I was honored to be invited by David Henderson of XPV Water Partners to attend their annual retreat for many of their portfolio companies. XPV is a private equity firm that raises funds and exclusively invests in companies that are providing services in the water arena. This is a broad category in many respects – for their focus is on municipal, industrial and consumer products from small filters to huge treatment apparatus to the latest software analytics. Yet it is also relatively narrow, for XPV is the only equity firm I know that exclusively invests in the water space.
I have known about and admired XPV for years because of their commitment to our sector and the patience they have invested in gaining knowledge and experience in the arena. I also believe they realize that the water sector is not a place to make fast money – but has tremendous rewards for a long term commitment. Given the enormous and compelling needs in the water sector, private capital and technical and management expertise is welcome support and even essential.
The retreat was not public so I will not share the discussions that were held with the portfolio companies in attendance (not all XPV portfolio companies could make it.) I will explain, though, that entrepreneurs that start and build new companies are courageous. The financial pressures are intense in parallel with a vast array of priorities: establishing the product; identifying potential customers and creating a sales program; attracting talent; managing costs and procedures – and most important, managing cash flow and generating profits.
The list of the portfolio companies that attended is impressive. I do not mean to endorse any particular products or services, but I am fascinated by the group that XPV has brought together:
Fathom: Focuses on smart grid for water, customer information systems linked to meter data analytics and a fun customer interface.
Newterra: Modular water treatment with a focus on membrane bioreactors, used for water and wastewater in industrial and potable water use.
BCR: Biosolids management for Class A and “Clean B” with activated sludge to create fertilizer.
Filterboxx: Modular water and wastewater treatment systems – turnkey treatment.
Nexom: a wastewater treatment leader, focused on bringing innovative and proven technologies to market for improved nutrient removal and increased energy and operational efficiency.
David asked me to talk to a group of executives from these companies and others about what is driving innovation at DC Water. I am afraid I rambled on for almost an hour, but I can boil down my thoughts in seven points:
- Mission. Change in any enterprise must be driven by a commitment to a clear and important mission. People who are dedicated to achieving a mission are more able to shift practices or procedures and be innovative if the mission is therefore advanced. I realize that for many in the private domain, a mission is revenue and profit – and I respect that. But even within that context, I still believe people need to know and believe they are working on something that matters on a broader playing field.
We are blessed in the water field to be working to improve a bedrock foundation of everything. Yes, everything! Every job relies on access to water. Every life relies on access to water. And not just human lives, EVERY life form. In our world, public and private, we are working to improve the quality, reliability and accessibility of this life giving resource. This is a mission worthy of shouting from the mountaintops, and worthy of constantly making sure we are doing the right thing. Water is a mission that drives performance, and drives innovation to do better. DC Water’s tag line is “Water is Life” – which is our simple formulation to connect everything we do to a fundamental purpose.
Message: Constantly highlight the fundamental importance of a mission and how the further and improved attainment of the mission is what drives the need for change and innovation.
- Listen. Before any leadership, strategic and/or change agenda is announced, leaders should go out and listen to the people that make up the place to be changed. In my experience, these listening efforts always inform the change agenda, sometimes dramatically, and improve the chance of success. Listening allows a leader to adopt ideas and language and reasoning from those who must live with and implement any change to come. People are simply more able to change if their ideas and viewpoints have at a minimum been solicited, and even better, at some level incorporated. Every organization and its people has strengths. Make sure you know what they are to preserve and strengthen them even as change adds new dimensions. As I have often explained to my team, we want the dog to be pulling on the leash to move forward, not be pulling the dog along with resistance at every step. I have often seen visionary leaders fail at this critical first step – which ultimately only inhibits their own goals for an enterprise.
Message: Go inward to listen to your team before suggesting a new strategic or change agenda. Your agenda can only be improved, can only add elements that need to be preserved and strengthened, and change can then be owned by everyone.
- Challenge. I often say that a crisis is a terrible moment to waste. We are obviously willing and driven to innovate in the face of a crisis – we do what needs to be done. Sometimes a crisis that is relatively slow to develop, or has an impact in a big organization, and is therefore harder to spot. The daily grind may lull us to become desensitized to the crisis, or perhaps it has been happening long enough that the challenges now seem to be the norm.
