Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government
Issue link: https://fhpublishing.uberflip.com/i/1309237
22 | DECEMBER 2020 | UTILITY WEEK Policy & Regulation was no line drawn between innovations that were inside Ofwat's Outcome Delivery Incen- tives or outside of them. "Take leakage," an Ofwat representative told participants. "We might not look at a bid that was for innovation to get down to target 16 per cent leakages but we might look at something that was to innovate to get to zero leakage. "So bidders can put forward ideas in some areas that the customer wants that are transformational rather than just hitting immediate or incremental targets." The need to allow for failure All agreed that there should be no expecta- tion that all those awarded a slice of funding would prove successful. One chief executive went as far as suggesting, that "for every two that are successful, it should be expected that eight will fail, otherwise we're not trying to be innovative enough". Ofwat agreed with the sentiment, but added: "It would be good to get some early runs on the board." Winning over customers The question of how water companies would demonstrate the benefits of the fund to cus- tomers was raised by a number of those present, though no solutions were forth- coming. Given that a small levy has been added to customers' bills, which has not been consulted on, sooner or later customers will need to be asked whether this is a good way of spending their money, suggested one attendee. Another present commented: "The fund does need to deliver real transformation – but people need to see how that success ben- efits customers, who need to able to see the outcomes of what we do with the fund." Competition versus collaboration The concern about the clash between compe- tition and collaboration was a strong theme of the debate, despite Ofwat publicly previ- ously calling this a "red herring". One participant who had been involved in drawing up the water industry innova- tion strategy said that a study the group had carried out around leakage had shown that companies weren't up for sharing their developments and saw innovation in this area as providing competitive advantage. "I think it's an argument we need to settle once and for all," he added. There was hope that the competition process would direct funding to those who excelled in certain fields, and who would then share their innovations and prevent duplication. Pushing on an open door to innovation Utility Week has been following the evolution of Ofwat's new Innovation Fund closely, tracking sentiment among industry leaders about its potential and its limitations – for example reporting calls from the non-domestic water sector for access to be extended in that direction. In a recent feature, Utility Week water correspondent Rut Williams reviewed the content and clout in the joint innovation strategy which was published in October, including plans for a so-called Centre of Excellence to create a single home for innovation in the sector. The creation of the strategy was a key prerequisite from Ofwat for delivery of the new funding pot. Utility Week members can read the article in full at utilityweek.co.uk The strategy is intended to go beyond Ofwat's fund or other eligible financing to be a new way of thinking. It is a call to existing and new partners to innovate, co-create and co-design and to be a platform for sharing and creating. The authors are clear it is not a detailed delivery plan with a list of solutions, nor is it fixed – it will evolve and develop. Neither is it designed to replace existing innovation strategies but rather to draw together existing work for the benefit of all. The centre of excellence envisaged as part of the plan will be a virtual space because, as United Utilities innovation strategy manager Selwyn Rose puts it: "there's no sense spending money on more concrete". The essence of the centre will be open access for innovation to act as a "front door" for the strategy to communicate its themes, share projects and where each company can benefit from existing work and previous experiences as well as new ideas. Rose says: "If we open the doors and create the space for people to come in then they will. We have seen that in our Innovation Lab, at Northumbrian's Innovation Festival, with Southern's BlueWave and Anglian's Shop Window." Steve Kaye, chief executive at UK Water Industry Research (UKWIR), describes it as "pushing at an open door" with no lack of interest and enthusiasm in the opportunities the sector has to offer – the only thing missing was the platform. "Now that we have opened up, people will fill the space," Rose says. While the details of the centre, such as governance and how it will be used, are still being finalised, the alliance has agreed on the vision for an open-data platform. It will build over time as the people use it so can respond to the needs of the users and the industry. Paul Horton, chief executive at Future Water Association, says that the thinking behind the centre, and indeed the strategy, could have been different if not for the pandemic. He says the events of 2020 meant the logistics of getting all participants in the room changed with the shi to homeworking. Rather than being a hinderance, the level of engagement improved as meetings were held virtually. "Maybe going back 12 months having a physical space would have been higher up the agenda but working remotely has made people think differently. The centre can support innovative products, services and research as a place to co-ordinate with suppliers, academia, research groups and other stakeholders," Horton says. "There are things we've all learnt that we would not have done seven months ago, now we can take the best of that and turn it into business as usual." Analysis Other participants, however, took the view that there were many issues, particu- larly on environmental matters, that tran- scended the sector and would represent a huge opportunity and no conflict for large- scale collaboration. Not everyone convinced. One com- mented: "It's a huge issue. I think it's inevi- table that as long as we have a regulator sitting in the middle, as it were, they will want to see some competition because they have the customers' interests at heart. If we want collaboration and transformational solutions, the way forward is to have col- laborative environments and all companies working together and we do that ourselves without the involvement of the regulator." Summing up, Ofwat reiterated the view that "competition and collaboration can co- exist", drawing comparisons with the auto- motive and oil and gas industries. "There are lots of sectors that are ultra-competitive but come together to collaborate – like the car industry where manufacturers are jointly developing battery technology because they realise not doing so is an existential threat to them – but then they still compete like mad on sales." Concluding on an optimistic note, Ofwat said: "We've seen that the appetite for col- laboration is there and if we can harness that to embedding innovation in the sector, and take it to the next level, then that is a very worthwhile prize." continued from previous page