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Grundfos LIFELINK: solving the base of the pyramid tangle?

Poul Houman Andersen
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Poul Houman Andersen, (2013),"Grundfos LIFELINK: solving the base of the pyramid tangle?", Emerald Emerging Markets
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Grundfos LIFELINK: solving the base
of the pyramid tangle?
Poul Houman Andersen
Poul Houman Andersen is Introduction

based at Aarhus University,
Aarhus, Denmark.
Grundfos is a world-leading pump supplier, who has developed LIFELINK, a business
model for providing potable water to villages and rural areas in base of the pyramid (BoP)
markets. Although pumps are an important part of the project, they are not a centerpiece of
the LIFELINK business model. The core capability of Grundfos LIFELINK is to establish and
manage an active network of partners in which each partner adds significant value to the
product being offered to the customer. Value is channeled back, allowing the technical
system to be maintained and to remain in operation. The business model underpinning the
LIFELINK system therefore draws on a network of local community partnerships.
The case is concerned with the complexities of doing profitable business in BoP markets and
with the trial and error processes of the Grundfos LIFELINK management team in developing
the LIFELINK business model to fit these complex market conditions. In particular, the case
illustrates the changes in the value-creating activities pursued and the changing role of
Grundfos LIFELINK: from hardware supplier based on engineering capabilities to a business
network architect and developer, matching engineering excellence with soft skills. The
case provides important lessons for strategic management, sustainability and the BoP
research agenda.
For communities in the third world, the lack of potable water presents perhaps the most
fundamental challenge for survival and prosperity. Currently, close to 1 billion people lack
immediate access to water sources, and 2.6 billion lack water for basic sanitation making
water collection a time- and resource-consuming daily task (WHO, 2011). Access to water is
a precondition for human existence as well as for the agriculture and livestock activities that
are the economic foundation for these societies. The World Health Organization says that at
any time, up to half of the worlds population has a disease associated with poor drinking
water and inadequate sanitation. About 5 million people die each year from contaminated
drinking water, poor sanitation, or a dirty home environment often the result of water
shortage. Developing an economically as well as socially sustainable business model with
the potential to solve this problem is an important social innovation in what has been labeled
BoP markets. These markets consist of subsistence users, with an income of less than US$2
per day to cover their living expenses.
Grundfos LIFELINK is a turnkey water solution that encompasses a solar-driven pump
Disclaimer. This case is written facility, a GPS-based monitoring system, and charges based on digital payments of water
solely for educational purposes
and is not intended to represent
credits. Together, they represent the business model of Grundfos LIFELINK[1]. Figure 1
successful or unsuccessful shows a LIFELINK water kiosk.
managerial decision making.
The author/s may have Grundfos is a world-leading pump supplier, but although pumps are an important part of the
disguised names; financial and
other recognizable information
project, they are not a centerpiece of the LIFELINK station and the underlying business
to protect confidentiality. model. The core capability of Grundfos LIFELINK is to establish and manage an active
DOI 10.1108/EEMCS-10-2012-0187 VOL. 3 NO. 1 2013, pp. 1-21, Q Emerald Group Publishing Limited, ISSN 2045-0621 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 1
Figure 1 The LIFELINK water kiosk
network of partners in which each partner adds significant value to the product being offered
to the customer. Value is channeled back, allowing the technical system to be maintained
and to remain in operation. The business model underpinning the LIFELINK system therefore
draws on a network of local community partnerships.
Since its cautious start in 2009, Grundfos has successfully expanded its operations to
16 villages in Kenya. The project team is looking at scaling up operations in several other
villages and in other African and Asian countries. With their innovative business model,
Grundfos LIFELINK has shown that it is possible to develop a market-based system that
provides access to water for rural societies in BoP markets.
This case is concerned with both the complexities of the BoP markets and with the trial and
error processes of the Grundfos LIFELINK team in developing the LIFELINK business model
to fit these complex market conditions and the ensuing change in managerial mindset. In
particular, we will look at changes in the value-creating activities pursued and the changing
role of Grundfos from hardware supplier to business network architect and developer.
In several previous cases, multinational corporations have attempted to access this market.
Most of them ended up discarding the commercial aspect and continued as a charity project.
Successful implementation of a business model tailored for BoP customers is unusual. Previous
research has identified several reasons for failure. For instance, mangers underestimating
distribution challenges in as in the case of the cement producer CEMEXs attempt to serve
home-building needs of BoP customers in Mexico or failing to understand and match local
buying behavior as in the case of Proctor and Gambles launch of PUR, an additive to clean
water.
Success in BoP markets requires firms to radically readjust their business models and
corresponding mindset. Managers seeking to develop a business venture in a third-world
country are often misled by managerial assumptions built in and designed for a
first-world market and shared among top managers inside a corporation. Seen from
a first-world perspective, BoP business contexts are hostile or complex. There are formal
institutional voids, such as no or little capital market structure, weak legal enforcement, and
weak protection of private property. In addition, managers find a dated or flawed infrastructure,
a harsh climate, partners and customers who need to be educated, and workers who require
deskilled production processes. Creative distribution systems are also needed to reach these
new customers.
In this case study, we outline the origins and evolution of the Grundfos LIFELINK business
model, as well as the current version and performance. In the case analysis, we discuss how
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PAGE 2 EMERALD EMERGING MARKETS CASE STUDIES VOL. 3 NO. 1 2013
Grundfos has faced these challenges and how the company has altered the dominant logic
of Grundfos managers.
Origins
Grundfos A/S is a multinational corporation with headquarters in Bjerringbro, Denmark. The
Poul Due Jensen Foundation owns the majority of the shares, followed by the Due Jensen
family and Grundfos employees. The company specializes in the design and manufacturing
of pumps, and it controls half of the world market for circulation pumps. It employs 17,000
people and is established in 45 countries, in all regions of the world.
Grundfos is involved in charity programs, such as the REWaRD program co-sponsored by
UNICEF and supported by the Thai royal family. Worldwide, local branches of Grundfos have a
tradition of involving themselves in various forms of donation and charity work. This practice is
aligned with Grundfoss core values, captured by their slogan: be responsible . think
ahead . innovate. This is also reflected in the part of their mission that is concerned with
delivering resources to future generations. Nevertheless, developing a profit-based business
model for a BoP market is a new way of thinking about these issues, as it integrates the vision
of Grundfos directly in the proposal:
To Grundfos, the LIFELINK initiative goes beyond our current thinking in terms of philanthropy and
our CSR concerns: We like to characterize it as Corporate Social Innovation (Peter Todbjerg
Hansen).
The original idea for launching the Grundfos LIFELINK initiative dates back to a personal
experience by Niels Due Jensen, Chairman of the Poul Due Jensen Foundation. In February
2007 he visited a village community in northern Thailand, as part of a visit to the REWaRD
program. He was surprised to learn that the villages used expensive groundwater boreholes
for their water supply, instead of cleaning surface water. Niels Due Jensen decided that he
wanted to know more about the possibilities for developing a sustainable and profitable
solution for supplying water in areas where the infrastructure was thin or even absent.
The ideation process begins

