The Case Study of Business Model of Veolia Water (Vivendi)

Author: Xinyue Wang

Student number: 1299580

Year: 2014

Supervisor: Prof. Dr. Patricia A. Adam

Table of Contents 1. Introduction 1 2. Brief introduction of Business Model 1 2.1 Business model canvas 1 3. Business Model of Veolia 2 3.1 Customer Segments 2 3.2 Value Propositions 2 3.3 Channels 3 3.4 Customer Relationships 3 3.5 Revenue Streams 4 3.6 Key Resources 4 3.7 Key Activities 5 3.8 Key Partnership 5 3.9 Cost Structure 5 4. Conclusion from the study of business model of Veolia Water 6 4.1 Unbundling business models 6 4.2 Multi-sided Platforms 7 5. Assessment and Conclusion 7 Bibliography 8 Statutory declaration 10

Abstract
Nowadays, with the development of economy, the problem of lack of resources came to sharper. Thus the issue of how to protect environment and save resources has gained much emphasis recently. Therefore, some enterprises have become more heating due to their outstanding business on environmental-friendly aspect.
Vivendi is a company whose business involves water supply and water management, waste management, energy and transport services. Veolia Water is a subsidiary of Vivendi, it is committed to providing clean drinking water, and collecting and treating waste water or sewerage water. Because of its advanced technology and strong brand image, nowadays it has come to a great success.
This case study choose Veolia Water as a main study object to research what kind of business model does this enterprise use and how it makes profit from its business.
1. Introduction

Veolia Water, is the water division of the French company Veolia Environnement and the world's largest supplier of water services. Veolia Water is a world leader in water and wastewater services. Specializing in outsourcing services for municipal authorities, as well as industrial and service companies, it is also one of the world's major designers of technological solutions and constructors of facilities for water and wastewater services.[1]
Veolia Water’s activities can be grouped into two main areas: providing clean drinking water, and collecting and treating waste water or sewerage water.[2]

2. Brief introduction of Business Model

2.1 Business model canvas

A business model describes the rationale of how an organization creates, delivers, and captures value. There are four areas should be taken in consideration when start a business: customers, offer, infrastructure, and financial viability. The nine business blocks in business model canvas cover all the four main areas, and distribute them into nine parts, they are customer segments, value propositions, channels, customer relationship, revenue streams, key resources, key activities, key partnerships and cost structure. [3]

3. Business Model of Veolia

3.1 Customer Segments

The customer segments building block defines the different groups of people or organizations an enterprise aims to reach and serve.[4]
The main customers of Veolia are the governments and private companies who need to be provided clean drinking water, as well as collected and treated waste water or sewerage water. Besides, Veolia Water also provides service to normal citizens.

3.2 Value Propositions

The value propositions building block describes the bundle of products and services that create value for a specific customer segment.[5]
Veolia's primary missions involve producing the highest quality drinking water and collecting and treating wastewater so that it can be discharged safely into the environment or recycled.
As the development of industry, a lot of countries are faced with the water pollution problem. Veolia Water is the world's largest supplier of water services, and it has a long history and a well-developed technology in processing polluted water. And due to its past experience in finding solutions for treating drinking water and wastewater, Veolia Water is currently the world leader in publishing research works on water. The company has a portfolio of more than 3,000 patents.[6]
Thus, rely on these advantages, Veolia Water has built up a stable relationship with lots of governments and industrial companies.

3.3 Channels

The channels building block describes how a company communicates with and reaches its customer segments to deliver a value proposition.[7]
The strong brand image is the most efficient channel for Veolia Water. For its mature technology and many successful examples in water service, lots of governments and companies would like to buy Veolia Water’s service without any advertisement. But, Veolia Water still prepares different ways to reach customers. Multi-channel management and relations including call centers, local branches, a web portal and mobile apps are all the ways Veolia Water provides to customers to get in touched with the company.[8]

3.4 Customer Relationships

The customer relationship building block describes the types of relationships a company establishes with specific customer segments.[9]
The ways of service Veolia Water provides are varied from customer to customer. For governments, Veolia has four main contract forms, and with different contracts, it will provide different kinds of service. For example, Veolia provides a contract form which called DBO ( design, build, operate), in this form, it will provide the service for design the water treatment project, then it also has the duty to build the whole equipment, after that, it is responsible to operate the treatment station. But if they sign an O&M (Operations & Maintenance) contract, what Veolia Water need to do is only to take the responsibility of operating the equipment and maintain it. For private companies, which the relationship it keep with is similar.

