Water firms must speed up their piloting and implementation of new products, technologies and processes if more innovation investment is to be enticed into the sector. That was the clear message from a funding workshop run recently by WRc as part of a full-day initiative to foster more innovation in water.
Bankers and financiers in attendance said the typical 15 years it takes for an idea to be commercially implemented is a major turn-off for venture capitalists. They said product developers and supply chain companies acted fairly swiftly: concepts could become products within three years. But water companies were a bottleneck, typically taking 11 years to consider, trial, adapt, commercialise and implement innovations.
According to one attendee: “There isn’t a shortage of technology, there’s a shortage of operational innovation.” Another pointed out that there were no venture capital funds – bar one, abroad – devoted to the water sector “because of that curve. The cycle has to be reduced, particularly for SMEs . That curve kills them”.
According to Oxera figures, water company research and development (R&D) spending as a percentage of turnover fell from 0.5 per cent in 1996 to 0.25 per cent in 2003. That compares with an all-utility sector average (including telecoms, transport and post) of 1.5-2 per cent. Delegates estimated that current water innovation spending had declined further to around 0.18 per cent, while in sectors such as gas networks, R&D activity was growing, heading up from around 0.5 per cent to 1 per cent.
There was little consensus, though, on how to incentivise water companies to make innovation more of a priority. Suggestions included a regulatory incentive, education (specifically, sharing good practice case studies) and slicker procurement processes. One delegate felt they would need some kind of “burning platform” to motivate them: “Operational people see innovation as a garnish and it needs to be core.”
Another felt there was little prospect of motivating water companies to be more innovative: with little competition in the market, there was no prospect of first mover advantage, no patent to bag; the five-yearly cycle focused attention on the short term and the deliverable; plus, as a low risk industry concerned with ensuring safety and quality above all else, why would water bosses risk it?
That led to the suggestion that the onus to innovate should be on the supply chain, rather than water utilities. After all, unlike their regulated clients, suppliers are exposed to competitive pressures, are not bound by low risk operation, and potentially could sell successful products and services globally. One delegate said: “Innovation is unknown, and is going to fail. Water companies should buy successful innovation, not innovate themselves. But it’s a Catch 22 situation: because they are not in a competitive environment, it’s hard for water companies to procure innovatively.”
Others disagreed, arguing that history showed that products and technologies developed by academics or inventors without end-user experience frequently failed in operation. One water company representative said: “We need to be able to trial ideas on assets so there is still a level of involvement and investment for water companies. Piloting and testing does cost money.”
In the face of climate change, population growth, water stress and rising prices, Mark Smith, managing director of WRc, said the lack of innovation was everyone’s problem. He called on all involved parties to stop blaming each other, “to stop reinventing the wheel just because didn’t invent it” and to collaborate. “We’re all in this together … we must put aside self-interest,” he said, adding: “Government needs to take more of a leadership role in these national problems.”
£4 million … and counting?
Steven Lambert, lead specialist at the Technology Strategy Board (TSB), told the WRc meeting that the TSB’s recently launched £4 million water innovation platform was the first “hopefully of many” water sector initiatives his agency would fund. Although unable to give details, he confirmed there was “an appetite within TSB” and speculated that further competitions were likely to either continue the theme of the first (which focuses on encouraging water efficiency and effective use, in light of the looming deficit of 10,000 megalitres per day by 2050) or to explore one of three other themes thrown up in the TSB’s research on where to spend its money. These were: flooding, environmental water quality, and water’s carbon footprint.
This article first appeared in Utility Week’s print edition of 11 May 2012.
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