On his way back to Denmark, Due Jensen called Mads Prebensen, head of the New Business
division in Grundfos (see Exhibit 1 for more information about the New Business division). He
asked Prebensen to look into the commercial possibilities of establishing a water purification
system driven by solar power. Prebensens immediate response was that this was certainly
doable. Such a system could be organized around standard components already available
on the market. Prebensen also saw synergies with other product development projects that
Grundfos was currently working on. The real challenge was how to organize a user interface
and a feasible business model around the service and maintenance of the system in a
developing country. As Prebensen said in the mail correspondence: The market is created
and organized by NGOs, national aid programs, and other actors. We work with them already,
but we still have a lot to learn. Prebensen also pointed out that he had contacts with a
supplier of the water purification unit. Niels Due Jensen replied, Fine. Please provide me with
a plan for how this could be done.
The project was nicknamed Solar to Water, and a team headed by Mads Prebensen
started a feasibility study to detail the idea further. In the beginning, the project was meant to
be a joint venture between Grundfos and the manufacturer of the water purification system.
The team considered the many challenges and concerns and soon came to the conclusion
that the technical problems in the LIFELINK project were well within the competences of
Grundfos and its possible partners, but that most of the commercial aspects of this project
were uncharted territory. This would be where most of the exploration was needed. If the
team could not see any solution to this problem, the project would be terminated.
They soon decided to focus on rural townships in one country as a test market. Kenya was
chosen for several reasons: first, Danish companies have good standing in Kenya, thanks
to extended foreign aid from Denmark aimed at Kenya and perhaps also due to a strong
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VOL. 3 NO. 1 2013 EMERALD EMERGING MARKETS CASE STUDIES PAGE 3
cultural link[2]. Grundfos had a few years earlier donated 25 pumps to Kenya in
collaboration with UNICEF. From a business perspective, Kenya was seen as one of the most
challenging markets; it would therefore be a demanding test site from which Grundfos would
be able to stress-test their business model:
I was the one responsible for choosing Africa and Kenya. I chose Africa instead of Asia and Latin
America because we thought we would learn more per dollar spent by taking on a very difficult
market. I avoided what I saw as more dangerous places in Africa such as Somalia. Kenya was
relevant for several reasons: one of them was that all the NGOs were there, another that Kenya at
that time was rather peaceful (Mads Prebensen).
In Kenya, 42 percent of the population has access to potable water, and collecting water
consumes three to four hours daily. Focusing on a particular target country simplified matters
a bit. It helped the development team to design a business model that met the conditions of
one particular market, rather than taking into consideration the differences in business
conditions across African countries. The feasibility study would lead to an investment
decision only if five criteria could be satisfied:
1. It had to function with sustainable and locally accessible energy sources.
2. It had to have local service support in order to be sustainable in long-term operation.
3. How money was spent should be economically transparent, and the system should be
resistant to corruption.
4. It should be adaptable to regional cultures and structures of local water management in

more than one country.
5. It should be profitable or at least not loss-generating for Grundfos in the long run.
These principles were stated in a presentation made on the Solar to Water project in March
2007. Grundfos knew from its previous UNICEF project that if these systems were not
serviced regularly, they deteriorated fast. Out of 25 systems, eight malfunctioned within a
short time, and several others were based on improper boreholes. Moreover, the NGO
UNICEF was unable to oversee the projects.
The early design of the business model

