Why the water sector must embrace disruptive innovation – before it’s too late

By Kala Vairavamoorthy

Eight years ago, the legendary founder of Intel Corporation, Andrew S. Grove, published a book that could have been written explicitly for established players in today’s global water and sanitation industry.

In Only the Paranoid Survive, Grove argues that leaders of dominant institutions must be relentlessly on guard for unpredictable yet inevitable challenges to their position – prepared for what he calls Strategic Inflection Points – in order to adapt to sudden changes or risk becoming irrelevant.

Grove’s own crunch point arrived in the late-1990’s, upon discovering a flaw at the heart of Intel’s business – the Pentium processor was expensive and there were two new insurgents, Cyrix and AMD, who started producing cheaper chips eroding part of Intel’s business. Someone else might have put up walls and let his company go the way of Wang, Atari, Netscape, RIM (Blackberry) or Myspace. Instead, he turned the crisis into an opportunity to innovate, diversifying Intel’s product range with the Celeron Processor that became the highest volume product in the company, and making the business more robust, resilient and relevant to society than ever before.

While hard, this mindset is an existential requirement. In the water sector, we ignore such warnings at our peril.

Many of the world’s leading water companies have been around for decades, even centuries. They enjoy high prestige, low staff turnover, and healthy margins. Few see threats from competitors sneaking up to steal their metered customers who are, after all, tethered to miles of buried pipes. As natural monopolies, incumbent water and sanitation institutions most likely feel safe, comfortable, and insulated from competition.

They aren’t. Innovators are disrupting the old business models and there is little room for complacency in water and wastewater utilities.

Imagine, one day a new company or housing developer starts implementing small, decentralised systems to remote peri-urban areas where your services are either poor or nonexistent. Once they have perfected their business model in these remote areas, they start to adapt their systems to attract your networked customers. No problem. It’s just a few homes and the majority of your income is derived from larger commercial, institutional and industrial users.

The next month one of your oldest corporate clients announces they will no longer require your services. The firm has turned to a modular company that has perfected decentralised technology for a closed-loop system that costs half of what you’ve been charging.

As revenue projections begin to look shaky, you discover that a third of your clients are now using smartphone apps and slashing consumption. That’s good for the resource but puts a severe strain on your bottom line. Your board, or regulators, are reluctant to raise rates.

Looking ahead, you seek to make up the shortfall by adding more and more new families and firms from semirural areas or peri-urban settlements. Except both groups have begun to bypass your pipes and sewers for distributed systems. In the developing world, competing teams of Uberlike trucks deliver water and waste services. In affluent cities, accounts may simply go ‘off the grid’ producing their own energy to pump and clean their own water from rooftop to tank and back again.

Each innovation makes the slope increasingly slippery. These relentless waves of ingenuity only compound existing pressures: a fast changing climate, rapid urbanisation, the emergence of more persistent pollutants and austere public budgets. The shocks come on top of what many water professionals recognise as a ‘well functioning but unsustainable business model’. As efficient use erodes the revenues needed to cover costs, it brings pressure to defer maintenance, trim ‘excessive’ testing costs or cut corners.

While this may seem far-fetched, we live in an era of disruption. Yet all too often, we water professionals – especially within older public and private legacy bodies – have shown ourselves averse to not only risk but also to the endless potential of innovation itself. It is time to recognise our sector’s many “strategic inflection points” not as threats or crises to avoid but rather as opportunities to experiment, to retrofit, to disrupt ourselves from within, taking steps so that we can individually and institutionally emerge stronger and
more valuable than before.

In David and Goliath, author Malcolm Gladwell argues that in hindsight, yet contrary to ourassumptions, it was obvious that the amateur would ‘disrupt’ the professional warrior. The shepherd boy was young, nimble, fit, agile, and had mastered technology that let him triumph over his competitor from afar, without warning. David felt highly motivated to change, adapt to the field and innovate.

The giant Goliath was large, slow, weighed down by heavy infrastructure (shield, helmet, armour and sword) that only made sense at close range. Goliath, burdened by past success, was complacent. The good news is that disruptive innovation need not be a zero-sum game in which only one side emerges victorious. Indeed, there’s no reason
why water utilities cannot learn from insurgents, engage with new thinking, and embrace innovation to update their business models to deliver new solutions that benefit all. As a global organisation that represents scientists, researchers, technology companies, and water and wastewater
utilities, IWA has a central role to play in bridging the chasm between innovation and practice.

The IWA’s network is where these ideas are being fermented; where both innovators and adopters of new technologies and approaches can bring the push and pull of innovation together. The IWA can provide the platform that helps utilities recognise emerging disruption, help them learn from it, and help them adapt and embrace change. Within the IWA network are prominent opinion leaders, the people Malcom Gladwell refers to as ‘Mavens’: “They are the ones who make it possible for innovations to overcome this problem of the chasm. They are translators: they take ideas and information from a highly specialised world and translate them into a language the rest of us can understand.” If the IWA can identify and mobilse our own Mavens, we will be in a strong position to accelerate the diffusion of innovation.

In an era of rapid transformation, where climate change will demand adaptive solutions, the circular economy will see water companies become resource miners, and digital water will bring automation and connect the sector to the Internet of Things, the IWA has never been more relevant. Rather than choose distributed versus centralised, small versus big, we will continue to link the most promising developments and optimal solutions, sharing the best from around the world.