Innovation and Change in the Historically Conservative Water Utility Industry - Paul Gagliardo, American Water

Innovation and Change in the HistoricallyConservative Water Utility Industry

Paul GagliardoManager Innovation Development

Water & Wastewater Management SummitMay 3-4, 2012Las Vegas NevadaLas Vegas, Nevada

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.

• Referring to the time dimension of innovation the focus is on new processes rather than new objectsnew processes rather than new objects.

• Innovation is transformation which results in change.

• So, how does change occur ?

Creative Destruction• Joseph Schumpeter theorized that industries must

incessantly revolutionize their economic structure from within.

• Innovative entry by entrepreneurs is the disruptive force that sustains economic growth.

• Creative Destruction is the process by which the old ways of doing things are organically destroyed and replaced by new ways.

• Evolutionary Economics proposes that the usual macroeconomic equilibrium is being perpetually destroyed by entrepreneurs who try to introduce new innovations. The successful innovations disturbs the normal flow and causes existing technologies to lose market position.

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.

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• It refers to the responsibility to take care of something belonging to someone else.

Who We AreW th l t bli ll t d d t d t t iWe are the largest publically traded water and wastewater service provider in the United States.

• We serve a broad national footprint and a strong local presence

• We provide services to approximately 15 million people in more than 1,600 communities in more than 30 states and parts of Canada

• We employ approximately 7,000 dedicated and active employees and support ongoing community support and corporate responsibility

• We treat and deliver more than one billion gallons of water dailyWe treat and deliver more than one billion gallons of water daily

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Where We AreWe manage more than 370 indi id al ater s stems across theWe manage more than 370 individual water systems across the countryEvery day we operate and manage:

• 49,000 miles of distribution and collection mains

And more than:And more than:

• 80 surface water treatment plants

• 600 groundwater treatment plants

• 1,000 groundwater wells

• 60 wastewater treatment plants

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Innovation in a 126 Year old Water Utility Company• Genesis of the Innovation Program

Acknowledgement of Value by CompanyAllocation of ResourcesExecutive Team SupportExecutive Team Support

• Why Innovate:Operational EfficiencyC li ith N R l tiCompliance with New RegulationsStrategic Business OpportunitiesAdding Value to Shareholders

Organizational Model to Institutionalize Innovation• Organizations are non-linear systems where minor events can

have significant consequences.• Chaos Theory – Butterfly Effect• Minimize overall impact on day to day core business p y y

activities.• Small group whose function is to seek out new ideas.

Innovation as Controlled Chaos• Organizational Structures• Vertical Functional Hierarchies• Cross-Functional Interaction• Order versus ControlOrder versus Control• Self-Organizing Systems

Innovation Development Program• Stage Gate Process

Protocol for introducing and implementing new ideas• Innovation Manager

Idea ScreenerIdea ScreenerOmbudsman Entrepreneur Liaison Ch M t Ch iChange 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• Create a Culture of Innovation throughout the company

Projects• Enbala – Regulation Services Program

Opportunistic• NPX – Anaerobic MBR

SerendipitySerendipity• Smart Earth Technology – Universal Data Transceiver

Calculated

Enbala

• Genesis Story• Invention• Innovation• Value PropositionValue Proposition• Validation/Implementation Process• Creative Destruction Consequences

ENBALA• Electricity System Regulation is a service purchased by the

l l I d d El i i S O (ISO) idlocal Independent Electricity System Operator (ISO) to provide a continuous balance between electricity supply and market demand. Traditionally, System Regulation responds to second to second fluctuations in market demand by matching the realto second fluctuations in market demand by matching the real time adjustment of supply in the form of fast responding generation, such as hydroelectric or gas turbine generators.

• New sources of intermittent, renewable, generation, such as solar and wind power have increased the requirement for Regulation Services to balance the electricity system across North America It is predicted that the demand for RegulationNorth America. It is predicted that the demand for Regulation Services will double in the next few years. To meet this expected growth ISO’s across North America have been seeking new ways to supply System Regulation. g y y y g

Water Utility Regulation Services• Water/Energy Nexus• Smart Grid Application• Use Inherent Flexibility of Water Systems• No CapitalNo Capital • No Impact on Operations

Regulation Services Concept

NPX


NPX• Anaerobic MBR• Cost Efficient Nutrient Removal• Patent Filed• Energy and Carbon Efficient

35 40% reduction in energy• 35-40% reduction in energy required

• Combined with CEPT – Up to 100%

• Carbon for Denitrification Utilization Reduction – Up to 100%

• Green House Gas GHGGreen House Gas, GHG, emissions reduction

• Incidental Phosphorus Removal

Nitrate Shunt without Anammox

Demonstration Project

Energy Use Mapleton WWTP

80,000

90,000

onth

)

37% reduction in usage

40 000

50,000

60,000

70,000

Use

(kW

h/M

o

20,000

30,000

40,000

Oct-06 Apr-07 Nov-07 Jun-08 Dec-08 Jul-09 Jan-10

Ener

gy U

p

Smart Earth Technology


Information Technology and Interoperability• Smart Earth Technologies

Universal Data TransceiverSingle Device reads all meter vendor offerings, allows for the commoditization of metersAutomated route loading and billing info downloadingAbility to incorporate legacy equipment Ability to migrate to AMI seamlesslyAbility to migrate to AMI seamlesslyPlatform to collect data from all end points in the distribution systemM t D t M tMeter Data ManagementHosted SaaS solution

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

i tenvironments. • One of the most transformative and recognized strategies has

been the adoption of a common communications standard th t ll f thi d t d i f t t b ildthat 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

GutermannNeptuneAclara

NeptuneItron MLOG

Itron

Neptune

BadgerHersey Itron Savesource

PermalogDatamatic

Elster

Actaris

Badger

MetrotechMetron Farnier

Permalog

EchologicsSensus

Sensus

Elster

Badger

Hersey Sensus

KP Electronics

Hersey

Interoperability

Universal Data Transmitter and Collector

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.

Certified Innovation Partner Program

Questions?

Paul Gagliardo, M.P.H., P.E.Manager, Innovation Developmentg pAmerican Water1025 Laurel Oak RoadVoorhees, NJ 08043856-727-6151 office856-448-5206 cell

[email protected]