The early idea was to develop a water kiosk where users could buy purified water and could
finance the establishment and maintenance of the system. At its technical core the system
should have a Grundfos submersible pump and an energy supply system; it should also
solve the problems of servicing and payment. Grundfos already had a series of pumps the
SQFlex line that works under difficult conditions and can use solar panels or other local
sources of power. The team also found a potential supplier of a water purification unit in
Denmark and started to test the unit, using an external consultant to do so. Grundfos had a
distributor in Kenya, who with some support and knowledge transfer could install the
LIFELINK system in the chosen village. The technical solution would be based on
manufactured or purchased standard components and existing global partnerships.
The team saw the realization of the commercial part as much more difficult. Grundfos had
some in-house experience from working with NGOs on charity programs, but no one had any
experience in the commercial aspects of these issues. Furthermore, even though emerging
markets are a target area, experience with doing business in BoP markets is limited within
Grundfos. Nevertheless, it was important for the thinking process about the entire project
that the commercial ambitions were kept intact:
Taken our mission as new business developers into account, we did not want this to be another
Grundfos charity program. The commercial ambitions were sacrosanct for us and always
imperative in the new business development teams thinking (Peter Todbjerg Hansen).
Mads Prebensen decided to strengthen the teams resources by hiring a new temporary
researcher to work on fact-finding in relation to the commercial aspects. To begin with, his
job was to find out the basics about operating costs and market revenues in BoP markets.
A rough estimate suggested that the costs per installed unit would be around e14,000 for an
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installation with a daily capacity of 8,000-16,000 liters of water. In a study from Danida
(the Danish Governments unit on foreign aid) on water consumption and water kiosk prices
in Kenya, it was estimated that each private user would draw 20 liters daily on average, and
that a user would be willing to pay around 3-5 Kenyan shillings (KES) to draw that amount
(approximately 5 US cents or 3 euro cents). The average amount of water to be drawn on a
daily basis was estimated at 14,000 liters or 700 jerry cans, with 50 percent utilization,
making 350-400 people the minimum village size required:
1. Rough initial estimate (KES1000).
2. Annual water consumption (KES5 per 20L jerry can): 639.
3. Annual costs for village.
B Bank loan: 340.
B Grundfos service fee: 175.
B Spare parts: 40.
B Salary for local attendant: 12.
4. Total annual costs: 567.
5. Annual surplus (village): 72.
This estimate took a number of issues and uncertainties into consideration and left some
economic room for surprises. First, the utilization rate was very conservatively set. The model
showed that at a price of 5 shillings per jerry can, a water kiosk could be profitable. Second,
the price of the tower and the maintenance costs were set relatively high. Even with these
assumptions, the model was profitable for the village, which would be able to pay off the
loan, pay for the service expenses, and even turn a profit. Hence the project seemed
economically sustainable. This finding reassured the task force that further development of
the idea had potential[3].
Collecting the local payments for water credits presented a puzzle. Individual payments
would be relatively small and hard to collect and to transfer. By chance, the temporary
researcher came from a consulting job in the telecommunication business. His background
came to have a strong influence on the further ideation process. At the next meeting of the
task force, he told the rest of the team that he had done some internet research and found out
that Safaricom, a local Kenyan company associated with Vodafone, operated a successful
mobile banking system: the M-Pesa payment system. A large proportion of the poorest part
of the population in Kenya in fact owned a mobile phone and used it for a broad range of
purposes. If the team used M-Pesa for water payments and linked the local water kiosks in
the villages to the internet to monitor water use, it would be possible to match usage with the
payments made:
The use of mobile phones in Kenya was advanced beyond any mobile payment system we knew.
He told us that farmers use mobile phones to find the best market prices for their cattle. We were
not aware that such a thing existed. This kind of idea often does not surface from a thorough
analytical process, but is the consequence of frustration, pondering, luck, and coincidence
(Mads Prebensen).
An additional problem that almost stopped the project was the initial testing of the water
purification system. While the group concentrated on developing the commercial part, it had
outsourced the testing of the water purification component. This system was to be supplied
by a Danish company specializing in water purification systems. Rigorous testing of the
system in Denmark showed that it did not work as promised, but demanded much more
maintenance than expected. The due diligence report showed that filters needed cleaning
every day and that the quantity of clean water produced was not as large as expected.
Negotiations with the Danish manufacturer became problematic, as the manufacturer
believed that the contract was settled on the system it had developed, whereas Grundfos
foresaw the need for considerable additional investment if the system was to be developed
into one that would actually work under the harsh conditions in Kenya. After some discussion
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of the possibilities and challenges ahead, the team decided to present these issues to the
board and suggest that the LIFELINK system should be designed for groundwater use to
begin with. Later on, the system could be further developed for use at surface water sites as
well. This was a radical break from Niels Due Jensens original idea and was not seen as a
trivial issue by the board. For a period, the future of the entire project was uncertain. After an
extraordinary board meeting where the possibilities were discussed, they agreed that there
were plenty of other development challenges that could be tested and solved in a
groundwater-based solution, then later transferred to a surface-based version. Consequently,
the collaboration with the supplier of water purification systems was terminated, and the team
continued working on the project with a new perspective on the water source.
The intended position and role of Grundfos in the value network. From the outset, it was
Grundfoss intention to collaborate with a local partner. The value network concept is a way to
portray the value conversion roles of business actors in generating a marketable output.
Using the value network, we can provide a strategic overview of the actors and activities in
the partner-based business model that Grundfos LIFELINK management had in mind. The
value network in 2007 suggested that Grundfos would deliver only the technical hardware,
whereas their partners would deliver all the cultural and business software, including
contacts with important local, regional, and global constituents such as the local villages, the
regional water boards in Kenya, and the sponsors. Figure 2 shows the position and role of
Grundfos in the value network.
In the value network imagined by Grundfos, LIFELINK would be financed primarily through
the water purchases made by the local villages. The villages would either raise the capital for
investing in the system themselves or be granted loans by local, regional, or global sponsors,
such as the government, local water boards, microfinance institutions, or global organizations
and NGOs such as the World Bank and the Bill and Melinda Gates Foundation. Most of
the fundraising was to be taken care of by the local NGO, supported by Grundfos.
Figure 2 Imagined value network in Grundfos
Regional
Service Water
provider board
in Kenya
(Davis &
Shirtliff)
Grundfos
LIFELINK Local
(Denmark) village
users
BP Solar Local
(UK) NGO
Governance role:
Local,
Hardware designer/
domestic
producer/provider
and
Help providing donors global
Monitoring and broad casting sponsors
Safaricom
Training local service provider
Negotiating terms with Safaricom
Responsible for smart card system
Note: Before market entry in Kenya
Source: A board presentation in 2007
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The development team listed a number of reasons why a donor would find the project
relevant. These included local economic growth, transparency, and low administration costs.
Besides the local NGO, Safaricom was seen as the primary partner, and because market
expansion was closely connected to users access to mobile phones, further regional
expansion was closely linked to this partner.
Setting up the LIFELINK organization. In their final meeting with the development team,
The New Business Development board endorsed further development of the idea and
provided e1 million in seed capital for the initial phase, with an option for more capital later.
The plan was that ten units should be in operation for field testing in the period 2007-2008.
The plan was to scale up to 100 units in 2009; once the test period was over, 20,000 units
should be put into operation each year thereafter, following the penetration of mobile phones
in other African countries. With the boards support, New Business started hiring people to
implement the system and to establish Grundfos LIFELINK as a legal entity and spin-off.
Three months later, in October 2007, Peter Todbjerg Hansen was hired as the managing
director. He hired Lars Denning as a technical director and Carsten Kvistgaard to manage
interaction with partners in Kenya. Kvistgaard was recruited internally from another division
in Grundfos. He had relevant experience from working with NGOs in relation to the Kenyan
UNICEF project mentioned earlier. Hansen and Denning were both new to Grundfos. The
development team started handing over the project to the new team. Denning recalls:
