Decentralised solutions gaining momentum

In a small suburban development on the far western outskirts of Sydney’s urban sprawl, the city’s first suburb-wide, privately owned decentralised wastewater reuse scheme is about to start construction. The development is Vermont, in Pitt Town.

The privately-run scheme will collect sewerage from 900 houses and deliver third-pipe recycled water back to the same homes for a slightly lower price than the state-owned utility currently provides drinking water. The scheme will operate under a new regulatory frame-work specifically designed to encourage new market entrants, and I would imagine that it could be highly profitable, given that they will be collecting sewerage rates on top of the price of the recycled water but only have to run one plant. I suspect that the cost of constructing and maintaining a third-pipe is not dramatically higher than maintaining two.

No doubt the recycled water will be plumbed directly into the toilets and gardens of the homes before purchase, so they have a captive market.

Small scale reuse schemes seem likely eat away at the market of major utilities by providing decentralised solutions to outlying suburbs and small communities. The major utilities are vulnerable in the locations where pumping distance and geography erode the efficiencies of large centralised plants.

 If the population ever accepts recycled sewerage as potable water then the decentralised business model becomes dramatically more compelling. If you can bundle in stormwater harvesting then you are really talking.

It seems to me that if the major utility business are able to create divisions that specialise in operating and maintaining decentralised schemes, then there is no need for them to lose that market share to smaller players. For better or worse I think that they are unlikely to do this. Large utilities tend to be big, lumbering, heavily unionised beasts that are impossible to steer and which crush innovation.

A smart utility executive interested in entering a more lightly regulated market might see an opportunity to create a 100% owned subsidiary with a separate management structure to target these potentially highly profitable opportunities. It would require a far less hierarchical management approach and very lean and very smart operations. They will need to select executives and management who know water and sewer well, but who also have an entreprenurial mind-set and the ability to rapidly innovate.

If they don’t, then they can kiss that market share goodbye.

talent – THE source of sustainable competitive advantage

One of our market contacts that delivers white label package treatment plants and skids recently informed us that clients are increasingly willing to accept copies of well-known water product brands produced in countries with minimal intellectual property protection.

So with intellectual property increasingly under assault as a source of competitive advantage, how can organisations survive with reasonable margin in the water industry?

It will come as no surprise to readers that in my view, talent is the only true source of competitive advantage. As long as you have an innovative R&D team in your organisation, you can keep ahead of the imitators.

With the water industry capex set to grow at around 6% year-on-year for the next five 5 years (Global Water Intelligence) the competition for that talent will remain intense.

So how do you attract and retain the best people? The good news is that most organisations are not very good at this so it is easy to outperform. The bad news is that your organisation is probably one of the bad ones.

Here are my top three tips.

1. Have a coherent strategy! 

I rarely come across a company in the water industry that has a coherent strategy which all members of the organisation are able to articulate clearly.

Smart people know that working in a company without a coherent, comprehensive strategy can be hell. Have a great story to tell…people love a great story. Make sure it makes sense from every angle because great people will see any inconsistencies.

2. Give real responsibility with accountability

 Great people want agency. You must give your star employees the room to do great things. If you have the high-level strategy in place then micro-management will be unnecessary.

3. Be generous

Reward high achievers. Give your people the best technological support available. Make their work lives comfortable. Give them access to plenty of training and development opportunities.

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If you can nail these three things then you are well on the way to attracting and retaining the top people, and achieving sustainable competitive advantage.