Understanding and stimulating innovation within the water industry
Consultants from 42 Technology recently attended a Water Innovation Network (WIN) meeting in Peterborough. WIN is a free membership network for water industry utilities and supply chain companies and was created as a partnership between Anglian Water and Opportunity Peterborough. The key theme of the meeting was “What’s Next with AMP6?”. AMP6 is the acronym used to refer to the Asset Management Programme from 2015 to 2020. All investment by the regulated water utilities in the UK will come under this program. So Anglian Water were explaining how the system will work, and what the investment priorities would be in this next cycle. 42 Technology acted as one of the facilitators in a workshop session to determine ways in which the WIN and Anglian Water could improve the process of innovation related communication both within Anglian Water and by implication in the wider water industry. The session highlighted some interesting challenges. For example, utilities work to a 5 year investment cycle – utility companies have little guarantee of revenues past the current budget cycle, which limits the time available to pay back investments. Many vendors perceive an unwillingness by the industry to invest in new solutions unless they can be seen to give a payback within the current AMP cycle (while, paradoxically, solutions are expected in most cases to have a working design life of 20 years or more). Furthermore, a successful pilot program in one cycle may not result in any major investment until the next, meaning that innovative vendors (and their investors) need to be patient. Another challenge is the constraints placed on the industry by regulators. For example, capital investment and operating costs have hitherto been treated separately, so rational investment decisions related to operating cost savings were not always favoured. A recent shift of emphasis to “Totex” is changing that, in some cases freeing the industry to take a wider view. The UK water industry is structured such that investments are actually made by a handful of “Tier 1” contractors rather than the utilities themselves. An increased culture of innovation in utilities like Anglian Water therefore needs to be supported by similar changes within the Tier 1 contractors, otherwise no real change to investment behaviour is likely. One vendor gave the example that an innovation that reduced the number of water treatment tanks required might not be championed by large contractors who are still paid by the tonnage of concrete laid. Another suggested that the only way to bring innovation to the table was to submit a non-compliant bid in response to a tender and hope that the benefits would be understood. “Open Innovation” is a popular buzzword, but the key to this is openly sharing your problems, rather than specifying solutions. Anglian Water certainly showed they were keen to move towards openly sharing perceived challenges – Smart metering, leak reduction and more industrialised (off site) construction of major assets are all key areas which they expect to invest in significantly in AMP6. However, other innovation focused initiatives (such as WIN’s new process for prospective suppliers submitting innovative suggestions) were more cautiously received – IP ownership of submitted ideas remains unclear. Nevertheless, the very existence of WIN and the willingness to hear all this feedback demonstrates real intent and seems likely to result in fruitful relationships in the future. It is clear that the water industry faces challenging targets, and that many of these offer opportunities for innovative solutions. Whether the industry can embed the innovative culture and evolve the institutional behaviour required to unlock the creativity of their wider supply chain and implement the solutions and reap the rewards remains to be seen. This meeting was a step in the right direction.