastics manufacturing was not possible in Cambodia, it is possible in Bangladesh, iDE’s second largest sanitation program, enabling mass production and cheaper transport. Pictured here is a satisfied customer in iDE’s Bangladesh program. 

The Lipman Prize’s emphasis on impact helped spur iDE’s early thoughts around expanding the scope of our mission beyond sanitation. iDE began considering how we might extend the tenets of the market-based approach to making an impact in the areas of water, hygiene, and fecal sludge management, all of which contribute to diarrheal disease. The Prize connected iDE’s co-directors to investors and advisors in Wharton and San Francisco, whose advice and input helped advance the transition from a Cambodia-based sanitation program to what is known today as iDE’s Global Water, Sanitation, and Hygiene (WASH) Initiative.

Design to context

The importance that Lipman Prize places on transferability helped iDE deepen its thinking on how to replicate its approach elsewhere. One significant benefit of the Prize is the community of passionate, brilliant innovators it brings together. In speaking with other honorees working towards similar social impact goals but in very different contexts, iDE’s co-directors gained insight on the processes and parameters for scaling.

Grounded in human-centered design, iDE took its market-based approach for sanitation and introduced it into new markets. Instead of replicating the exact same toilet and the exact same business model, however, iDE evaluated the local context and re-designed it to fit local needs and preferences. For example, business capability in Cambodia is vastly different than Bangladesh. In Cambodia, iDE works with small, community-based concrete producers; in Bangladesh, iDE enlisted the assistance of large national corporations that mass-produce toilets. The reasons why someone would buy a toilet in rural Vietnam are different than why they would buy one in rural Ghana. These differences need to be accounted for in each country, but iDE’s process of understanding the market and the user through human-centered design remains the same.

The reasons why someone would buy a toilet in rural Vietnam are different than why they would buy one in rural Ghana. These differences need to be accounted for in each country, but iDE’s process of understanding the market and the user through human-centered design remains the same.

Know your unit costs and improve your efficiencies over time

As iDE replicated sanitation marketing globally, it saw similar trends in costs and exponential growth. In the graphic below detailing marginal cost and cumulative sales, all programs have a spike in upfront investment—typically costs for researching the local context, prototyping, and initial training, and outreach activities. These investments, however, reap exponential sales growth. What took three years to scale in Cambodia is now occurring in two years or less in other countries. Benchmarking unit costs is critical for understanding what it takes to trigger exponential sales growth.

Six-month rolling average cost-per-toilet vs. cumulative latrine sales in five countries.

Leverage flexible money

The Lipman Family Prize included an award of $100,000 in unrestricted funding. While $100,000 may not be enough to solve the sanitation problem globally, or even nationally, for iDE it enabled strategic growth at a pivotal time. Traditional grant money must be spent towards activities specific to project implementation and are typically not permitted for investments in innovation, knowledge management, communications, finance, or business development. If any business were restricted from investing in these areas, they would scoff at any expectation for continued growth and innovation. But such restrictions are common in development, where low overheads serve as a (poor) indication of the actual performance and impact an organization is having. Thought leaders in philanthropy like Kevin Starr and Jeri Eckart-Queenan have written extensively on the importance of investing unrestricted funding into high-impact organizations if you want to see them scale.

The prize money from Lipman enabled iDE to invest in these areas. iDE hired a knowledge manager to capture and share learning across countries, driving iDE to be a human-centered, iterative, data-based learning organization. The organization hired an innovation manager to drive new ideas and coach design thinking into our country teams; a communications manager to share the exciting news of the progress being made in Cambodia and elsewhere; and a business development manager to aggressively secure further funding to scale up the approach. In short, with restricted funding, you can add more gas to the car to go further, but with unrestricted funding, you can improve the engine and accelerate your speed, going further and faster in the long-run.

In short, with restricted funding, you can add more gas to the car to go further, but with unrestricted funding, you can improve the engine and accelerate your speed, going further and faster in the long-run.

These lessons learned over the past six years are just a part of iDE’s journey of discovery and how to iterate, refine, and innovate for scale. Partners like the Lipman Family Prize recognized the early seeds of scale potential in iDE and invested in not just their ideas, but the organization itself. While iDE didn’t know all the answers five years ago, the Prize trusted iDE to make smart use of flexible funding as well as access to the Wharton community. Today, iterative learning informed by rigorous data, paired with well-aligned financing continues to drive iDE’s market-based approach to solve the water and sanitation challenge at a global scale.

Read a related article on global sanitation innovation.

All images courtesy of iDE.

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  1. I have found it very exciting and encouraging information. I believe that this article add great value to iDE . We are proud for this achievement.