Endogenous Innovation Creating a Smart Water System Paul Gagliardo Manager Innovation Development Smart Water Infrastructure Summit May 18, 2012 Washington DC
What is Innovation? Innovation is the creation and use of more effective ideas or methods. Inventions refer to the creation of the idea or method itself. The focus is on new processes rather than new objects. Innovation is transformation which results in change. So, why Innovate?
Why Should Utilities Innovate? American Water Vision Statement: Our Vision is to be the trusted steward of your precious resource water Stewardship is an ethic that embodies responsible planning and management of resources. It refers to the responsibility to take care of something belonging to someone else. Value > Price > Cost
Who We Are The largest publicly traded water and wastewater services provider in the United States. Employ approximately 7,000 active employees Treat and deliver more than one billion gallons of water daily Operate and manage 49,000 miles of distribution and water mains Provide services to approximately 15 million people in more than 1,300 communities. 4
Where We Are Operate in over 30 states 370 individual water systems 80 surface water treatment plants 600 groundwater treatment plants 1,000 groundwater wells 60 wastewater treatment plants 5
Innovation Development Program Genesis of the Innovation Program Acknowledgement of Value by Company Allocation of Resources Executive Team Support Stage Gate Process Strategic Plan Culture Change
Opportunities, Focus Areas and Goals Operational Efficiency New Regulation Monitoring and Compliance Strategic Business Opportunities Power, Pipe, Meters, Chemicals Company Growth Providing Shareholder Value Cost-Centric vs. Revenue-Centric Model In order to be successful market, economic, invention and innovation trends must be identified.
Long Wave Economic Super Cycles Modulation between high and slow sector growth Averages 40-60 years Innovative companies identify and leverage the upward prosperity section of the curve.
Fractal Dimensions Benoit Mandelbrot analyzed cotton prices and coastline length. The numbers that produced aberrations from the point of view of normal distribution produced symmetry from the point of view of scaling. Fractal has come to mean any image that displays the attribute of self-similarity
Diffusion Innovations are spread from the entrepreneur to other groups. The Innovation life cycle can be described using a Diffusion curve. Successive S-Curves will replace older ones to continue to drive growth upwards.
The Onset of Chaos and Self-Similarity As growth rate rises final population jumps between two values. Bifurcation continues until chaos appears. Behavior prediction is impossible. Strips reveal windows of order. Identical copies of itself inside the chaotic region.
Order in Chaos There are patterns in organizations, weather, nature, biology, economics and business that are difficult to identify. Fractal structure analysis and self-similarity can uncover the patterns. Lorenz Strange Attractor as the center of focus around which patterns emerge.
Institutionalizing Innovation Organizations are nonlinear, self-similar systems where minor events can have significant consequences. Chaos Theory Butterfly Effect
Organizational Model Minimize overall impact on day to day core business activities. Small group whose function is to seek out new ideas and create innovative opportunities. Innovations are not steady state or periodic or predictable.
Innovation as Controlled Chaos Organizational Structures Vertical Functional Hierarchies Cross-Functional Interaction Order versus Control Self-Organizing Systems
Innovation Development Program Stage Gate Process Protocol for introducing and implementing new ideas Innovation Manager Idea Screener Ombudsman Entrepreneur Liaison Change Management Champion
Evolution of the Innovation Program Develop internal and external connections and contacts. Create a pipeline of ideas to screen and analyze. Importance of first project to move through the Stage Gate Process. Engender credibility and trust within the organization. Document Value to the Organization. Create a Culture of Innovation throughout the company.
Projects Enbala Regulation Services Program Opportunistic NPX Anaerobic MBR Serendipity Smart Earth Technology Universal Data Transceiver Calculated
Smart Earth Technology Genesis Story Invention Innovation Value Proposition Validation/Implementation Process Creative Destruction Consequences The process by which the old ways of doing things are organically destroyed and replaced by new ways.
Module Replacement Cost, US$ Capital Cost Cents/Gallon Standardization and Commoditization Reverse Osmosis Element Price Reduction Standardization of RO Systems and Element Configuration led to pricing competition and lower unit costs. 80 70 60 50 40 30 20 10 0 1975 1980 1985 1990 1995 2000 2005 2010 Year Figure 4.90 Relationship between module replacement cost and warrantied membrane life Lack of Standardization in low pressure membrane systems exhibits more random variations in pricing and valuation. $10,000 $1,000 $100 0 5 10 15 20 25 30 Warrantied Membrane Life, Years
Standard Communications Protocol Water utilities around the world are faced with enormous infrastructure challenges that will demand better strategies for delivering the expected efficiencies that have become the standard within other more progressive industry environments. One of the most transformative and recognized strategies has been the adoption of a common communications standard that allows for third-party device manufacturers to build solutions that are not handicapped by the limitations of a single-purpose communications method.
The Meter/AMR/AMI/Acoustic Monitoring Relationship Maze Meters Network AMI Acoustic Monitors Neptune Badger Actaris Elster Sensus Hersey Aclara Neptune Itron Hersey Metron Farnier Datamatic Badger Elster Sensus KP Electronics Gutermann Itron MLOG Itron Savesource Metrotech Permalog Echologics
Commoditization of Water Meters Approximately 3.3 million Water Meters 10% Manual 60% Touchpad 30% AMR <1% AMI Legacy Meter Inclusion Migrate to AMR/AMI PUC Mandated Replacement Schedule Interoperability
Information Technology and Interoperability Smart Earth Technologies Universal Data Transceiver Single Device reads all meter vendor offerings, allows for the commoditization of meters Automated route loading and billing info downloading Ability to incorporate legacy equipment Ability to migrate to AMI seamlessly Platform to collect data from all end points in the distribution system Meter Data Management Hosted SaaS solution
Interoperability
Universal Data Transceiver
Value Looking Forward Real Time Data Collection Predictive Analytics using Big Data Field Service Representative tools Deployment of real time sensors and monitors in system More responsive customer service Creating customer tools Automated Billing Automated versus Manual Operation Predictive versus Reactive Operations
Certified Innovation Partner Program
Questions? Paul Gagliardo, M.P.H., P.E. Manager, Innovation Development American Water 1025 Laurel Oak Road Voorhees, NJ 08043 856-727-6151 office 856-448-5206 cell Paul.Gagliardo@amwater.com