OPEN SOURCEHOUSE

LEARNING CASE

From OS-House to Janta Meals and everything in between. How Enviu learns its way to more successful

social business development

Our top-7 key lessons1) Focus on asking the right questions, instead of jumping to solutions.

2) If you want to start a company, start developing the business model, and then the business case, as early as possible.

3) Do this intertwined with involving the end-user, in their role as a possible customer, not as a non-binding think tank.

4) Attract a financing/funding mix for your development that allows this iterative development, also allow time for emerging insights.

5) Preferably the entrepreneur is the idea-owner and otherwise involve the entrepreneur as early as possible. Make sure the entrepreneurial team has the right skill set for this particular start-up idea.

6) Innovation is seldom about (just) technology.

7) Cherish crowdsourcing but use it wisely. Accurately assess its position in the whole process from Idea to Start-up.

01/INTRODUCTION

CONTENT

02/THE PROCESS OF OS-HOUSE03/DIFFERENT THANEXPECTED04/LESSONS LEARNED05/SOME FINALWORDS

pag. 03

pag. 04

pag. 12

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pag. 24

Innnovation, a word we love to use.

Innovation, a word we love to use. But what does it mean? When are you innovative. And when is innovation successful? We will get back to that question at the end of this report.

At Enviu we believe in challenging the current system, the way things are done in business. We also believe in the power of the crowd: two can come up with more than one. With these two things in mind we started our Enviu journey in 2004. And it brought us to various places.

01/INTRODUCTION

Image credit: Detail from competition entry

02/THE PROCESS OF OS-HOUSE

In 2007, while in Africa, Vincent van der Meulen, an architect, noticed there was a huge need for affordable housing. Moreover he saw the new middle class building housing for themselves in a unsustainable way. As an architect he knew you could build an affordable house that people with a stable income and decent jobs would be able to afford and at the same time would be sustainable.

Flashback to 2007. Vincent, an architect, went on a trip to Africa and discovered something...

Image credit: Detail of competition entry WBR House

THE STARTSince the context of his regular work was not the place to work on this idea, he knocked on Envius door. At Enviu we love a good challenge, so together with Vincent we started working on the Open Source House concept. From the start the question was how we can unleash the international knowledge about sustainable building for people in the emerging middle class. Therefore the idea of organizing an international competition and making all designs available as open source was born.

Additionally, it was a method that we knew would be interesting for funders, because of its visibility. At that time social entrepreneurship was not a topic yet and most grants would not allow to develop a social business but instead were focussed on creating visibility and awareness. We applied for a grant at VROM (one of the former ministries now included in the current one for Infrastructure and Environment) to finance the project.

Image credit: The Advocacy Project (Flickr.com)

1 blj.people live

in slums

30%mortgage rate per

year

The Open Source House challenge was born.

THE ISSUEAs Vincent noted, a lot of people live in slums. To be exact, more than one billion people worldwide. The inhabitants of these slums are usually people with a job and an income. However because of a lack of choice, a lack of knowledge on sustainable building, use of expensive imported materials and high prices of the current housing these people do not have access to appropriated housing.

After a research period about the size of the issue in various countries, and their general conditions, we chose Ghana as country for the competition. It would be a pilot country because the results were to be the basis for activities in more countries. Next to the grant of VROM we attracted partners such as COM.wonen, Dura Vermeer and NCDO to finance the competition. The aim was to challenge architects worldwide to submit and co-create a design for a modular, flexible and sustainable family house. The Open Source House challenge was born.

CHALLENGE COMPETITIONIt took us 7 months to prepare the challenge, which included more in depth research about the social and cultural characteristics and stakeholders in Ghana, as well as finding a plot for the pilot house so the architects would have a context to design for and building relationships there. This phase included collection of the wishes and needs of the end-user and an assessment of the current housing industry.

We selected a jury for the competition involving high-end people, so it would be attractive for architects to participate. In January 2010 we started the competition. The assignment of the competition was a single family house for the emerging middle class in Ghana on a plot within the Cape City project.

The assignment:a single family house

for the emerging middle class.

Image credit: Detail of competition entry

RESULTSThe competition process took 5 months from start to choosing a winner and the response was overwhelming. 3100 architects from more than 45 countries worldwide participated, joined as teams and submitted a total of 247 entries. That was a lot more than we expected, especially since the participating teams had to share their design open source and on-line to be eligible to join the competition. We had to include an extra jury round. 10 independent architects rated all the designs, which took them a week to do, and handed the top 30 over to the expert jury. The expert jury chose 10 designs to be presented to the final jury. More than 500 people joined the OS-house final event, and the design Emerging Ghana was selected as the winner of the competition.

The event reached national television, the competition had been enormously successful, the jury was happy. We were all excited.

The design Emerging Ghana was selected as the winner of the competition.