3.5 Revenue Streams

The revenue streams building block represents the cash a company generates from each customer segment (cost must be subtracted from revenues to create earnings).[10]
For Veolia Water, the most important revenue stream derives from selling the service to provide clean drinking water, and collecting and treating waste water or sewerage water. The pricing mechanisms of Veolia Water is dynamic pricing. That means, price will be different between different partners depending on the varied influential factors, at the same time, price will be diverse due to different projects.

3.6 Key Resources

The key resources building block describes what are the most important assets required to make a business model work.[11]
For the physical resources, Veolia Water has well-developed equipment and advanced work system.
What’s more important is the intellectual resources of Veolia Water. Firstly, it has a strong brand image. Veolia Water has got 10 global markets around the world, and made 22.3 billion euro in revenue. It also provide 103 million people with water service and 73 million with wastewater service. That’s the evidence of Veolia’s strong brand image. Secondly, Veolia has advanced technology in processing clean drinking water, and collecting and treating waste water or sewerage water. It has a portfolio of more than 3,000 patents. Besides, it also benefits from a global network of 850 high-level experts. [12] [13]

3.7 Key Activities

The key activities building block means what the company should do to make its business model work.[14]
As a service company, the key activity is to provide a series of service of providing clean drink water and collecting and treating waste water or sewerage water.

3.8 Key Partnership

The key partnership building block is network of suppliers and partners that make the business model work.[15]
On the one hand Veolia Water's research and development works with that of Veolia Environment in those areas which also affect the waste (Veolia Environmental Services), and energy (Dalkia) divisions of the Group. They work together to manage the whole networks. On the other hand, Veolia Water also keeps the partnership with some local communities (eg. partnering Unis Cité and the PIMMS network in France), it aimed at appealing the society to pay attention to act in an environmental friendly way.[16]

3.9 Cost Structure

The cost structure describes all costs incurred to operate a business model.[17]
Veolia Water’s main cost can be separated into two parts, the fixed costs and variable costs. The fixed costs part is related to the organization, such as the fees to employ employees, the payment for employee benefits, and the investment for operating the whole company. The main variable cost items are shown in figure 1.
[pic]
Figure 1. The revenue and a part of variable cost of Veolia Water in 2011-2013[18]
As it shown above in figure 1, Veolia Water costs a huge volume of money in sales, selling and financial aspects. Besides, the purchasing function with external expenses is over 50% of total revenue.

4. Conclusion from the study of business model of Veolia Water

4.1 Unbundling business models

The concept of the “unbundled” corporation holds that there are three fundamentally different types of business: customer relationship businesses, product innovation businesses, and infrastructure businesses. Each type has different economic, competitive, and cultural imperatives.[19]
Since Veolia is a company who pay lots of attention to water management. By cooperating with governments as well as industrial companies, it provide service in many different ways. It focuses on levering research and development to bring new technology and service to market. The service of Veolia can be brought to customer directly, thus, what Veolia did is a customer relationship business.

4.2 Multi-sided Platforms

Multi-sided platforms will bring two or more distinct but interdependent groups of customers. They create value as intermediaries by connecting these groups.[20]
Veolia Water sets the value proposition targeting on the customers who needs clean drink water or who need to collect and treat waste water or sewerage water. The main customer segments are governments and private companies. Both of them need the service of Veolia. Thus Veolia Water is a company who operate a pattern of multi-sided platform.

