Innovation in the water industry: unlocking Ofwat’s £200 million fund

The multitude of challenges facing the water industry, including the coronavirus pandemic, climate change and delivering value for customers, are being amplified by the regulatory funding squeeze that is reducing customer bills by an average of £50 over the next five years. To address this, water companies need to adapt the way they operate. AECOM’s Ian Small says the answer to unlocking innovation could be as simple as finding ways to get more ideas out of both the workforce and supply chain.

Water industry regular Ofwat has confirmed a £200 million innovation fund to encourage innovation, a recognition of the urgent need for change. Without it, the affordable clean water and treated sewage we take for granted could be at risk.

Ofwat has made it clear that business as usual is no longer an option. In April 2019, the economic regulator of the water sector in England and Wales challenged the business plans of fourteen out of seventeen water companies, saying they had to do more to “deliver for customers”. The regulator is driving companies to simultaneously improve service to customers and the wider society at a lower overall cost, believing that innovation will be an enabler for this.

Implementing the sorts of “transformational innovation” Ofwat is looking for is not easy, especially in a highly regulated sector working with infrastructure that has been developed over centuries. But there is no choice: leakage, pollution, climate change and a growing and increasingly urban population are all putting huge pressure on resources.

To date, the industry’s track record on innovation has been mixed. It has certainly invested in research and development but has sometimes failed to turn that knowledge into value. My experience championing innovation at AECOM suggests that often the answer can be found internally by finding ways to get more ideas out of your people. Ask your teams where they would like to see investment and how that could improve the way you do business.

The innovation challenge

Transformational change requires innovative thinking, which is what the Ofwat innovation fund hopes to encourage. Following consultation rounds in summer 2019 and early 2020, the regulator announced in August that it will hold two collectively-funded competitions, which will be open for entries to established water and wastewater companies as well as new entrant companies (small water and sewerage companies), supported by their supply chains.

The two competitions differ in scale and format. The £2 million Innovation in Water Challenge will fund projects up to £250,000  – its Dragon’s Den-style format will be exciting to see in action. The larger £40 million Main Competition will provide a platform for ambitious and transformational projects to be tested and I hope we see some truly ground-breaking projects making the grade.

To answer Ofwat’s call to innovate, an alliance of water companies and their stakeholders recently published the 2050 Water Innovation Strategy. Still in draft form, the document includes seven key themes and ambitions and is intended to “provide insight for Ofwat in rolling out the £200 million innovation fund.” It is also a valuable resource for the supply chain and new entrants to the sector looking to enter Ofwat’s competitions.

One of the goals of Ofwat’s wider innovation strategy is to encourage companies and their supply chains to work more effectively together – and the competitions are a means to this end. However, as ideas and propositions flood in it is important that water companies have a robust review process in place. There are many ways to do this, including communicating a clear set of challenges right at the start, while also setting clear expectations around idea maturity. Technology Readiness Levels (TRLs), a common method for estimating technology maturity, will help this process.

However, ideas alone are not enough – behavioural change is also necessary to drive transformational change. Water companies and their supply chains will need to work collaboratively towards common innovation goals. This involves having a partnering ethos, sharing risk and developing a culture of innovation.  The organisations that can do this most effectively will have the best outcomes.

How to develop a culture of innovation

There is no A-Z guide to developing a successful culture of innovation, itself an imperfect science. A balance needs to be struck between understanding a problem and implementing a solution based on the management vision, together with talking to the doers about what is needed and what is possible.

The most innovative companies are those who find effective ways to get ideas out of their people, then act on and implement the changes that make sense. It’s also helpful to get people in different parts of the business to talk to each other.

At AECOM – where I’ve led innovation in the water division and now champion innovation across civil infrastructure – I’m always thinking about how to improve what I’m doing, which is the area I’m most qualified to judge. Figuring the same was probably true of my colleagues, I launched Mindblazer, a tool designed to encourage ideas that support technical excellence, innovation and collaboration on AECOM projects.

Every three months we launch a call for ideas through Mindblazer – with a two-week window for submission. Winners can be anyone in the company. They are initially awarded 40 hours or the cash equivalent to build something; if this proves successful the idea is linked up with a team to develop the technical idea, build the business case, commercialise and scale. We focus on projects that address a burning need, rather than things that would be nice to have.

Jeremy Hidderley, a data and GIS specialist in our water asset management team is always looking for ways to automate processes to make them more efficient. Wastewater modelling has a lot of time-consuming tasks, and Jeremy noted that his modelling colleagues were often having to repeat some of these tasks in order to deliver a suitable model. Across the business there are many colleagues doing the same sorts of things for different water companies. He approached Mindblazer with a proposal to apply machine learning to the modelling process for the sewer network. This allows modellers to speed up repetitive tasks, leaving more time to problem solve and explore solutions. After winning the prize, he developed a prototype ‘rapid model build’ tool which is being developed further for Wessex Water.

My job at AECOM is both to encourage colleagues to be innovative and to ensure that innovation is effective. There is no point innovating unless it improves the way we operate, and we also have to be careful when changing what we do that we aren’t exposed to undue risk.

Three recommended ways to entice ideas from your workforce

We also help our clients innovate. We do this by generating ideas and solutions though a range of group events, either internally for clients as we’ve done with Highways England and the Environment Agency, or in partnership with other companies, such as the CityHack18 competition; an AECOM-organised event aimed at finding ways to make London healthier, more liveable and connected. We also facilitate design-thinking-led ideation workshops, competitions and more traditional consultancy approaches, such as scenario planning, and advise on ways to embed innovation in businesses. By doing this we help clients improve performance – the ultimate goal of innovation.

CityHack is an AECOM-led technology competition that brings together computer programmers, industry experts and professionals to create solutions for a city’s most pressing challenges.

Informed by our experience, here are a few recommended ways to entice ideas out of your workforce:

Challenge statements:

Identifying specific challenges is a good way of setting out what innovation needs to achieve. The challenge statements should be shared widely, both within the project team and to the wider organisations.

Sources of ideas:

This process should be as open as possible: ideas can come from anywhere and anyone. They need to be shared, reviewed and refined to make sure that they will meet the project requirements. No idea should be immediately rejected, and a record of all ideas and their pros and cons should be kept as these can often trigger new or hybrid ideas that will be more effective than the original.

Delivery team:

Ideas that meet the criteria for further investigation and investment pass through into the delivery stage. This will require a wide range of skills, which are unlikely to sit entirely within one person. We advocate a team of at least three people, who could be classified as follows:

  1. The idea owner, and often the originator of the idea.
  2. The Chief Technology Officer, responsible for providing the technical skills to turn the idea into reality; and
  3. The integrator. Often overlooked, the integrator turns the idea into a business by connecting the dots – and making it happen.

The team can be larger than this, and the roles and responsibilities are often blurred in an effective and mature team.

Ingredients for success

A recent survey by UKWIR (UK Water Industry Research) of industry executives showed that innovation is important or extremely important for everyone (literally 100% said so). I don’t know how the questions were worded, but I saw very little reference to culture or organisational flexibility in the findings. In my experience, these are the crucial ingredients for creating an innovative culture: without them the technology barely matters.

In short, innovation is about having the right people in the right jobs, listening to them and encouraging them when they make the case for change. When it makes sense, companies should be open to test and implement these suggestions.