Routes to resiliency and digital transformation in the water sector

A new study of global water risk - Aquanomics - has revealed significant challenges to water availability, quality, and security and highlights the urgency for change. The number of storms, droughts, floods and wildfires is rising, and Aquanomics predicts that the economic consequences of these events could result in total losses of almost USD5.6 trillion to GDP by 2050.

Aquanomics makes the case for rethinking water resiliency and how we can prepare for an uncertain future. Now is the time to recognise water’s importance as a balanced natural cycle and maximise the benefits of its inherent circularity. For the water industry, as custodians of supply, quality, collection and treatment, this means a focus on innovation and fostering a collaborative approach to transform global water systems.

Building for resilience means we can no longer rely primarily on implementing costly, large-scale, engineered interventions. Instead, we must take a long-term strategic view of resource management, focusing on three key principles:

1. Adapt
   Build future resilience into new projects. The industry needs to rapidly adapt to evolving risk. Adopting an adaptive management model using smaller and even temporary investments - with 10-and 20-year horizons - will allow for more flexibility.
   
   
2. Optimise
   Improve performance of existing infrastructure with advanced technologies and data-driven insights.
   
   
3. Prioritise
   Put regenerative and nature-based solutions first. A circular economy approach to water management is crucial. Focusing on water recycling and resource recovery, working within nature’s cycle, will improve long-term sustainability.

Many water leaders recognise the need for digital transformation to help optimise for better outcomes, to understand where systems are failing to meet changing needs and in how to plan for better investments in the future. While the technology is available now, a longer-term challenge is the need for cultural change in order to see success – new mindsets are required to innovate and solve complex issues. How can decision-makers build and nurture the leadership and cultural shifts needed to drive this transformation?

1. Urgent need for more digital leaders
   Digital leadership has become the newest trait expected from CEOs as the traditional role of the executive changes. Leaders need to make sense of vague external trends, help organisations imagine digital futures, educate others, repurpose technical expertise, and use agile thinking to foster innovation.
   
   Today’s digitally savvy CEOs need to understand how to build and lead teams, keep people connected and engaged, and drive a culture of learning and continuous improvement.
   
   Various water industry associations across the U.S. have developed frameworks for preparing the future leaders of water. However, too few organisations are focused on growing their own pipeline of digital leaders. Instead, they rely on the legacy model of retirement and succession.
   
   
2. Shift mindset from operational efficiency to value creation
   Water industry enterprises spent decades building “operational efficiency” mindsets into their organisations. Until recent digital disruption, they gave little thought to the other side of the productivity coin – creating value for customers. Innovation goes against the grain in many organisations, competing with legacy management principles.
   
   After the COVID-19 crisis, cost reduction and operational efficiency became vital as organisations attempted to recover from financial setbacks. Digital investments focused on automating processes and cutting costs. Improving service and the customer experience were rarely the focus of such initiatives.
   Today’s customers expect personalised and highly relevant interactions, catering to their individual contexts. Amid rising uncertainty, digital leaders must work twice as hard to achieve customer satisfaction.
   
   Over the last decade, the Australian water sector has shifted focus from asset-centric to customer-centric organisations. The U.S. is also now making this shift, as data reveals that customers always have a choice, even if it is buying bottled water at 400x the cost of public water.
   
   
3. Build flexible, agile systems to deal with rapidly changing conditions
   Leaders must pivot from the “fortress” mentality, instead adopting flexible and agile infrastructure and systems. Fresh ideas are just the starting point – organisations must seize emerging opportunities rather than allocating resources to static financial planning that hampers innovation.
   
   Organisations are creating frameworks that leverage analytics and machine learning for rating projects by a risk/return profile. By identifying opportunities that offer greater returns, we can bolster performance and ensure financial stability.
   
   
4. Create ecosystems for global and local collaboration
   Inward bias makes leaders reluctant to share talent and operating knowledge, or to look beyond their organisation’s boundaries. This hinders collaboration — a sizable penalty at a time when traditional industries should partner with players who understand the rising power of customers.
   
   Riding the water sector’s wave of change means engaging with a broader ecosystem. It’s time to embrace change: to seek open-source collaborations, partnerships, minority investments with start-ups and innovative niche players, and to take organisations into unfamiliar territory.
   
   
5. Effectively communicate the value of new approaches
   We need leaders who can guide their organisations through disruption, illuminating the value of embracing flexibility, rather than resisting or ignoring present climate-driven realities. The potential of intelligent asset management to benefit organisations and affected communities is massive. But how do we elegantly convey the potential impact of digital transformation? Leaders who effectively explain the value proposition will see the greatest buy-in and return on investment as they innovate.

To capitalise on the available solutions and prevent serious financial impacts, leadership in the water industry must focus on change at all levels of system management.

The water sector can look ahead into a new reality where agility is the new norm, human experience is the focus, technology and data are the enablers, and certainty of value is the outcome.

Perpetual change is here to stay, and successful leaders must not only embrace it, but catalyse it.