Digital transformation can be a challenging process in any sector and in any company, impacting the organization in all its dimensions and requiring strong commitment from top management to line managers and staff.
To be aware of such impact is not so common but is of utmost importance, either for service providers aiming to sell their digital and innovative solutions or to companies aspiring to catch the train of digital transformation.
Building a company digital mindset that promotes innovation and the systematic introduction of new technologies can be a difficult process when, as in the case of water utilities, fundamental constraints may deter the adoption of digitization: water utilities operate in a context of natural monopoly free of competition, companies may not be financially sustainable and need to be subsidized to keep running, the management team may be struggling to understand the numerous digital solutions popping-up every day and, at the end of the day, their main direct mandate is not to innovate or digitize companies but “simply” to provide drinkable water 24 hours a day and treat used water. The company culture, its structure, organization, systems and staff profiles reflect this context.
While in finance, retail or automotive sectors, digitalization is key for the companies to thrive or at least survive, in the water sector, digitalization is not yet commonly perceived by all stakeholders as a fundamental lever for long-term social and economic growth. Some stakeholders can do their share, like regulators or end-users pushing for more efficient ways for the companies to operate and better client service, but digitizing the company depends mainly on the water utility management.
Ultimately, it’s not uncommon to see our sector colleagues (usually the ones on the vendors’ side) complain about how difficult it is to introduce new technologies into utilities, due to the lack of funding or lack of interest of decision-makers. So, how can we overcome this and push for digitization?
The fact is that to make people work in a different way and use new tools and techniques is difficult – it is time-consuming, introduces new risks, requires different departments to interact, demands new technological skills, it distracts the teams from their main responsibilities and requires an important commitment from the board and management teams. This can be overwhelming.
Building a company digital mindset that promotes innovation and the systematic introduction of new technologies can be a difficult process
If the competitive context is not pushing for change and new technology adoption or if the management and shareholders are not prone to this (although they will never admit so in the surveys), it will become a herculean task to introduce any digitization initiative.
Nevertheless, the unprecedented time we are living, and the current state of technology, have created a favourable context to introduce digitization in water utilities. More importantly, there is growing awareness that we have functioning technology required to economically and efficiently address the same old problems: the critical need for non-revenue water reduction, efficient and non-disruptive maintenance, lower energy consumption, automatic water quality monitoring, better customer service, corporate and business processes automation, etc.
But this is not enough. Either we are service providers interested in selling new technology or decision- makers eager to improve operations and P&L, it’s important to be aware of relevant levers that will push or constraint the introduction of innovation in the water sector and specifically in water utilities.
Introducing organizational or technical innovation requires more than a good idea, a powerful selling pitch, or a department staffed with technologically driven people. To successfully introduce innovation and new technologies into our companies, we need to address other non-technological perspectives such as: i) the expected economic benefits and the possibility to scale them; ii) the organizational impact in people and in the organization of work; iii) new operational risks and; iv) always neglected: the specific professional risk assumed by people in charge of decision making and implementation.
If the above aspects are not addressed, it will become more difficult for service providers to sell their great ideas or company managers to adopt them. The fact that, to defend the benefits of an innovative solution, we mention frequently technical buzzwords such as Big Data, Artificial Intelligence or Machine Learning (what percentage of utility managers really understand such concepts?), or that we make a demo with the full range of functionalities of the new app, will not add much to important questions for decision making such as: how will this solution impact on the P&L, what is the ROI of the solution and how can I finance it?, what risks am I taking if this fails?, what organizational and business disruptions can this cause? or, what impact will this have on my current systems and how do I integrate?
There is work to do. From the vendors’ side, any selling initiative should start with an estimate of the impact of the solution on the specific client P&L account. There must be a “promise” of increased revenues, cost reduction or improved productivity to be initially estimated and later confirmed after the implementation, using client-specific data. It is also important to understand how scalable the solution is, as it is prudent to start with project pilots and later escalate.
Digitalization is not yet commonly perceived by all stakeholders as a fundamental lever for long-term social and economic growth
The vendor and his representatives must fully understand the client’s business and the specific problems to solve, not just the bits and bytes of the solution, so the conversation goes well beyond the great technology that is under the hood. Vendor and Client must talk as sector partners, about business issues and how they can be addressed at a minimum cost in terms of financial resources, potential operation disruptions, the organization of the work, the time required from the implementation teams, etc. The ability to construct a holistic approach that considers all relevant perspectives will, for sure, differentiate such vendor from the competition.
If the vendor has confidence in the solution he proposes, then a risk and benefit-sharing value proposition would for sure be appreciated by the client. Some vendors are moving towards this model with success, and the exponential growth of solutions “Software as a Service”, avoids the need for investment and allows the client to simply “disconnect” from the Service Provider if they think the solution is not delivering as promised.
Another facilitator is the adoption of performance-based contract and pricing models where the vendor finances the investment required (for example in sensors), so that the client does not have to make any initial disbursement. In such cases, the future payments to the vendor will be made by the utility through a fee correlated with the savings generated by the introduction of the new solution into client operations.
As per the water utility, the most effective way to approach the digitization challenge is to design a digitization strategy and an implementation roadmap. Calculating the economic benefits of the implementation of digital technologies, the resources required and the risks to manage is the best way to start and push for the digitization program. A change management program is also critical (although normally not taken into consideration by top management), to communicate, address the normal resistance to any change, align people’s agenda, identify blockages, and prioritize actions.
To identify people in the organization that can manage the digitalization program, to partner with firms that have collected experiences and best practices in the digitization of water utilities, as well as with companies that can scout the market for the most relevant technologies will support and accelerate the digitization program and extract its benefits.