First a pilot, then a contract from the Bangalore municipality. Sweepsmart, which develops waste management systems for emerging economies, got the job done. But the Indian government is definitely not an easy customer, warns founder and director Silvia de Vaan.
The start of the Sweepsmart pilot in Bangalore with Silvia de Vaan on the left and Niels van den Hoek in the middle.
In 2014, Silvia de Vaan stands at the top of India's largest landfill. The Pirana landfill in Ahmedabad is 84 hectares in size and is also known as the Mount Everest of waste. On the spot, De Vaan decides she wants to find a solution to this problem. Back in the Netherlands, she set to work with good friend Niels van den Hoek, who at the time worked for Van Gansewinkel, the largest waste management company in Northern Europe.
Test your idea before you enter the Indian market
"Our idea was to make people who look for saleable or edible items in a garbage dump become part of a better functioning waste management system and that they could earn income by picking up the dirt from people's homes and processing and recycling it in special centers," de Vaan says. "But whether what we came up with in the Netherlands would actually work in India was questionable. We therefore decided to organize a trade mission to India to test our idea against the real situation in India."
During their trip, De Vaan and Van den Hoek came to the conclusion that there was actually already a basis in India and that it was better to build on that than to start everything from scratch. "When we talk about a basis, I mean that NGOs were already setting up a system and that there were already sorting sheds, for example. But separating the waste was still done manually and people were sitting on the ground among the dirt," says De Vaan. "So there was a lot of room for improvement and that became our new goal: to take waste processing in India to a higher level. Without this exploratory trip, we might not have made that change and stuck to the idea we had put down on paper in the Netherlands. But to succeed in India, you need to understand where and how you can add value to what is already there. Therefore, I would recommend every entrepreneur to investigate that aspect properly first."
From pilot to government contract
De Vaan and Van den Hoek are starting with a pilot. "With the local organizations we had met during our trade mission, we wanted to form partnerships," says De Vaan. "They were already doing a great job in realizing solutions to the waste problem. We had to prove that we not only had great stories to tell, but that we could also make a real contribution. This became clear in the preparation phase during the discussions with IndiaConnected about our market entry strategy. It then became clear to us that we were focusing too much on how we would come to help, instead of explaining in concrete terms what we actually came to do there. You don't want to be a Western savior, but rather to work together to develop a solution that fits the local needs and wants."
Sweepsmart set up the first pilot in Bangalore. "There were already more than 140 small-scale sorting centers there led by experienced organizations, we had found good partners there, and on top of that the city was embroiled in a court case with citizens over the waste problem. So at the highest level, there was already thinking about a better approach and budget, and all kinds of initiatives for separate waste management had already been put in place." In the first four months in Bangalore, Sweepsmart, together with local partners, is taking two centers in hand and modernizing the processes with the installation of the conveyor belt and performance dashboard designed specifically for India.
The success of the pilot project did not go unnoticed for long. "The municipality was on the doorstep of one of our pilot sites in no time and before we knew it there was a request for the upgrade of ten more sites. Our solutions are developed not only for, but also together with the location where it will be put into use. As a result, it fits in seamlessly with the local wishes and way of working. But in addition to the fact that we offered the right solution in the right place, there were also some peripheral issues that ensured we won a major government contract so soon after we started," says De Vaan. "First of all, our timing was good because of the ongoing court case that put the municipality under pressure to improve the waste situation as quickly as possible. As a result, a budget had already been made available for upgrading the centers. In addition, it also helped that the Dutch government gave a financial boost through the Dutch Good Growth fund with additional funding resulting from the pilot that was fully funded by them."
The challenges of an Indian government contract
In securing the contract, Sweepsmart immediately faced new challenges. "The Indian government is really incredibly complex," says de Vaan. "We are fortunate to work with partners who have good ties to Bangalore, but still I have spent days waiting in city hall in recent years." Despite the fact that the municipality had indicated to Sweepsmart that it wanted to start the project within a few months, it ultimately took 2.5 years for the Dutch company to actually get started.
"During the process, new difficulties kept coming up. This came as a surprise to us, but is quite normal for working with an Indian government," says the director. "In particular, the award of the contract was difficult, because governments normally have to tender all their work and in this case wanted to award the contract directly to us. It turned out that there was no quick fix for this particular situation, so we started investigating every possibility. In India that means literally going from desk to desk with all your paper documents and there are more than you think! In the end, with a '4B-exemption', where SweepSmart was designated as the 'unique supplier', and thus without a tender, we were able to get started. But it did take a lot of creativity and adaptability to find a solution that would work for both parties."
Delivering good quality at an Indian price is a challenge for foreign companies
When de Vaan and van den Hoek could finally get started, they were again confronted with the challenging differences between a Dutch and an Indian government contract. "Now that we finally had a contract with Bangalore, it turned out that we had left some agreements too open to our own interpretation," says de Vaan. "For example, we had agreed that the municipality would hire a contractor for the actual renovations, but who that would be or what requirements they had to meet we had left open. That was a mistake. We learned that we really have to lay down every comma and dot, because otherwise bad solutions are arranged or things take extremely long."
She says the same applies to payments. "Make very strict agreements on this," she advises. "Not only in the case of a government contract, but also with commercial customers. People often only want to pay after the fact or they are quick to point out that you can do it much cheaper at a local competitor." De Vaan therefore sees price pressure as one of the biggest challenges for foreign companies starting to sell in India. "The customer often prefers to accept poorer quality, rather than having to invest too much. As a result, you really go into negotiations very differently," says the CEO. "For example, before we join, we look up the proposals and prices of our competitors and calculate them all the way through. Often it looks cheaper on paper because a lot is left out of the quotation, but it only makes a difference of five percent in price. We can then compare these during the negotiations and demonstrate that we really have a better solution to offer."
Opportunities for innovative, European solutions in India
"India is developing at a rapid pace at the moment and therefore needs the knowledge we have in the Netherlands, but it is also challenging to market that knowledge here," says De Vaan. "In India, you won't succeed with a solution that isn't adapted to local needs, and besides that, Indians are incredibly smart and inventive. In their eyes, you are nothing special and you first have to prove that you are willing to invest. I noticed this very strongly, for example, when I was waiting in front of a civil servant's office in Bangalore. He would poke his head around the corner to see who the next appointment was and, as soon as he saw me again, he would pull a grin over his face like 'there she is again, is she still there? But our endurance did prove that we are really involved and therefore we are taken seriously."
In addition, de Vaan advises European companies that are not yet active in India not to focus on winning tenders. "We were actually a bit fooled by the fact that we had a contract with Bangalore in our hands so quickly, but that is not a realistic course of action at all. It's much smarter to take intermediate steps first by targeting local or commercial parties. By doing so, you not only get to know the needs of the market well, but you also gain important contacts that can support you in a government contract," she explains. "And also don't mistake the innovative solutions that are already being devised in India itself."