I saw the ad in the Sunday paper, and it appealed to me immediately. In the job description, they
focused on the ability to match and coordinate different technologies. I quickly realized that this
meant that several people were working in parallel on different ideas, and that the written project
description in front of me was already outdated. I spent the first part of my time as newly
appointed technical manager trying to find out what to manage. What had been realized and what
had been given up on? In short, where was the project at the moment? (Lars Denning).
The new staff in the small LIFELINK organization worked both independently and jointly on
developing the business model. They took several field trips to Kenya, met with local and
global partners, and so on. Before entering Kenya in 2008, Grundfos LIFELINK had already
formed some of its critical partnerships or was negotiating them. Other components were
already available and could be matched directly to the project, which meant that they could
be purchased and used without using resources to develop collaborative partnerships. For
instance, BP Solar had already developed a solar panel designed for the local conditions,
which could be mounted on top of the water tower (Figure 1). Other ready to wear
technical components were standard supplies, such as the server and communication unit,
or already produced internally, such as the SQFlex pump. The key business aspects to be
negotiated were related to the position and role of Grundfos LIFELINK in the business model,
including issues of contracting and gaining buy-in from local communities and of governing
local value capture. In one of the first meetings, the team outlined several challenges. How
should Grundfos LIFELINK representatives approach local communities in rural areas, in
order for them to support the establishment and servicing of a water pump station? How
should the company develop a corruption-free payment system that would match
subsistence customers ability to pay for water services? In the following sections we will
discuss how these concerns were addressed.
Developing the payment system. A pressing problem was how to develop a corruption-free,
workable payment system. Much of the new technical directors energy and effort was
directed toward this issue. The idea from the feasibility study involved M-Pesa[4], the
mobile-phone-based money transfer and payment system. M-Pesa users can use their
account to deposit and withdraw money from a network of banking agents. These agents
include airtime resellers and various retail outlets in the local communities. In Kenya alone,
the M-Pesa system is estimated to process as much as 10 percent of Kenyas GDP[5], [6].
Lars Denning saw several technical problems with respect to this solution, however. It was
not clear how delays in receiving a short message service text (SMS) would affect the
system and how it could sort out how to transfer water-drawing credits to the right user.
Therefore, Denning started to investigate other possibilities. He interviewed local providers
of e-banking solutions in Kenya and learned that an important cost driver was the information
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infomediaries standing between the user and the telephone companies, responsible for
sorting out SMS text messages from users and connecting them to mobile operators.
Another solution considered was issuing scratch cards with water credits. These alternatives
were discarded once Denning realized the problems of managing distribution and the lack
of trust among end-users due to a lack of recognition. LIFELINK therefore ended up
adopting the M-Pesa system.
The development team contacted Safaricom, which was very interested in discussing the
development of a dedicated payment system for LIFELINK. Safaricom saw interesting
perspectives in co-designing this system because of the potential volume of data traffic, and
also for participating in its design, which might be useful for developing a new service to be
sold to other utility service providers, such as electricity companies. Also seeing the
commercial potential of this system, however, the LIFELINK team decided that they would
not simply leave the development of the system to Safaricom. They wanted a part of it as
well. LIFELINK therefore involved more of Grundfoss internal engineering and development
capacity. Consequently, they divided the work and took over parts of the development tasks.
Lars Denning recalls the organization of the development work, which started in early 2008:
We had these weekly meetings over the phone, using a telephone meeting service. We used a
principal sketch of the system as a tool to pass information between us and discuss the obstacles
we were facing. Each meeting started with a mutual look at the development map, in which all vital
information was exchanged between the organizational teams and which grew more and more
complicated. We had only one or two face-to-face meetings during this period (Figure 3)
(Lars Denning).
Figure 3 shows the system at a relatively advanced stage. Grundfos had developed its own
utility for managing the exchange process, building on the M-Pesa system, but instead
loading a keyfob (a memory card) with credits. The reason for this additional layer of
complexity was the cost of submitting an SMS in the M-Pesa banking system. As the
individual minimum transaction for buying water credits was kept relatively low (KES100) so
people could afford to buy water in small quantities, the individual SMS charge was
substantial in comparison. Initially, the SMS price was KES50 for transferring KES100 of water
credits. The LIFELINK team and Safaricom agreed to lower the price to KES15 per SMS.
Another issue was to ensure access to the system for users who did not own mobile phones.
Figure 3 The template for exchanging information
Note: June 2008 version
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Although mobile phones are widely distributed in Kenya, not everyone would necessarily
own one individually. The development team headed by Lars Denning therefore decided to
add an additional layer to the system, so that bulk purchases of water credits could be
conducted through the M-Pesa system but could then be banked at the Grundfos server and
be transferred to users in smaller amounts. This would allow users to buy collectively, paying
only one SMS fee. Later, payment could be divided among the users. Over the next four
months, Dennings team developed the first version of the payment system:
At that time, we saw it as a rocket launcher system, where the purpose of the M-Pesa-based
system was to carry our own extension of the system to the local users. We are now using this
system to develop an alternative that can be used when we enter new markets where mobile
ownership is less common (Lars Denning).
A prototype was ready to be shipped to Kenya in July 2008. The system that Lars Denning
designed is further explained in Exhibit 2.
At the core, the system that Denning suggested as an add-on to the M-Pesa payment
system was based on a radio-frequency identification (RFID) tag (Figure 4), which is a
medium used for exchange of digital information such as payments, for instance on toll
roads. A tag is relatively inexpensive to manufacture and can be distributed for a very small
charge (KES115 or approximately e1). Denning had heard that these tags were used for
distributing water credits in the Philippines. In addition, Grundfos designed an internet link to
the water station, which allowed both users and Grundfos to monitor payments and water
usage in real time.
The system would achieve two aims: first, it would reduce the SMS transaction costs further,
and second, the RFID key would bring the system to virtually any potential customer. By
developing this intermediate step between the M-Pesa payments and users, Grundfos
gained a share of the credit flow and thus opened up the money exchange issues for further
development. This project although a side issue to begin with has steadily become a
core part of the LIFELINK value potential, as it allows LIFELINK to act as a Net-based
intermediary. Local villages are wired into a global payment system that is much less
expensive and easier to scale to new market needs than any mobile-based system.
Managing negotiations with stakeholders. Linked to this issue was commitment from the
local and regional stakeholders, who controlled critical resources, both physical assets and
influence. Whether they see the purpose and operations of a business as legitimate defines
their ability to assess these resources. There were several stakeholders to take into
consideration in the imagined value network, shown in Figure 2. During the spring of 2008,
Denning, Hansen, and Kvistgaard spent most of their time talking to them. Denning recalls:
Figure 4 An RFID tag inserted in the LIFELINK water kiosk terminal
The RFID tag
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It was a concurrent process, where Carsten, Peter and I worked on different agendas: the
technical challenges, exploring financing opportunities, and finding the right NGO to partner
with. Occasionally we would meet and coordinate our activities. It was a really effective way of
doing things, but also a bit chaotic at times (Lars Denning).
During their explorations the three realized that there were more obstacles and they needed
to adjust the business model further. In light of their experiences, they were able to define
more detailed requirements for the villages that would help them segment the market further.
First, it was important that the village was of a sufficient size (more than 300 potential users),
that it was within reach of the mobile network, and that the borehole was suitable. Second,
and of equal importance, was the villages attitude toward the idea. A new pumping facility
on top of a local water borehole represents a potential intrusion into the life of the village.
Granting an outsider the right to establish a water kiosk is therefore no small issue. In order to
create a sustainable solution, Grundfos needed to get local buy-in, which was one of the
reasons that collaborating with a local NGO who knew the ropes and was seen as a
reliable negotiator was important.
Ramping up the business model in Kenya