Image: The winning team of the Open Source House Competition 2010.

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image: detail from competition entry Emerging Ghana

Image credit: Detail of winning competition entry Emerging Ghana

DREAM HOUSEThe winning team teamed up in a pressure cooker week with architect Vincent to optimize the design. We started preparing for the pilot in Ghana. At this stage we involved a lot of possible end-users, took interviews, and we asked them what their dream house would look like.

We started building the winning design in Ghana as a pilot house. It turned out that the calculated price of the house was much higher in the Ghanaian context using local calculators. One reason for this was the innovative sustainable building technology that was applied and not yet common in Ghana. So we had to go back to the drawing board to come up with a more feasible design. It took us a year to build the first pilot house, mainly because of land issues (zoning plans and permits from different government institutes). We attracted a local entrepreneur, Samuel, in Ghana to start the OS-house company there and to sell the houses, with the first house as showcase. All this was a slow process, at least, much slower than anticipated, despite the local support we had built.

We had to get back to the drawing board to come up with a more

feasible design.Besides the costs of the pilot house, we discovered by going in depth with end-users and other stakeholders that apart from availability of proper housing, a much bigger issue was relevant, but less visible, literally: In Ghana the typical mortgage rates were 30% per year. This turns the total costs for financing a house for an end-user into an insurmountable barrier, at least if the mortgage works as it currently does.

With this new knowledge, much more attention had to be paid to the financial mechanisms of buying a house. This effort paid off: a new innovative financing service was developed with stakeholders, bringing down the mortgage rate to (less than) 10%. With this break through achieved, the entrepreneur wrote a decent business plan, paying more attention to groups of houses (communities), got the parties involved, but we were not able to make the deals with the stakeholders since the market was not ready yet. All parties waited for the other to go first.

Rick and Enviu started a new company, called

INURBA

INURBAThen Rick came on board, an American entrepreneur with years of experience in project development. The new direction which had evolved focussing not only on the house, but much more on the community, infrastructure, affordable financing and scale to make the house affordable was something he could relate to.

After his evaluation of the project in Ghana, he wrote recommendations on what to do next. His main conclusion was that setting up a company in Ghana was not feasible at that moment. The financial innovation we had developed was good, but it was an extra effort for the company to make it work. Since project development is already a very cumbersome process we decided to start with a project where the right partners were on board and that preconditions were met. He also concluded that, since the focus of the business had shifted from the house to project development, we had to strengthen the entrepreneurial team with real estate development experience.

Rick and Enviu started a spin-off company, called INURBA, which includes a whole new inclusive business model around building communities, mortgages, infrastructure and housing. Prefab housing replaced the more expensive designs from the competition to improve control on budget, quality and timing. Getting the project finance on board is still a challenge, because developing the project to a stage where there are enough securities for funders is difficult without initial funding. A community project in Nigeria is close to launch. Over 250 potential buyers signed up for a mortgage for an affordable house and are already enrolled in the screening process of the bank.

We had guarantees for 3 million euro

FUNDINGRight now the business model is good and the financial feasibilities and securities are getting better every day. We had guarantees for 3 million euro from two large housing corporations, but then at the last minute that deal fell through because of the crisis in the Dutch housing corporation sector at the beginning of 2013.

Rick and Enviu are currently looking for investors in the public and private sector. As soon as we receive funding we can start building the houses. We just have to find the right source for funding.

Image credit: Putting up the panels of the INURBA house - ENVIU

03/ DIFFERENT THAN EXPECTED

Image: Detail from competition entry

Asking the wrong questions and more unfortunate choices

It took us three years from start to finish to learn that some things didnt work as we assumed they would. To start with we spent an extra-ordinarily amount of time conducting feasibility studies, but we asked the wrong questions, and the answers given were theoretical and not binding.

But we made more unfortunate choices...

Their dream house was too expensive

EXPERTS VERSUS END-USERSIn the competition we focussed only on the product, the design of the house; not on other things that can be relevant for a house to be bought by the end-users. We selected a high-end jury, including high-level people from Ghana. They were not the potential end-user, so they focussed on other things in judging the designs than the end-users would have. We dont use them as scape goat, as they judged with their best intention, but for us it was a lesson: match the person with the task.

DEVELOPING THE BUSINESS MODELWe involved stakeholders, but we didnt think about the business model in the first stages of the project. In part this was due to the financing, which was focused on organising a successful design competition, Getting access to an affordable mortgage or other form of financing proved to be a much bigger problem than getting access to an appropriate house. We did come up with an innovative solution for that, which actually turned out to be the real innovation. This happened relatively late in the process though. A likely reason again was the focus on design of the house from the start of the project and therefore asking the wrong questions to the end-users, i.e., not about how they were thinking to finance their house.

