Sara Carvalho, Business Model Innovation Consultant at Bosch
We have long equated groundbreaking innovation with the entrepreneurs and startups of Silicon Valley. But now, more than ever, large corporations are staking a claim in the innovation game. Driving this wave of corporate innovation are Corporate Explorers: the leaders actively pursuing bold, exploratory business ideas beyond their firm’s core.
This article is the fourth in a series featuring Corporate Explorers to Watch in 2021. Sometimes, Corporate Explorers are managers given the license to create new businesses, operate outside established corporate rules, and use the assets of the firm to convert the organization’s financial lead over startups into disruptive growth opportunities. At other times, Corporate Explorers are CEOs, personally leading the charge to innovate. Regardless of their position within a firm, Corporate Explorers are typically insiders willing to stand out from the crowd, act with independence, and break the firm’s taboos to commercialize disruptive ideas. They are purpose-driven individuals on a mission to transform the status quo.
Corporate Explorer to Watch: Sara Carvalho
Role: Business Model Innovation Consultant
Organization: Bosch Innovation Consulting
We often say you need to get ‘out of the building’ to find ways to disrupt markets. This is a message close to the heart of Sara Carvalho from Bosch. A simple insight set her down a path of developing a way to provide Kenyans with easy and affordable access to hot water. She learned that no matter how great of an idea you have, you need to talk directly to those you wish to serve to test your assumptions and learn what it takes to delight them.
Mobile Connectivity for Good
In 2013, Carvalho was traveling through Peru. After a long day exploring the Lake Titicaca region, she returned to her lodging and, exhausted, told her hosts that she was going to take a hot shower and relax for the evening. The expression on her hosts’ faces sunk—their home was not equipped with hot water. Mortified by her assumption that hot water would be readily available, the seeds of opportunity to improve the lives of others with technological innovation were planted in Carvalho’s mind.
At the time, Carvalho was working with Bosch’s Thermotechnology division in Portugal, which is, among other things, responsible for the firm’s hot water heater product lines. Then in 2015, she attended a lecture at the London School of Economics by Nick Hughes, the founder of the African mobile money platform M-PESA, through which passes roughly 40% of the Kenyan GDP, and M-KOPA Solar, a clean energy provider for off-the-grid solar lightbulbs.
During his talk, Hughes described how he was committed to leveraging mobile connectivity to create a better world for all. Founded in 2011, M-KOPA has, to date, connected over 1 million homes in Kenya, Uganda, and Nigeria to affordable solar power, with hundreds of new homes being added every day. Collectively, M-KOPA customers have saved hundreds of millions of US dollars and experienced over 100 million hours of kerosene-free lighting per month.
While listening to Hughes, Carvalho had an idea: if mobile connectivity could be used to power lightbulbs, couldn’t it do the same with water heaters? Given the estimated 119.9% mobile penetration and M-PESA’s ubiquitous use in Kenya, the potential to bring warm water into the homes of Kenyans, even in remote regions, was promising.
Approximately one year later, Carvalho got the opportunity to test her idea when Bosch invited its employees to submit new business concepts to an internal innovation competition. She spent 20 minutes outlining the idea and submitted it to the contest. Shortly thereafter, her concept was selected as a winner and she joined Bosch’s Accelerator Program in Germany to test it.
Bosch’s Accelerator Program (BAP) has two phases. The first lasts eight weeks and focuses on customer discovery. The second is six months long and centers on customer validation. After phase 2, Carvalho started an Incubation Phase directly in the Thermotechnology division in Kenya to prepare and test all needed operations for a successful scale. Carvalho’s project ended after the latter phase, not because it wasn’t a viable, feasible, and desirable product idea, but because the Bosch Strategy decided to focus on B2B revenue models, whereas hers was a B2C venture.
That said, Carvalho’s story is about more than taking a product to market. It is about getting out of the building to empathize with your customers and identify their needs and pain-points, and then creating something that brings value to their lives. It is about centering the human throughout the innovation process, consistently checking in with them to test your assumptions and ensure that you are offering them something they actually want.
Phase 1: Customer Discovery
The goal for this phase is to complete at least 100 face-to-face customer interviews to learn about and truly understand your customer, their motivations, and the problem they wish to solve. To do so, Carvalho had to test an initial hypothesis and business model. Her original concept involved using Bosch’s most economical electrical water heater model and putting a SIM card into it so that users could pay for power with M-PESA. Her hypothesis was that young people living in rented apartments wanted to have hot water and were not happy with existing solutions, if they even had any at their disposal. She named this target customer, “Maji.”