Version 1.0 (April 2008-December 2008)
In June 2008, a plane left Denmark for Kenya with supplies for building 20 water kiosks.
LIFELINK had formed an agreement with a small, local NGO whose job it was to develop
agreements with other NGOs to identify 20 relevant sites. The NGOs had extensive
experience and several local operations in rural Kenya. In the original plan for the roll-out, the
NGOs task would be to find suitable villages and negotiate the terms with local authorities,
using their established goodwill. Grundfos and a local dealer would be responsible for
constructing the site once an agreement was reached. Grundfos planned for LIFELINK to
work with five different market segments: farms and game reserves, small-scale agriculture,
small rural centers, semi-pastoralists, and pastoralists. The team planned to expand to
Tanzania and Uganda in 2009 and to Zambia, Malawi, and South Africa in 2010.
But over the first eight months, very little happened in Kenya. At the board meeting in June
2008, it was decided to change the name of the company to LIFELINK. The second decision
was to send Carsten Kvistgaard to Kenya for six months. His job was to find 20 suitable sites
and finalize the agreements with the local communities. Although the NGO had developed a
list of villages it thought were suitable, closer inspection showed that most of the villages
suggested were not really good candidates for the program. This was a period of some
frustration for both LIFELINK management and Grundfos. At one presentation for the board
in October, five key learning points were identified:
1. It is technically possible to combine telecommunication, infrastructure, mobile banking,
and the Grundfos LIFELINK automatic water system, thereby creating a unique business
environment.
2. Customers are willing to pay for water, but possibly less than anticipated (KES5 per 20
liters).
3. Collection of borehole data is cumbersome, and the data are to a certain extent
unreliable.
4. Potential stakeholders believe in the business models, and contracts have been signed.
5. It is difficult for LIFELINK to be the project leader when the success of the project is in the
hands of key executing partners, and where significant cultural differences exist.
Grundfos LIFELINK management had to acknowledge that several of the assumptions they
had built their business model on were wrong. In particular, they had miscalculated the
interests of the NGOs in the process. The NGOs were primarily concerned with their own aid
programs; they saw Grundfos as a potential contributor to these programs rather than the
other way round. They had already established programs in some villages, and their choice
j j
of potential villages for the Grundfos LIFELINK project was strongly biased by their own
current operations. These rural villages or even whole areas often lacked the basics needed
for operating the system. Some entirely lacked capital flows or mobile telephones and had
insufficient cattle-raising or agricultural activity in need of a water supply. Furthermore, often
these villages even lacked a borehole. In November 2008, Grundfos LIFELINK management
was increasingly frustrated. They had no operating sites in any villages, only several failed
negotiation attempts with villages that were not really suited for the project. LIFELINK
managers realized that they needed to take a more active role in the location of sites and the
negotiation of the agreements with the local villages:
Teaming up with the local NGOs was a great mistake from our side. We knew very little about BoP
markets and had no concepts to really grasp the local market conditions in rural areas, but we
believed that our knowledge from servicing hotels and other more economically advanced
customers in Kenya would be useful to us. Like everybody else from our part of the world, we
teamed up with the local NGO experts and explained our purpose to erect 20 commercially
operated test sites and then left it to them [. . .]. We learned that there are many agendas and
that a clear division of work between us and the NGOs was not possible. We learned that as a BoP
operator you need to control all activities and enroll people in your own design, rather than linking
to existing systems, as they seldom serve your interests (Peter Todbjerg Hansen).
A new tack was needed if the roll-out was to be a success. Extending control over activities
such as sales, lease agreements, and negotiations with the local telecom necessitated the
establishment of a subsidiary in Kenya. Late in 2008, Carsten Kvistgaard left the project.
Grundfos LIFELINK established a subsidiary and with it a new sales organization, situated in
Nairobi and headed by a newly appointed manager, Lars Laursen. His job was to focus
directly on the regional water boards in order to find a suitable partner. The water boards in
fact had funding to support water supply initiatives in the local villages. A second source of
funding was the Danish Embassy in Nairobi. LIFELINK also decided to replace the NGO as
the go-between to the villages and instead hired Paul Kilonzo as community consultant. In
addition, they hired anthropologist Louise Koch to conduct research in the villages in order
to understand consumption patterns better; they would use her insights to help Grundfos
profile the potential customer villages. They started by contacting the national government
and UNICEF to locate existing boreholes. The anthropologists visited the rural communities
to learn more about them in order to evaluate whether they were interested and ready to
negotiate an agreement with LIFELINK. Koch remembers her first impression:
The big problem that LIFELINK experienced at the time was identifying the relevant villages and
how to approach them. This was primarily the headache of Lars and our community consultant
Paul Kilonzo. From what we learned in Katitika, however, we soon discovered another serious
challenge: The agreed price for water was simply too high, and it was unlikely that village
inhabitants would ever pay 5 shillings per jerry can, since the perceived normal price for water
in a public water kiosk is 2-3 Kenyan shillings per jerry can. Furthermore, the water
consumption was much less than what had previously been expected (Louise Koch).
This acknowledgment made it clear that the commercial funding model would never be the
primary one. Nevertheless, Koch helped LIFELINK management to see a different
perspective for establishing their water kiosk. Rather than looking for prospective customers
for LIFELINK, they should think of the water kiosk as an entrepreneurial project. Rather than
thinking about how to bring the kiosk to the village and make users pay for their current
consumption, their focus should be on how the kiosk could generate local growth once it was
there. With the new approach, the LIFELINK initiative could be seen as a community
development platform that could attract other organizations and NGOs. An important lesson
learned was that it was necessary to alter the original financing scheme for the water kiosk.
From the onset, the business contract was imagined and constructed as an agreement with
the local community. The surplus generated from the daily payments for water was
supposed to finance a loan taken out by the community. Once it was realized that 5 shillings
was an unrealistic price, it was also clear that this model would never be the dominant one for
the rural communities in Kenya. Other sources of revenue should be looked for to finance at
least the initial investment, in order to complement what became labeled as the commercial
model. One new model developed was based on donations: NGOs, humanitarian
j j
organizations, and others could finance the system, and only the service contracting costs
would be paid through the user fee. The second was a semi-commercial model that
mixes community user fees with donations from donors such as government, regional
development banks, or the World Bank. The models are shown in Figure 5.
With the semi-commercial model and the donation model, Grundfos again changed the
focus of the business model. It became increasingly important to attract funds from donors
interested in the developing countries as well as to raise funds through other means.
Documentation of the sustainability of LIFELINK became even more important than before.
It is now at the core in raising more capital for the water kiosks:
We have realized that searching for villages that can afford the system should be complemented
with a more systematic search for investors. Lars Laursen and Peter Todbjerg Hansen have
divided the work between them, so that Peter works on attracting international NGOs, whereas
Lars focuses on the support from locally present NGOs (Louise Koch).
The anthropologists have developed a procedure for negotiating with the local communities
and evaluating the impact of the water kiosks. A baseline study is made, starting with an
overall assessment of the local village, which is now becoming standard procedure in
Grundfos LIFELINKs business opportunity assessment activities.
From these experiences another important lesson has been learned: it is necessary to focus
on the top of the BoP market. If there is no existing initiative and local agency in the villages to
build on, the LIFELINK business model will not work. This does not mean that one should
forget helping the weakest communities altogether, but that one needs a base and some
working examples in order to inspire other communities in the rural areas to follow suit.
Another learning point from the anthropologists work concerns negotiations with the local
communities in order to generate acceptance and commitment.
Version 2.0 (January 2009-May 2011) operating and expanding the model in Kenya
During 2009 and 2010 the number of sites grew. In 2009 Grundfos had launched five
production sites, and in 2010 the water facility stations were working in 14 villages. Working
with one of the water boards in the Machakos region was particularly successful. Figure 6
shows the LIFELINK sites in Kenya. Today, in the Summer of 2011, 16 of the 20 sites originally
planned for operation in 2009 are working. Other water facility stations are being negotiated
with villages, and an additional 65 units are expected to be in operation by the end of the
year. One may monitor water consumption at the sites on the link www.grundfoslifelink.com.
Figure 7 shows the water consumption from the village of Katitika. It was the first village that
agreed to establish the LIFELINK system and is typical of the villages served in Kenya in
population size, income, and other relevant factors. As can be seen, consumption varies
Figure 5 Two additional payment models to supplement the commercial model
j j
Figure 6 Water kiosk installations in Kenya
Machakos
Note: Spring (2011)
Figure 7 Estimated and realized consumption of water in Katitika

