Nobody knows anything, so let’s consolidate
Published May 11th, 2017
In Hollywood they say “Nobody knows anything” with a certain amount of pride. There is a certain machismo in gambling hundreds of millions of dollars on a blockbuster new movie in the full knowledge that it may well fail.
Nobody knows anything in the water industry either, but the difference is that Hollywood goes to great lengths to preview its products with different audiences, and radically changes things if the response is poor. The water industry tends to make very little effort to listen to the voice of the customer.
Part of the problem is that many suppliers don’t know who their customers are: any number of independent sales reps, agents, distributors, systems integrators, engineers and contractors stand between them and the end-users of their products. A company like Dow probably has no idea where half its sales end up.
The other part of the problem is that the customer base is so fragmented. Booky Oren’s session on Uninvented Technologies at last month’s Global Water Summit illustrated that well. Although his panel consisted of a reasonably homogenous group of large utilities in the developed world, when they presented their technology needs, 70% of what each utility wanted was not wanted by any of the other panel members. It means that when you start talking to customers about new products, it is highly likely that you are not talking to the right ones.
Companies trying to sell into the water market always complain that the sector is too risk-averse to take innovation seriously, and they complain about long sales cycles. Could the fact that they don’t really know who wants stuff be a bigger problem?
I asked myself this question recently when I was reviewing some Voice of Customer research carried out by our sister company Amane Advisors. A couple of years back, Amane took over the activities of a market research agency in Singapore called Cataliz Research. At that stage it focused on supply chain work for major FMCG brands, but Amane saw the opportunity to refocus on the water sector.
It is not cheap. You need to survey a lot of busy people to get actionable information. Some of the information that comes back from respondents is utterly bewildering: there is very low awareness of the different product offerings competing for their custom, and especially on the industrial side, you need to speak to a lot of people to find a quorum of respondents who have a common interest. What you get back is fascinating, however. In most cases, customers seem to want something very different – and a lot more interesting – than what suppliers initially propose. It is great for Amane’s clients, but it seems to me that this is another reason why water technology start-ups struggle to make headway.
Big companies can afford the investment in understanding the market, but small companies tend to take the view that the brilliance of their technology offering outshines the value of good market research. It is another reason why I think a folding star is currently shining over the water technology sector.
The folding star, according to the English poet John Milton, is the star that signals to shepherds that it is time to return their sheep to the fold. The clean tech investment boom (which came to an end in 2014) scattered new water technology companies across the world, but now it is time for consolidators like Evoqua, Xylem, Danaher and Pentair to pick out the best and fold them into their existing portfolios. One suspects, however, that not all of the sheep are going to make it to the fold, and those that do and those that don’t will be distinguished by who has the best understanding of their customer base.