Xylem CEO Patrick Decker: Smart water is the next disruption

Only smart water technology can solve how utilities address water affordability and scarcity, says Xylem CEO Patrick Decker. Following Xylem’s acquisition of several smart water companies, and extensive R&D investment, Decker describes how utilities are adopting smart water technologies and how they are impacting the industry.

What do you see as some of the main challenges in the water industry today?

When you think about the full cycle of water, there really are three predominant pain points for the water industry that rise above the rest. First is water loss across the distribution network, which we refer to as non-revenue water. It’s a major financial burden for utilities in an age where affordability of water is such a concern.

The second is stormwater overflow. With the rising impact of climate change, we’re seeing record weather events that are placing enormous stress on the water and sewer networks of our customers. And third is the rising level of energy consumption for utilities. The water sector uses a lot of energy, and it is also one of the biggest generators of greenhouse gas emissions.

How do you think smart water technology will help solve some of these problems?

I think the role of smart water technology is predominately in two areas. One is being able to embed more intelligence in the actual equipment and hardware that we sell to our customers. The second is to be able to overlay software and data analytics on top of that hardware.

 This could be data for an individual piece of equipment or an entire network, which is turned into actionable insights for our customers. These insights can help them reduce their water losses on clean water distribution networks, help them more effectively manage stormwater overflow situations, or reduce their energy consumption on the wastewater side of the network.

Xylem has been acquiring companies that specialize in smart water technology. Why has Xylem been making these acquisitions?

We’ve been making a number of acquisitions over the last couple of years to further build out our portfolio, to truly make it a portfolio of smart water solutions. I would like to emphasize that it’s not just through acquisitions that we’re doing that. We’re also investing heavily in our own R&D to continue to embed intelligence in our existing hardware and equipment.

That’s as important as the software development and data analytics overlay that we’ve acquired through our new analytics platform. It’s important to recognize that this is not about software versus hardware. This is about marrying the two together to really be able to derive the best insights for our customers.

What have you heard from Xylem customers about smart water technology? Are they cautious or excited about it?

As I talk to utility customers around the world, what I’m hearing from CEOs and their management teams is that it’s not that they are risk adverse and unwilling to try new technologies, but that they need to be proven technologies. One reason our customers are so excited is that our move to smart water technologies is based on the credibility that our teams have built up over decades of serving these customers.

One utility CEO told me, “Patrick, you’re doing the hard work for us. You’re going out and putting your money where your mouth is. You’re doing diligence on these terrific new technologies, vetting which ones work and which ones are not real, and then bringing that to me as a customer. I don’t have to worry about the sustainability or the effectiveness of what you’re bringing together because you’re a proven company. You’re putting your reputation on the line, and that makes it easy for me as a utility to adopt.”

Are there some parts of the water industry that are taking on smart water technologies more than others?

We are seeing different rates of adoption. I would say, first of all, it’s not necessarily by geography. It tends to be by the philosophy of the utility itself. CEOs of utilities are implementing these technologies for a number of reasons. It could be due to a national security issue, a regulatory challenge, or issues of water scarcity. Each situation drives a different mentality.

But those utility CEOs that are more progressive are adopting this technology with open arms, because they see the immediate payback financially for them, as well as being able to provide better service to their end users. The approach we’re taking is to really go after those early adopters, use them as thought leaders, and then after that really drive a fast following of next-level utilities as they see that this is proven to be effective. I’m very optimistic that we’ll see a tipping point here in very short order.

Do you think the water industry is changing how quickly it adopts new technologies?

The water sector has traditionally been criticized as being risk adverse and slow to adopt new technologies, just like many other industries and sectors. I do see, along with other water leaders, that a movement is afoot today. It is driven by the confluence of water scarcity issues and the affordability of water. Those pressure points are coming together, and now that utilities see that there is a more cost-effective way to do things using smart technology, they are becoming more willing to adopt. We see that movement definitely gaining momentum at this stage.

In emerging markets, they have no interest when they build greenfield infrastructure to put in dumb water infrastructure. They’re leaping ahead of that and are putting in smart, better-designed infrastructure. But also in more mature markets, where there is aging infrastructure, the technologies that we’ve brought into the portfolio now help utilities better pinpoint exactly where they need to replace infrastructure, as opposed to doing it widespread in a very costly way. They can now target specifically where leaks are occurring or where there’s ineffective metering. This is just one example of ways they can work smarter in allocating capital.

What do you see as the ultimate impact of smart water on social, economic and environmental issues?

I believe passionately that smart technologies in the water sector are going to change the world in a few different ways. In my view, the reason why the water sector is the next big sector to be disrupted in a positive way through technology is because it has all of the necessary characteristics to do so. First of all, there is massive spending in the sector – one trillion dollars a year. Secondly, it’s got an incredibly wasteful and inefficient supply chain. Third, regulation is going to drive a technology disruption.

Issues of water scarcity and water affordability can only be dealt with through positive technological disruption. Only through technology can we significantly slash the capital spending requirement and CapEx budgets of a utility. And we have those technologies. Whether it is taking the cost of upgrading a clean drinking water distribution network and cutting that by two-thirds, or helping a city address stormwater overflow at a third of traditional contracts and CapEx budgets, the technology exists. We’ve proven this in a number of cities across the US and will be able to do that around the globe.

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