considerably and is below the original estimate, although it increases in most villages after a
period of adjustment, and the trend is slightly positive.
More generally, the operational revenue and cost breakdown for the two years of operation
show that the majority of the local LIFELINK sites generate a surplus. The overall revenue is
small, but positive. An important cost driver is the maintenance costs. In almost all of the
accounts, transportation costs are greater than service costs. These costs are expected to
decrease as the number of LIFELINK sites increases. As the number of facilities expands, a
more decentralized service organization will become feasible, leading to lower average
service distances and decreasing costs. When local administration costs are included, the
model is still not economically feasible. But given the scalability of the model, this will change
with an increasing activity level.
Impact on local community welfare. The LIFELINK team originally believed that consumption
of pure water from a LIFELINK kiosk would replace the use of river water. They have now
realized that LIFELINK remains a complementary water source for many of the village
inhabitants. When times are hard, they still prefer using the river as their main source, even
though they become ill from contamination. The problem is that the water from LIFELINK
often is handled by users with no experience or knowledge about bacterial conditions and
hygiene. Besides water, three additional routes of infection, for instance from human and
animal faeces, can be identified (Figure 8).
j j
Figure 8 Infection routes of water-borne diseases
Water
Soil
Faeces Food Mouth
Flies
Fingers
Although LIFELINK may help by providing water uncontaminated by faeces and may make it
possible to build sanitation facilities and latrines, other possible routes for contamination by
animal faeces remain, and education is necessary. On top of installing the LIFELINK system,
village inhabitants must be taught the importance of clean water, washing hands, and so on,
if having access to clean water is going to have a stronger effect on health. Grundfos plans to
make long-term overall assessments of the impact of LIFELINK on community growth. The
purpose of these measures is twofold. First, because the business model is dependent on
servicing and operations, learning more about the processes that affect the likelihood of
adoption of the system in the local village is important. Second, and no less important, such
reports are important for the further marketing of LIFELINK both to other villages and to
potential investors and donors.
One assessment report has been made to evaluate the impact in Katitika after one year.
Louise Koch and Adamson Katilu made a baseline study in 2009, and the follow-up study
carried out in 2010 measures changes on a range of parameters used in this first study. Data
were collected through more than 80 interviews in both the baseline and the follow-up study.
The interviews were carried out by interviewers with knowledge of the local Kamba dialect.
Close to 60 percent of the village inhabitants interviewed now use LIFELINK as their main
source of water. At the same time, the number of illnesses has decreased significantly, as
shown in Figure 9.
Figure 9 Number of days a child in Katitika has been ill the latest three months: 2009
versus 2010
45
2009 2010
40
35
Respondents in percent
30
25
20
15
10
0
No sick 1-3 sick 4-6 sick 7-9 sick 10-12 sick 13-15 sick o. 15 sick
days days days days days days days
j
PAGE 14 EMERALD EMERGING MARKETS CASE STUDIES VOL. 3 NO. 1 2013 j
A local nurse confirms this positive impact assessment:
The cases of amoebae, diarrhea, and intestinal worms, especially among children, have been
reduced by 50% in the last one year (Nurse Jane, Itoleka Dispensary, Katitika Village).
A number of other positive changes can be attributed indirectly to the LIFELINK water
projects. These include growth in the local income levels, which at least partly is attributed to
the decreased time spent on collecting water, adults sick days, and looking after sick
children.
Next steps. Some adjustments are still needed, and challenges still lie ahead. Development
has been very cautious, and the system is thoroughly stress-tested. One area that LIFELINK
is continuously considering is the degree of ongoing involvement in the communities. The
teams experiences show that apart from the hardware oriented aspects of implementing
and servicing the LIFELINK system, the community issues or software can be just as
important for ensuring the ongoing success and sustainability of the projects. Louise Koch
explains:
There are often some minor issues related to the running of the water project in the community that
will influence the success in the long run. These could be conflicts of interest in the community,
lack of awareness of the value of clean water, or supporting start-up of micro-entrepreneurship
activities like water distribution or horticulture. Getting involved with these issues would demand
many resources, and in the end, although our vision is to see these communities prosper, we are
not an NGO and dont have the capacity for this. So we are considering how to work with these
issues on the ground possibly by inviting other partners into the communities to work with these
issues (Louise Koch).
Another challenge is that many users in the villages still find the system complicated or lack
knowledge about the alternative way of buying water-drawing rights that short-circuits the
M-Pesa payment system. This has led the LIFELINK team to consider further involvement in
training locals in water use and in using the water keys. Another issue that remains to be
further developed is the fine-tuning of the service contract, based on the current
experiences in Kenya. On the basis of constant collection and mining of both user and
production data from the site, Grundfos LIFELINK will continue to improve its ability to
estimate the true operation costs. Grundfos LIFELINK has decided to make these data
accessible to all, making it possible for other private companies and NGOs to learn about
operation costs in BoP markets.
With the successful experiences in Kenya, the board of directors has given the green light to
a fast expansion of the business model to other countries as well as to new sites in Kenya.
Grundfos LIFELINK will rely on external local partners, which they will certify in the set-up
procedures. Therefore, a part of the Grundfos LIFELINK organization is currently developing
a training program for new LIFELINK installers.
A business developer has been appointed to expand the model into other countries in
Africa, and other models are used for transferring the business model to Southeast Asia.
Louise Koch supervises the process in Africa, together with representatives from Grundfos
LIFELINK. At present, the idea is that the variability of business conditions, with respect to
payments, external partners needed, marketing, and so forth, can be matched by the
component-like structure of the business model in its current version, and of Grundfos
experiences in Kenya so far. Although there will be new learning points in a new business
context, the board is confident that time is ripe for quickly expanding the activities.
The realized business model in 2011 differs in many respects from the imagined business
model from 2008. It is portrayed below in the value network in Figure 10.
When the intended and realized positions and ensuing governance roles for Grundfos
LIFELINK are compared, it is obvious that Grundfos LIFELINK has enhanced its presence
and activities in Kenya considerably, compared to its original intentions. LIFELINK has
become the hub firm that orchestrates the activities of the others and is responsible for
captaining the further development of the business model. Grundfos LIFELINK has also
j j
Figure 10 Realized value network in Kenya
developed an overview of partners and allies in consulting, hardware, software, peripherals,

