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Sailing Through Rough Water – What are the ‘Secrets’?
A Frost & Sullivan Growth Opportunity Briefing
Melvin Leong
Research Manager, Energy & Environment
February 2014
Fact or Fad: The 5 Common Statements in the Water Industry
It's easy to make a buck. It's a lot tougher to make a difference.
Why is it a fact?
• Fresh water availability is reported to be decreasing
Statement #1: Water is the New Oil
Freshwater Resources, Asia-Pacific, 2011, 2015, 2020, and 2025
Two types of scarcity
3
8,000.00
8,500.00
9,000.00
9,500.00
10,000.00
2011 2015 2020 2025
Freshwater Resources
9,862.00 9,556.00 9,195.00 8,750.00
Fre
sh
wate
r R
eso
urc
es
(Bil
lio
n C
ub
ic M
ete
rs)
Physical—a situation in which water use is approaching or exceeding sustainable limits.
Economic—occurs when institutional, infrastructural, or financial limitations prevent people from gaining access to water, even though there is enough available.
It's easy to make a buck. It's a lot tougher to make a difference.
Why is it a fact?
• Water consumption is increasing due to growing industrial activities
Statement #1: Water is the New Oil
Country Number of Manufacturing
Enterprise (Thousands)
(2008)
Number of Manufacturing
Enterprise (Thousands)
(2015)
CAGR (2008-2015) (%)
4
(2008) (2015)
Thailand 354.68 437.76 3.05
Malaysia 32.54 37.77 2.16
China 6,966.12 7,645.56 1.34
Singapore 23.84 25.78 1.12
Indonesia 3,256.64 3,500.07 1.04
Taiwan 151.08 162.12 1.01
India 8,486.42 8,728.68 0.40
It's easy to make a buck. It's a lot tougher to make a difference.
Why is it a fad?
• Fresh water availability is reported to be decreasing BUT
water consumption per capita is decreasing
• Water consumption is increasing BUT water-use minimization
and smart water grid techniques continue to be innovated
• In certain instances, such as the case in the Middle East, the
oil economy affects budget of infrastructural projects that
includes water projects.
In actual fact, the constraints of
attaining clean potable water is
attributed to:
� Climate Change
� Livestock and Agriculture
� Political and Economic Water
Conflict
Statement #1: Water is the New Oil
5
includes water projects.
• Can water be commoditized and determine market forces the
way oil does?
• Oil can be substituted, but in principal water cannot be
substituted.
What the water industry really needs:
Water shortage mitigation only by innovative water management and conservation, and by developing nontraditional supply sources.
Eagles soar, but weasels don’t get sucked into jet engines.
Statement #2: Water Reclamation Too Costly
Why is it a fact?
• Energy consumption is high
• Treatment and disposal of by-products
• State-of-art technology such as MBR faces cost challenges in fouling membrane and plant operations
6
operations
Why is it a fad?
• Not all country needs it
• Costly? So is desalination!
• Underlying concern: More of a taboo or a cultural / religious perception
• Energy can be recovered
Eagles soar, but weasels don’t get sucked into jet engines.
Statement #2: Water Reclamation Too Costly
7
Eagles soar, but weasels don’t get sucked into jet engines.
Statement #2: Water Reclamation Too Costly
Why is it a fact?
• Energy consumption is high
• Treatment and disposal of by-products
Why is it a fad?
• Not all country needs it
• Costly? So is desalination!
• Underlying concern:
8
products
• State-of-art technology such as MBR faces cost challenges in fouling membrane and plant operations
• Underlying concern: More of a taboo or a cultural / religious perception
• Energy can be recovered
We can make more generals, but horses cost money.
Statement #3: Water Price Reforms Reduce Water Scarcity and Wastage
Why is it a fact?
• ‘Commoditized’ product with a hefty price tag deters unnecessary waste
• Reduce consumption is thought to slowdown water shortage / scarcity
Why is it a fad?
9
• Pricing reform contains two fundamental flaws: It tends to focus on focuses domestic water use, and it assumes domestic consumers can or will reduce water use when faced with higher prices.
• Rates should incorporate the cost of the services provided by water utilities, but should not reflect a monetary value placed on the water itself.
We can make more generals, but horses cost money.
Statement #3: Water Price Reforms Reduce Water Scarcity and Wastage
Why is it a fact?
• ‘Commoditized’ product with a hefty price tag deters unnecessary waste
• Reduce consumption is thought to
Why is it a fad?
• Pricing reform contains two fundamental flaws: It tends to focus on focuses domestic water use, and it assumes domestic consumers
10
is thought to slowdown water shortage / scarcity
domestic consumers can or will reduce water use when faced with higher prices.
• Rates should incorporate the cost of the services provided by water utilities, but should not reflect a monetary value placed on the water itself.
If you see a bandwagon, it’s too late.
Statement #4: Membrane is the Best Water Treatment Solution
Why is it a fact?