THE REQUIRED ENTREPRENEURIAL SKILLSWe took a local entrepreneur on board, with a good knowledge background in architecture and real estate. However throughout the course of the project the focus of the business slowly changed towards project development. We were not able to strengthen the core entrepreneurial team with the right real estate development expertise. This turned out to be crucial.

THE PILOT HOUSEInternational architects designed the house. The cost calculations were therefore off the mark. After having the cost calculated by a Ghanaian engineer we discovered that the house was too expensive to build and the design needed to be altered.

We organised two co-creation workshops with local experts and end-users in Ghana. We learned that the design didnt correspond with the local cultural preferences. For instance, the house was too open and didnt give enough feeling of security and the lay-out of the house was also not in line with how Ghanaian people like to live. The kitchen was closed and had a roof; something that they didnt like because all the food smells would be trapped in the house. They preferred to have an open cooking place next to the indoor kitchen.

We organised a second workshop and co-created a new design. We asked them what their dream house would look like. After this session 36 people signed up showing interest in buying such a house.

An affordable mortgage proved to be a

much bigger problem

04/ LESSONS LEARNED

Image: Detail from competition entry

What have we learned and how to

apply it?

With the valuable knowledge we gained in this project we definitely would approach things differently. We would not start with a competition. We would start with going to Ghana ourselves, discussing the issues and solution direction with potential buyers and getting them on board, then start looking for financing and finally the design.

Learn from your mistakes but also from what went well, even if it was not intended like that. Thats what true innovation is all about. So anticipate that this learning will take place, as will unexpected situations. The key is to let these unexpected situations happen before a lot of money has been spent and/or final choices have been made.

Continue reading for more specific lessons, both for Enviu itself, and others.

How to approach:1. Get a design2. Go to Ghana3. Discuss issues and solutions4. Look for financing5. Get a design

Check this video with the 5 dos for the lean start up at http://tinyurl.com/ohaxx3m But as always: never blindly copy, always Watch, Reflect, Learn and Apply when and how it makes sense.

1

2

3ASK BETTER QUESTIONS INSTEAD OF JUMPING TO SOLUTIONSA few years ago we had resources available to spend on research and feasibility studies. However, the questions asked in these studies, including proper analysis of the issue to be addressed, usually were not the right ones, or the most crucial ones. The solution direction that was provided (crowdsource designs) was so tempting that we forgot to verify whether design was really the problem.

FROM LONG TO LEANWith this financing mix having improved after the OS House challenge we have been working for all start-ups projects since then to apply the lean start up method. That means that you start with a proposition that is not ready yet and find out if you can attract buyers. If you dont have buyers, you dont have a business. Active involvement of the prospective end users means you will hit on crucial insights early on. In the case of OS-house, or now INURBA, we ask to start saving for a house and put down a deposit, so that we can discover how serious people are about buying a new house. On the cost side, with the details of the solution sufficiently clear, you can make a proper ballpark estimate about the costs, before something is built.

FINANCING MIXGetting from issue to idea to market is a complicated and risky process, which is known for its difficulty to finance. Organising a clear competition, with a goal, prizes a jury, and lots of inspiration to go around is a tough, but manageable process, which therefore can more easily be financed. The idea was that a successful competition would attract attention and draw in financing for follow up phases. And it did.

However, the importance of working on the business model, getting the right stakeholders on board, getting buy in from government, private sector and end users has become very clear. As has the fact that you need to start with these aspects as early on in the process as possible. Whereas, if your main aim is to solve societal issues, it feels wrong to start with the question Where is the money?. To make the idea a successful one, you need to start working on the question Who will pay for my product/ service and how sooner rather than later. The point here is: with that insight crystal clear, you need to look for a financing mix for your innovation project that allows both the technical part, as well as the business part to be developed in parallel, or rather, intertwined. We find that back in 2009 this was harder to explain to financers than it is nowadays, since social entrepreneurship has become much more known and accepted.

4 END-USER NOT AS CO-CREATOR BUT AS BUYERIt has been said before, but when people asked about their ideals, they can dream away. It doesnt mean that they will actually buy the product. For our new start-ups Discovered and Janta Meals we include the end-user as soon as possible in their role as (paying) customer, not just as Wouldnt it be nice if-think tank. As a very important additional lesson, we realise that while we did many workshops with a variety of stakeholders and end-users, most workshops, and the results, were text based. Working more with visuals, and even movies, as early on as possible, might probably have avoided some misunderstandings and resulted in conclusions that reflected reality better, especially for the design case.

Two examples of how we applied these lessons:

Janta Meals is a start up in India that aims to build a chain of restaurants where slum dwellers can buy affordable and healthy food. We opened the first restaurant branch within 4 months after conceiving the idea and we are testing what works, how much things should cost and whether people are buying the meals. The next step is getting an investor on board and scale up.