connectivity, legacy interfaces, and pre-sales services.
The LIFELINK organization in Kenya is arguably costly, but it is seen as critical for the further
testing and expansion of ideas. As Mads Prebensen says:
Kenya is our laboratory and showcase for testing and rolling out new ideas in the LIFELINK
business model. Until further notice, we need an extended presence here, so we can follow up
with new initiatives and show the international NGOs present here as well as international
stakeholders such as the World Bank that we can deliver and continue to do so (Mads Prebensen).
Rather than relying strongly on any particular partner in these areas, Grundfos LIFELINK has
established knowledge embodied in procedures and components to meet these different
needs. In other words, Grundfos now has control over the processes needed to transfer the
business concept from one BoP context to the next, without dependence on specific
partners. Instead, partnerships can be developed with local entrepreneurs.
In the present setup, Grundfos LIFELINKs activities parallel those of an NGO in many
respects. The organization is no longer dependent on a local NGO, but its managers have
the organizational muscle to tackle organizational challenges in the market by themselves.
The present structure also reflects the potential that LIFELINK believes there is in expanding
beyond the current configuration. Table I compares the imagined and realized business
network on key dimensions such as the tasks of Grundfos and other actors and the value
appropriation logic of the models.
Some ideas about the possible future(s) for LIFELINK and Grundfos
The number of pump sites in Kenya is expected to reach 30 in 2011. In 2012 the
accumulated number of sites is estimated to reach 50, and in 2013 to total 70. At the same
time, pump sites will be developed in the region. Although profit is expected to grow,
the income stream is still small, as expected. The profit/loss estimate for Grundfos LIFELINK
is shown in Table II.
j j
Table I Intended and realized value networks
Grundfos LIFELINK network-based business model
Before entering Kenya Two years after entry into Kenya
Role and activities of Grundfos LIFELINK is a business solution with a GLL is marketing the system to seed-capital
Grundfos LIFELINK (GLL) pump technology at the core. The primary providers and is the main organizer of the water
activity of GLL is to provide system solutions in facilitys operation and payment system
the shape of hardware (pumps, mainly), the
surrounding knowledge for pump operations,
and the GPS-based server system for monitoring
local water consumption
The role of other actors GLL collaborates with local NGOs with special GLL negotiates directly with local authorities and
in the network expertise in finding villages and negotiating with collaborates primarily with actors in the villages.
them and with a locally present global partner in GLL develops local entrepreneurs into partners
mobile banking (Vodafone) for the payment and helps them establish activities. Other actors
system. It uses local service contracts for the are increasingly seen as customers that can use
operation of the water towers components of the GLL model to configure their
own activities
Value creation and value capture Value is created through sales of the pump Value is created for GLL through organizing,
of the net-based model system solution and the after-sales service servicing, and mediating between key
contract. Partners capture value from financial stakeholders. GLL manages the sales of water
exchange and from bringing water supplies to drawing rights, servicing, and control of the
those in need. GLL depends on its partners for payment system. NGO partners primarily benefit
value creation and value capture from GLLs ability to ensure a closed-circuit and
corruption-free investment and payment system