• The world has embraced membrane treatment as the most reliable and proven technology for providing safe and high quality water
• New treatment systems are predominately moving to an all-membrane approach, determined as the sustainable approach
• Membrane systems bring operating savings, combined with reduced water and energy footprints, with the benefits of water reclamation for wide purposes
11
footprints, with the benefits of water reclamation for wide purposes
Why is it a fad?
• Again, it is not for every municipalities and industries, not for every country
• Relatively costly for urban uses and unlikely to become viable for directly supplying irrigation water for agriculture
If you see a bandwagon, it’s too late.
Statement #4: Membrane is the Best Water Treatment Solution
Why is it a fact?
• The world has embraced membrane treatment as the most reliable and proven technology for providing safe and high quality water
• New treatment systems are
Why is it a fad?
• Again, it is not for every municipalities and industries, not for every country
• Relatively costly for urban uses and unlikely to
12
• New treatment systems are predominately moving to an all-membrane approach, determined as the sustainable approach
• Membrane systems bring operating savings, combined with reduced water and energy footprints, with the benefits of water reclamation for wide purposes
uses and unlikely to become viable for directly supplying irrigation water for agriculture
It's easy to make a buck. It's a lot tougher to make a difference.
Statement #5: China / India, Gives the Best Opportunities
Why is it a fact?
• Currently the two of the largest Asian economies in the world, other than Japan.
• World’s top two most populous nations
• Urban population growth rate the highest in APAC, and among the highest in the world
13
Why is it a fad?
• Mega markets, mega risks
• Other territories uncharted
It's easy to make a buck. It's a lot tougher to make a difference.
Statement #5: China / India, Gives the Best Opportunities
14
It's easy to make a buck. It's a lot tougher to make a difference.
Statement #5: China / India, Gives the Best Opportunities
15
Rags to Riches, and then… ? ‘Secrets’ Revealed
The customer experience is the next competitive battleground.
Best Practices in Rapid Customer Acquisition
Securing exclusive business propositions in the market value
chain (distributorship; concessions; contractual sales, etc)
17
Focus on core competencies or vertical propositions instead of
horizontal propositions
Improving level of customer interactions and after-sales service
activities
Partnership is the way. Dictatorial win-lose is so old-school.
Best Practices in Strategic Alliances and Competitive Strategy
Multi-dimensional alliances for market expansion• R&D• Academic• CSR• Suppliers• Competitors• Customers
18
Example: Acquisition of a membrane raw material supplier; Collaborations in membrane R&D
• Customers• Public agencies
Alliance does not mean love, any more than war means hate.
Best Practices in Leadership in Operations, Product / Service Innovation and Customer Reach
Innovation in technologies
• Energy conservation in treatment equipment as optional feature at minimal
cost addition for clients
• Reduction in the cost of R&D and production by shifting their bases to
19
Operational Cost Optimization
Focus on Services
• Reduction in the cost of R&D and production by shifting their bases to
other countries, to take advantage of the lower cost of labor and
operations
• Local procurement in countries where the projects are based, as a
measure for cost reduction and time efficiency
• Focused on after-sales, operations, and maintenance (AOM) model for
customers
Power is winning the battle over who owns the customer.
Best Practices in Prioritizing Business and Understand Customers
Divestment; unsuccessful ventures and units may need to be eliminated.
Realignment in core competency; target good customers and improve sales from existing
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customers and improve sales from existing customers
Reinvent product and service proposition; look for new opportunities outside China and India.
We don't have a monopoly. We have market share. There's a difference.
Best Practices in Realignment and Convergence
• Focus on your target group clients as main revenue driver
• Focus on small to medium capacity solutions
• Introduce mobile treatment solutions for remote sites; focus on energy recovery
• Reinforce membrane treatment solutions and
21
• Reinforce membrane treatment solutions and applications (small to large capacity); increase third party sales of membranes to other water companies
• Strengthen consulting propositions in water management to client
• Partnerships with IT and building solutions providers
There’s no secret about success. Did you ever know a successful man who didn’t tell you about it?
The ways for water companies moving forward in business sustainability are:
• Rapid customer acquisition
• Strategic alliances and competitive strategy
22
• Leadership in Operations, Product / Service Innovation and Customer Reach
• Prioritizing Business and Understand Customers
• Realignment and Convergence
Next Steps
Develop Your Visionary and Innovative SkillsGrowth Partnership Service Share your growth thought leadership and ideas or
join our GIL Global Community
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Today’s Presenter
Melvin Leong, Research Manager
Energy & Environment, Frost & Sullivan
26
Melvin is a Research Manager with the Frost & Sullivan Asia Pacific Energy &
Environment Practice, and his research focus areas include water treatment
markets, buildings markets. With over 10 years of industry experience, he
focuses on monitoring and analyzing emerging trends, technologies and market
behavior in the environmental and building technologies market in Asia Pacific.
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