H2O Insights’ The Fountain – March 2018:
The Fountain is a quarterly publication providing a brief overview of strategic and finance-related issues for water executives. The Fountain touches on M&A, economic indicators, technology, water trends, and regulation. It is published by H2O Insights, a full-service strategy, corporate development and FP&A consultancy founded by David Rose.
Question: How would you describe the adoption rate of water sensor technologies over the last five years?
Uri: Generally, the adoption rate of sensor technologies in the water industry is still lagging that of other industries. It’s an adoption rate that moves in generations rather than years. Having said this, the past five years have seen an acceleration of the adoption of new technologies, on one hand driven by the regulators and legislation (e.g. France, UK, parts of the USA), but on the other hand also by the utilities that are finding themselves under increased scrutiny by the public and the consumers. In our sub-sector, some utilities still put price considerations above product functionality, but this too is changing slowly. For instance, correlating noise loggers are now more and more considered the gold standard of permanently installed acoustic sensors, which is playing into Gutermann’s hands having pioneered correlation in fixed networks.
Question: What lessons have you learned about selling into the water markets?
Uri: If provided with an effective tool and impeccable aftersales service, water customers are very loyal and grateful. This allows us to build strong longterm relationships with our customers and benefit from word of mouth recommendation.
Question: What changes do you see ahead that will ultimately improve the adoption rates for smart water technology?
Uri: The main drivers for future smart water technology adoption are (1) IoT on one hand and (2) improved data analytics tools on the other. (1) When I say IoT I actually mean any effective way to automatically transmit sensor data to cloud applications. In our case of leak noise data that comes from underground and has to be synchronized to 1 millisecond, the challenge of IoT is an even larger one. (2) And when I talk about improved analytics tools I mean tools that allow users to take the most informed business decisions based on their specific KPIs. We do that by combining the big data now available to us with algorithms that contain specialist industry know-how and by making the basis for decision-making available in the most simple and actionable way possible.
Question: Given the competitive landscape for sensors, how is Gutermann able to differentiate itself?
Uri: Of all traditional manufacturers of leak detection technology we were the first to concentrate our R&D efforts on permanently installed and fully automatic systems rather than on single instruments. While most of our competitors have now released their own permanent systems we are still the only provider of an acoustic system with what we call “Full Correlation”, i.e. our system correlates data from all neighbouring sensors automatically and every day, which allows us to eliminate false alarms and maximise the leak “hit rate” in any given water distribution system.
Question: How important is product specification in winning awards?
Uri: Awards are often given to those who apply for them. Technical specifications don’t matter too much, a unique concept does. We have won about a dozen awards over the years and I believe we merit all of them. Unfortunately getting awards doesn’t bring more business. Nevertheless, it feels good to get a little more credit for all our hard R&D and project work.
Question: How do you see your business evolving over the next five years (e.g. transition to software and service vs. equipment sales)?
Uri: We already embarked a few years ago on a transition to a more solution oriented approach and we’ve been experimenting with different business models (Software-as-a-Service, leasing models etc.). We need to keep our edge also on the hardware side which is why we have (to my knowledge) the largest R&D team of all acoustic leak detection technology manufacturers. But our cloud solution Gutermann Cloud Services (still widely known as Zonescan Net) is one of the crown jewels of Gutermann being the best-in-class leak detection software. We will continue adding functionality to it.
Question: How does Xylem’s recently announced acquisition of Pure shape your thinking about partnerships and the competitive landscape?
Uri: The acquisition of Pure Technologies by Xylem is not a surprise (maybe the valuation is). Xylem has positioned itself as broad technology provider for the water industry not least since their acquisitions of Sensus and Visenti. Xylem is looking to gen5 erate synergies in the area of geographic reach, data generation, data acquisition and services. However, implementing those synergies in real life is a big challenge. We believe that if you have the bestin-class solution to a growing global problem you will generate a wealth of opportunities of your own. As a family business we have the luxury of being able to be very selective in whom we collaborate.
— Thank you, Uri.
Original Post: The Fountain, vol. 2, issue 1 – April 2018
