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Customer-Driven Innovation in the Water Industry

Innovation in the water industry is as much about culture and behaviours as it is about new technology or data. Creating the right environment to encourage innovative thinking is critical for success as is ensuring that new ideas or new ways are working are driven by customer needs.

Director Stuart Pearce explores what is being done to encourage innovation in the water industry, how to improve customer engagement and what steps can be taken to set the right culture for innovation to thrive and then to embed change and realise the benefits.

Too many innovative ideas fail to deliver the benefits promised because they are not embedded fully into the operations of the business and this is not only expensive but creates innovation fatigue in organisations slowing down the rate of change.

It is clear to me that the water industry still has along way to go, when compared to the best customer focused organisations in the UK, to become truly customer-driven as too often the constraints of operational silos are accepted as a reason for many of the problems with customer engagement.

Innovation is about doing things differently

Ofwat, the water services regulation authority for England and Wales, has made innovation one of its central themes, encouraging water companies to think outside the box and bring ideas from other sectors to help drive better customer outcomes and greater efficiency.

It has established a £200 million Innovation Fund to grow the water sector’s capacity to innovate, enabling it to better meet the evolving needs of customers, society, and the environment. The innovation fund is designed to complement Ofwat’s existing approach to innovation and to help deliver against Ofwat’s strategy which highlights the role of innovation in meeting many of the challenges the sector faces.

Innovation is not necessarily about new technology or data but it is more fundamental than that. It is about doing things differently, and innovation must have a customer benefit at its heart. Customers expect more and cultural change is critical to enable innovative thinking and ideas to emerge. This is one of the drivers behind the Innovation Fund to help fund new projects that would otherwise not be approved under existing operational constraints.

Customer Engagement

I was struck recently by an insightful observation from a water company innovation manager, comparing water companies to Amazon. Whilst Amazon is often held up as the standard bearer for modern customer service, it is easy to think of them as a seamless and simple organisation.

However, the point here is that Amazon is just as complex as many water companies, with internal divisions, thousands of employees, hundreds of third party suppliers and delivering services to the public. So perhaps organisations like Amazon could be a source of best practice for the water industry.

Whilst there is scope to further improve customer engagement across the water industry, it is encouraging that there is already much being done to look for new ways of working to continually improve and meet the needs of customers and the objectives passed down by the regulator.

At the recent Water Industry Innovation Conference Water Industry Innovation  there was highly encouraging discussion about creating customer-driven innovation with many ideas coming forward, including;

  • Sharing data across departments, removing ‘data silos’ and create one version of the truth for the customer
  • Proactively alert customers to a change in their usage and help reduce costs
  • Developing customer-driven culture to put the customer at the centre of the organisation
  • Improve accountability and ownership throughout the organisation to solve customer problems.

People, Processes and Systems   

Innovation is about having the right mindset and aligning people, processes, and systems to deliver it. You must change the culture in the business to drive innovation and ensure that it is customer-driven.

The biggest barrier to innovation is often culture and the starting point to changing culture is to understand where your people are first by completing a cultural audit and build from there. In other words, take time to understand where your people are first, and adjust your strategies, rather than impose change on them.

To change business culture you need to see it through and be persistent, incremental, and aligned throughout the organisation. It is important to align innovation with a business sponsor to ensure time and resources are made available to innovate. Organisations need to develop skills with their leadership and managers to coax innovation and make time for it. This means adopting agile business practices, be adaptive to change and move at pace.

Too many change initiatives fail because they are not embedded properly. The benefits of the changes are often not realised as the new initiative is not embedded fully within the organisation. Is it equally important to have a clear strategy for the embedding process as it is to creating and implementing the new ways of working.

Embed change, learn from past mistakes, and do not be afraid of failure as after all not all the changes will land as you want them too.


Transformational change is achievable, but only if implemented at the right pace for the organisation. Start with what problem you are trying to solve; what does the customer want. To change means you must take a risk, it is an inevitable consequence of change, but the risk can be mitigated by being clear and understanding the outcome you want.

You must start by understanding where your customers are and innovate from there. Start with an open mind and talk to the customer. Some innovators would argue that speaking to your customers has limited value as they do not know what the future holds.

However, this is only part of the picture, perhaps relevant for truly disruptive technologies, and ignores the fact that most change is incremental and well in scope for our customers.