that can be used to channel foreign aid
Table II Profit/loss estimate for Grundfos LIFELINK

Million KES (1 million
shillings US$11,000/e8,000) 2011 2012 2013
Sales 93 163 228

Operation costs (service, maintenance, local
set-up and testing) 71 114 159
Local administration and depreciation costs 57 60 66
Profits 235 211 3
The figures show that the business model is profitable and has potential for further
expansion, along with the local infrastructure and the presence that is being established with
the LIFELINK water kiosks. There is still a wide range of ways that the LIFELINK business
model can be further developed in relation to the single elements of the model, the
penetration of markets, and the supplies used. The spider web below, developed by Peter
Todbjerg Hansen and LIFELINK, names some of the many ideas for the further development
of LIFELINK, along vectors such as geographic penetration, partnerships, water usage, use
situations, and the payment system. Not all these possibilities are practical for Grundfos to
pursue, but some have already been considered and pursued (such as the geographic
expansion vector). The innovation web shows the range of potential opportunities for
expanding the LIFELINK model (Figure 11).
Each vector (arrow) in the business opportunity web represents a possibility for activating
some or all of the elements in the LIFELINK business model along a specific development
path. Each stop on the path, marked by a red dot, shows a potential user problem that can be
addressed consecutively when one follows this path. One example of the development
possibilities focuses on the payment system vector. The LIFELINK payment model can team
up with local partners, who are issued a vendor RFID smart card and can transfer
water-drawing rights to locals. A water buyer can use her smart card with the vendors and
then settle her account with Grundfos. Grundfos can upload the vendor card directly,
j j
Figure 11 The Grundfos LIFELINK business opportunity web
bypassing Vodafone. The vendors commission consists of additional water drawing rights,
which he can sell to other users to earn cash. A typical candidate for a vendorship would be
the headmaster of the local school or someone who already has a stake in the community.
Given the constant monitoring and the low monetary value transactions, the system can be
used for a range of other infrastructure services, such as payment for electricity usage.
The shared smart card system allows users to avoid the SMS charges of a mobile payment
system like M-Pesa and also allows cash payments by users who have no access to mobile
phones. This evolution of the system allows people to transfer funds between their RFID
smart cards without any charges. It opens up the system even further, as it potentially allows
benefactors to donate water utility rights directly to beneficiaries, for instance in Kenya,
without a costly administrative system. Another improvement is to simplify the design of the
water station even further. Getting rid of the tower and placing the water tank on a low
platform is one development, and replacing gravity pressure with powered pressure is one
of the design improvements in the new model. Peter Todbjerg Hansen explains the future
prospects for LIFELINK:
At the moment we focus on water, but the next big thing for LIFELINK may very well be the use of
water to produce food. I imagine that irrigation systems based on our technology and payment
system could be further developed and that we would partner with development banks to launch
a new version of our business model (Peter Todbjerg Hansen).
With the scaling up of the model, Grundfos is routinizing the transfer of the procedures and
knowledge needed from Kenya to other countries. Another consequence of the preparation
for scaling up the model is that Grundfos increasingly focuses on its own payment model,
using local vendors as partners instead of teaming up with a mobile phone company.
Implementing the mobile banking model typically takes much longer to negotiate and
involves another external partner in an already complicated set-up.
The development process foreshadows the challenges for the future of Grundfos. It is not
useful for Grundfos LIFELINK to establish a parallel sales and service organization in every
market it will enter in the future. Rather, LIFELINK should be able to benefit from the existing
Grundfos infrastructure. Because the business model of LIFELINK is very different from the
companys main activities, however, it may be disruptive and therefore probably will not be
welcomed by a country manager as an addition to his existing portfolio of activities. Mads
Prebensen explains:
If anyone thinks that the same people who successfully sell our pumps will be equally successful
in selling LIFELINK, I think they are mistaken. This business model differs from our conventional
model on too many parameters. You create value another way and work with different partners.
j j
There is no way you can ask a salesperson to devote 10% of his time to this type of business while
using his remaining time on other business areas (Mads Prebensen).
The model will probably be to use the existing infrastructure as an incubator, and in this way
share back-office functions with the main organization. Later, when some scope has been
achieved, a functioning organization will be handed over to the country manager. As
Grundfos develops more of these ideas, the sales subsidiary managers must develop
competences for supporting business incubation activities as well.
Notes
1. A business model articulates a firms theory of value creation related to a specific activity. It reflects
the firms strategy and refers to the logic of the firm, the way it operates, and how it creates value for
its stakeholders (Baden-Fuller and Morgan, 2010).
2. Karen Blixen, the world-famous Danish author of Out of Africa, spent several years running a coffee
farm in Kenya. This has formed an enduring cultural liaison between the two countries.
Keywords: 3. As will be demonstrated later, the premise for the model that users were willing to pay 5 KES per jerry
Base of pyramid, can was wrong. The market price was closer to 2-3 KES per jerry can.
Sustainable business, 4. M-PESA means money in Swahili.
International strategy,
5. Vodafone sees the development of mobile banking as a strategic option for making a disruptive
Competitive strategy,
innovation in banking and is launching mobile banking in other African countries as well as in India.
Rural areas,
The company expects to launch it in the developed world as well.
Water supply engineering,
Pumps 6. The Guardian, January 14, 2010: are mobile phones Africas silver bullet?
References
Baden-Fuller, C. and Morgan, M.S. (2010), Business models as models, Long Range Planning, Vol. 43
Nos 2/3, pp. 156-171.
Prahalad, C.K. (2006), The Fortune at the Bottom of the Pyramid, Pearson Education, New Delhi.
WHO (2011), World Hunger and Poverty Facts, available at: www.who.int
Exhibit 1. New Business division in Grundfos

The New Business division
The New Business division in Grundfos is an internal business incubator whose job is to
search for and develop business ideas outside Grundfoss core area. It reports directly to the
Grundfos group management. The division actively pursues the long-term strategic vision
for Grundfos in 2025: to substantially develop the non-pump-related business activities of
Grundfos while matching Grundfoss overall growth ambition expressed in the company
slogan: Concern, care, create.
An important focus area in this plan is the development and use of sustainable technologies
for water provision and transportation (and related areas) for a growing population in
transition economies. Besides this potential growth area, the New Business division in
Grundfos works on business ideas related to six other areas:
1. Decentralized water treatment.
2. Online beyond mobility (focusing on market possibilities in pervasive computing).
3. Renewable energy (co-developing pump facilities to work with renewable energy
sources).
4. Emerging markets (providing solutions for the growing middle class in the BRIC
countries).
5. Solution sales.
6. Product adaptability.
j j
Most of the ideas pursued by New Business originate outside Grundfos and would be seen
as diversions rather than additions to Grundfoss main activities by these division managers.
Prebensen explains the rationale of the New Business division in the following way:
New Business is a unit that works with new ideas that are so far detached from the
activities of our main business divisions that they would not stand a chance there. In
Grundfos we have realized that such business initiatives need their own organization,
and some degrees of freedom, while still being supported from the very top of
Grundfos (Mads Prebensen).
The division supports intrapreneurship initiatives in Grundfos by focusing on evaluating and
furthering the commercial development of new technologies and ideas related to Grundfoss
existing technologies and the customer needs the company serves. New Business has an
internal staff of technical as well as commercial experts and frequently mobilizes experts,
consultants, and potential business partners to generate and mature new ideas.
Exhibit 2
Figure E1 A step-by-step overview of the LIFELINK payment system

j j
The following step-by-step procedure shows the processes involved in the information and
value transfer among the actors:
1. The local user sends an M-Pesa-based SMS to Safaricom via a mobile phone.
2. Water credits are automatically forwarded to a database hosted on a server in Grundfos,
Denmark.
3. Water credits are registered at the local site, and when the user uses his RFID tag, it is
recognized by the system.
4. Water credits are transferred.
5. At the same time, money is transferred to a local bank account in Kenya.
6. The money is used for service payments, profits, payments on loans, etc.
7. The local service provider is contacted.
8. Services are provided.
Corresponding author
Poul Houman Andersen can be contacted at: poa@asb.dk
j j

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Grundfos LIFELINK: solving the base of the pyramid tangle?

Vol. 3 Iss 1 pp. 1-12 http://dx.doi.org/10.1108/EEMCS-11-2012-0193

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Poul Houman Andersen is Introduction

draws on a network of local community partnerships.

The ideation process begins

4. It should be adaptable to regional cultures and structures of local water management in

The early design of the business model

Figure 2 Imagined value network in Grundfos

Figure 3 The template for exchanging information

Note: June 2008 version

Figure 4 An RFID tag inserted in the LIFELINK water kiosk terminal

The RFID tag

Ramping up the business model in Kenya

Figure 5 Two additional payment models to supplement the commercial model

Note: Spring (2011)

Figure 7 Estimated and realized consumption of water in Katitika

developed an overview of partners and allies in consulting, hardware, software, peripherals,

corruption-free investment and payment system

Table II Profit/loss estimate for Grundfos LIFELINK

Sales 93 163 228

Exhibit 1. New Business division in Grundfos

Figure E1 A step-by-step overview of the LIFELINK payment system

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