Discovered is an online platform where artisans can stage their products for an international buyers community. We had a lean version of the platform live and made our first reveneus within 5 months. Currently we are testing whether people are buying the products, and which products are most popular. Not everything works straight away. Its still a challenge, but we are already live and we can test with real buyers behaviour.

Visualisation might have avoided misunderstandings

Image: Screenshot from www.discovered.us

5At Enviu we get things ready but we need an entrepreneur to bring things further

ENTREPRENEURIAL SKILLSAt Enviu we start, we get things ready, but we prefer to start with an entrepreneur who has a great idea or get this entrepreneur on board as soon as possible. So they become mental owner of the start-up idea, can actively contribute to shaping the business model, and have a key role in building the relevant local relationships necessary for a successful launch. The combination of business skills, social relationship skills and deal closing skills simply requires experience in these areas. Both the timing and the required skill set is something we now are checking more carefully when getting the entrepreneur and his/ her team on board.

6 INNOVATION IS SELDOM ABOUT (JUST) THE PRODUCT/ SERVICEWe noticed that in most of our business models an innovation of the current financial system is needed. We often started with competitions to come up with a new product, such as the Hybrid Tuk Tuk challenge which resulted in Three Wheels United. We learned that its not only about the product, but that the far more important part of the issue is lack of appropriate access to finance to address the issue. By building a business model around that part of the issue, we can empower the end-users, instead if simply selling them something. The essential part of the business model is the business case, which determines whether besides addressing an issue, a viable start-up can be developed.

We know that inclusive business models can be complex and still time consuming to get everyone on board, but within this realm, we always aim to pilot, to test as soon as possible. And addressing the real issues and putting empowering end users central, we will achieve more impact.

In the case of the OS-house challenge we could have chosen to have 10 nominated teams to go to Ghana for a pressure cooker week with the end-users themselves to fine tune design. In this pressure cooker week not only the end-user should participate but also experts like constructors, quantity surveyors (calculators) and building permit civil servants. We would have gotten some answers sooner and the winning design would have been more than just a design, but the house would much more likely have been more affordable to build, we might have gotten the necessary government organisations on board sooner and we would have developed the necessary basis for a business model.

Granted, the financing at that time would not have allowed for such a step, but with that knowledge we would now include such a step and then find a way to finance it, instead of the other way around.

Our process:ideate, validate, participate

Image: Detail from competition entry

7 CROWD SOURCE CHALLENGE AND PROCESSTogether with partners we set up a challenge competition to come up with business solutions for issues. Not in every case a challenge is the right starting point. Sometimes the outcome of a challenge requires so much rework, that its not an efficient way to start a company.

That being said, a challenge is a great way to generate a lot of new business concepts. In terms of global outreach the OSH challenge is perhaps still the biggest success so far, with over 3000 architects from 45 countries participating. But the position of such a phase in the entire (business) development process must be clear(er) from the start. A open crowd source challenge is a perfect tool when looking for a lot of fresh input, or creating new business concepts for a specific issue/theme. However if the goal of the competition is a product or technology it is much better to start with a lean business development process immediately, going through the phases of ideate, validate and participate. During the course of validation a co-creation challenge can than still be applied, which gives a lot more context to the designers.

A FAILURE?So does this all mean that the (design) competition was a failure? Not at all! Thousands of people were inspired by the process, during and after the competition. The idea to actually share your design on a platform has triggered many people. Also long after the competition ended, people kept submitting to the platform. The Mexican organisation Sustentables has used it to organise a local OS House competition, and the Com.wonen/Dura Vermeer/Ballast Nedam had similar plans for the city of Rotterdam, which due to the budget cuts was not executed.

So, in terms of creating awareness and providing the opportunity to people world wide to discuss and work together on this issue, even in the form of a friendly competition, the original OS House idea was very successful. Our main learning is about the position of a platform and a challenge in the larger whole.

Thousands were inspired, during and

after the competition

The Enviu Process Diagram

05/ SOME FINAL WORDS

Image credit: Adam Bowie

No theoretical definitions but a

practical view

So, to answer the question: what is successful innovation? We are not married with theoretical definitions so our practical view is: a good idea that addresses an issue in a new way so that it reaches and is adopted by the market. Without the last part, it remains just a nice idea. To get through all these stages, with iterations, validations, loop backs and loop forwards, you need an eco-system that enables you to do that. This is valid for an individual entrepreneur and definitely for Enviu. We are well on our way to dynamically orchestrating this eco-system, we think this is reflected in the way we are currently working.

But make no mistake (pun intended), we will still learn from every project.

ENVIU 2014www.enviu.org

TextVibeke Helder, Wouter Kersten en Walter aan de Wiel

DesignRobin Budel Ontwerp

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