Leader: the water sector continues to think inside the box

Ofwat chief executive Cathryn Ross recently congratulated water companies on their progress in adapting to the introduction of totex accounting, saying they showed signs of using the new approach to “think outside the box” – to innovate and move away from traditional approaches to operations.

But these positive words stand in harsh contrast to the findings of recent research conducted by Utility Week and Arcadis, which is summarised on pages 10-13.

This study, titled Water Sector Innovation and Perceptions of Totex, canvassed operations and asset management leaders in the water sector. The results show that far from being seen as an enabler for outside the box thinking, totex is not remotely linked to the sector’s innovation challenges in the minds of respondents.

Overall, the report shows disappointing evidence that while operations leaders in the water sector acknowledge they need to innovate to meet new outcome delivery incentives and focus on customer experience, they are reluctant to accept or effect the troublesome changes to “the way things are done around here” that this entails. Industry commentators who reviewed the research findings generally expressed a weary lack of surprise at the results, saying they reflected their experience of working with water companies. A senior spokesperson in the energy networks industry expressed horror at the report finding that 43 per cent of respondents categorically said totex will make no difference to the way in which they innovate, saying it has been an integral part of recent innovation work in that sector.

In the face of mounting challenges to become more efficient, resilient and competitive and, above all, to show that the water sector is delivering optimum value to customers, the findings of this report are cause for concern. They imply that the motivation behind the shift to totex – despite clear statements of intent from Ross during PR14 – has fundamentally been missed by a significant proportion of those responsible for the day-to-day running of water services. This can only lead to lost opportunities for increasing efficiency and performance.

If, as Ross says, water companies have indeed made strides in embracing totex, it would seem they also still have a long way to go.