5. Assessment and Conclusion

Veolia Water runs a really successful business model. Compared with other water service companies, it has a very explicit value proposition, as well as an accurate customer segments. With its strong brand image and diverse ways to get connection with customer, it keeps different relationship with different groups of customers. Veolia Water can perfectly use its comparative advantage to process all its resources, then practice them into real activities, that’s why it can make profit.
But as there are still some disadvantages of this kind of business model. Firstly, for its unbundling business pattern, the cost is too high, it should pay attention to all aspects when they operate the business, besides, different conflicting organizational cultures are combined in a single entity, it will result in undesirable trade-offs. Secondly, for the multi-sided platforms, Veolia Water still has the possibility to lose potential new customers who are interested in gaining access to its service.
If Veolia Water can keep its comparative advantages and try to find a way to solve the problems, it will come to a more great success.
Bibliography

Business Model Generation, A. Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self published, 2010, p.14.

"Our Solutions? water services and water treatment". Veolia Water. Retrieved, .2013, http://www.veolia.com/fr/pour-nos-clients/nos-expertises

"Range of Services." Veolia Water in China.,(2010) http://www.veoliawater.cn/en/services/municipalities/services-range/

"Key figures." Veolia Water China. Web. (2010) http://www.veoliawater.cn/en/international/key-figures/

"Water management." Veolia Web. (2014) http://www.veolia.com/en/our-customers/solutions

Business Model Generation, A. Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self published, 2010,p.20

Business Model Generation, A. Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self published, 2010,p.26

Business Model Generation, A. Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self published, 2010,pp.28-29

Business Model Generation, A. Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self published, 2010,pp.30-33

Business Model Generation, A. Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self published, 2010,pp.34-35

Business Model Generation, A. Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self published, 2010,p.36

Business Model Generation, A. Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self published, 2010,p.38

Business Model Generation, A. Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self published, 2010,p.40

“Veolia in brief”. Veolia Water Web. 2014 http://www.veolia.com/en/veolia-group/profile

Business Model Generation, A. Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self published, 2010,p.57

Business Model Generation, A. Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self published, 2010,p.69

“Annual financial report-registration document” Veolia Water Web. 2014 www.finance.veolia.com

Statutory declaration

I declare that I have developed and written the enclosed thesis entitled
“The Case Study of Business Model of Veolia Water (Vivendi)” entirely by myself and have not used sources or means without declaration in the text.

This thesis was not submitted in the same or in a substantially similar version, not even partially, to any other authority to achieve an academic grading and was not published elsewhere.
.Hannover, 15.6.2014

Xinyue Wang

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[1] “Veolia Water” Wikipedia Web. 19. Oct. 2013 http://en.wikipedia.org/wiki/Veolia_Water
[2] "Our Solutions? water services and water treatment". Veolia Water. Retrieved,2013
[3] Business Model Generation, A. Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self published, 2010, p.14.
[4] Business Model Generation, A. Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self published, 2010,p.20
[5] Business Model Generation, A. Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self published, 2010,p.21
[6] "Key figures." Veolia Water China Web. (2010)/
[7] Business Model Generation, A. Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self published, 2010,p.26
[8] “Water Management” Veolia Water Web. 2014
[9] Business Model Generation, A. Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self published, 2010,pp.28-29

[10] Business Model Generation, A. Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self published, 2010,pp.30-33
[11] Business Model Generation, A. Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self published, 2010,pp.34-35
[12] “Veolia in brief”. Veolia Water Web. 2014
[13] “Key figures”. Veolia Water Web. 2010
[14] Business Model Generation, A. Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self published, 2010 p. 36
[15] Business Model Generation, A. Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self published, 2010 p. 38
[16] “Water management” Veolia Water Web. 2014
[17] Business Model Generation, A. Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self published, 2010 p. 40
[18] “Annual financial report-registration document” Veolia Water Web. 2014 www.finance.veolia.com
[19] Business Model Generation, A. Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self published, 2010,p.57
[20] Business Model Generation, A. Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self published, 2010,p.69