When Carvalho landed in Kenya to interview potential customers, she soon learned that Maji had hot water supplied by an electric shower head that they disliked using as it shocked them when the electricity was unstable. Additionally, the cost of electricity was prohibitively expensive for Maji and the design of these shower heads was a pain-point as it made it difficult to effectively wash their head. Carvalho had just the solution for Maji—or so she thought.
When told that Carvalho had a solution for them, Maji agreed that, while it sounded great, there was no way they could mount a hot water heater in their rental unit without losing their security deposit. For this reason, Maji could not be Carvalho’s target segment. So, she shifted her gaze to Kenyans in urban areas who owned their homes. She called this segment “John.” It turned out, however, that John had an electrical storage tank for their home. While John was unhappy about the regular blackouts and the high cost of electricity, they preferred to pay for the full-service upfront or every month, rather than via mobile micropayments. This segment had more financial means than Carvalho had anticipated, so she moved on and decided to explore rural markets instead.
In rural Kenya, Carvalho received mixed messages. Some interviewees told her that they barely had money to feed themselves, let alone to care about a water heater. Others expressed excitement about the product, telling her that her product was exactly what they wanted. It took her some time to understand the differences between these two groups, but continued conversations with local residents finally revealed what those were: families who owned two cows or more had enough money to invest in enhancing their lives, whereas families with less than two cows were merely surviving—all of their money went to feeding themselves and loved ones.
With this insight, Sara identified her target segment as “Baraka with 2+ cows.” For Baraka, it made sense to have a solar water heater because they did not have electricity and used much more hot water than Sara had known ahead of meeting with them—they use hot water when milking their cows, for instance. Furthermore, making micropayments suited them well given that they did not have a fixed salary. Rather, they sold agricultural products, which provided them with irregular income. With this, Phase 1 was successfully concluded. Of 22 projects to enter Phase 1, 10 proceeded to Phase 2 for customer validation, including Carvalho’s.
Phase 2: Customer Validation
The purpose of Phase 2 is for BAP teams to create an MVP, test it with users, and determine if there is a solution-market fit. Carvalho’s team created and tested 12 MVPs. This included testing channels, building customer relationships, and defining the partnership with M-KOPA to collect payments and control the water valves.
Carvalho entered this stage having identified her target market as “Baraka with 2+ cows” and the product as an economical water heater powered by solar and paid for with mobile micropayments. To create and test an MVP quickly, Carvalho tested existing solar water heaters with different technologies to test a range of features and identify what worked best for her customers. She also tested mounting structures. However, Carvalho’s team quickly learned that a mounting structure wasn’t necessary for this product. It turned out that placing the water heater on the floor created a barrier in the home from cattle and kids, something that her customers were delighted to have.
Once she finalized the design and created an MVP, Carvalho and a team of ambassadors attended fair events in local markets, where her target segment bought their daily produce. They handed out marketing materials and explained how the product worked to interested parties. They also collected data on the price that customers would be willing to pay for this solution. At these events, Carvalho got a conversion rate of 7%. These were customers who signed a letter of intent to purchase without even having seen the system in-person.
Next, Carvalho attended agricultural fairs, where many Baraka with 2+ cows were in attendance. This time she took a system that customers could touch and feel, and she increased her conversion rate to 15% (with a signed letter of intent).
Finally, the most effective way to engage customers was, surprisingly for Carvalho, through neighbor events. Carvalho asked those who owned an MVP if they could invite their friends, family, and neighbors to see the product and share their experiences with it. This approach yielded a 45% conversion rate. Interestingly, when Carvalho asked her existing customers to host these events, she suggested they invite approximately 10 neighbors to their home, but they always went above and beyond that figure. At one event, Carvalho counted a whopping 73 guests. It was then that Carvalho understood the value of empathizing with your customers, of truly understanding their culture, needs, and drivers, and, especially, of having a team working with and observing them first-hand. Had she not been there, had she not involved her customers in the validation process, she would not have learned that, for her target segment, the value of the hot water was not only the hot water itself but also the pride of having something new and the reputation and respect that they would get from their community.
Sara Carvalho’s innovation story teaches us the importance of centering your customers at every stage of the innovation process and regularly testing your assumptions about your customers and your product along the way. Her journey began with an assumption—that her hosts’ home had hot water. It ended with a realization that you can never really know your market without working with, observing, and talking to them. You must join them and learn what it means to walk in their footsteps or risk creating something that will not serve those whose lives you wish to improve.