Yet the crisis for water utilities is real and dire, even if it has been building for decades. In stark contrast to the “water is life” mission, we have challenges galore: old infrastructure, new contaminants, climate change, an aging workforce, invisible services, lack of public awareness, a risk averse approach and a lack of revenue and financing – just to name a few. Particularly in comparison to the worth of the mission, the need for improvements to water infrastructure is nothing short of a shocking calamity. Terrible grades for an essential infrastructure resource and the need for hundreds of billions of dollars of investment is a shocking reality.
Leaders should not shy away from this challenge, but highlight its immediate reality and relevance in a personal and practical manner to the organization at hand. We can then connect a strategic and change agenda to the potential solutions and improvements – to respond to and help solve the crisis.
Message: Much more change and innovation is possible in response to a crisis than in a steady, calm state. Be honest about the crisis and connect your agenda to the solution.
- Outside Game. Building on the first three, start change with communications with external stakeholders. And start the external effort by understanding your relationship to the world external to your enterprise. Can you answer the questions of how your enterprise is perceived, how people hear about you, how is your customer service? At DC Water (known as DC WASA when I began), we were not well regarded with respect to any of these criteria. Yet we know that our solutions on every other front rely on public support – for more funding, for patience during construction, for understanding in service upsets, for awareness of our role in the community. We absolutely had to improve, to change, and to do so quickly.
Fortunately, developing innovative communication approaches is probably the least costly initial step, and the one that can gain the quickest response. For us, we changed our name to DC Water, adopted the “Water is Life” brand and built a new social media presence. We started proactively reaching out to media and stakeholders of every kind and built a story about our critical role to every job and life. We emphasized the crisis in the system and used every water main break or service disruption as an opportunity to tell our story, rather than moment to duck the spotlight. We called for drinking water alerts when problems arose, emphasizing that the health and safety of our customers was our foremost priority. Some called external affairs the “soft” side of the enterprise. I believe it is the hard core of the effort – for without a story that people can understand and support, nothing else can happen.
I am gratified to report that our reputation in the community changed fairly rapidly. By being honest, we started to be trusted. By being open, we started to be understood. By telling our story, we started to gain support.
And by telling our story we started to believe it. We believe that we are the most important environmental organization in any place we exist, which is everywhere. What we do is a bedrock of civilization and all life. What we do is so important that we must be open to all ideas and approaches – just like we have done with communications. How we talk has huge influence on how we walk.
Message: Focus on your stakeholders and customers. Develop a compelling story about why what you do matters, and why people should support you. Be creative about telling this story – if you are honest and straightforward, people will listen. If you have a good story, they will support you. And if the story is compelling, your team will believe it too. The more the team embraces the story, the more the external world sees the story, and a righteous feedback loop grows.
- Inside Game. Following these steps, your team at this point will have had a chance to engage with leadership before a change agenda is adopted and is now hearing about the importance of their efforts in external communications. Seal the deal by focusing key aspects of the change and strategic agenda to improve the conditions for your own personnel. Ultimately, change must be supported by the people of the enterprise to really succeed – the agenda must be a joint agenda. Gaining support from the troops is straightforward – the team needs to have been heard before the change starts, must sense their input in the agenda itself, and then must see and feel that change benefits them in their daily efforts.
For DC Water, we started with a focus on safety, solving and investing in several long-standing problems. We also resolved some key management practices I had heard about during my internal focus which both boosts morale, and demonstrates that we had not only listened, but heard and acted. We made several improvements to the trucks of our personnel that made their job easier and improved communications and integration. From the beginning, change at DC Water has not just been about how we interact with our customers, but how we support our own personnel.
Message: Make sure your own personnel both sense their contribution to your change agenda and know how it makes their work and lives better. Then the change is OUR change, and we are all pulling on the same oar forward. Then the ship really starts to move!
- Highlight. Shower those who are driving innovations with attention and acclaim, and be sure that folks from all parts of the organization, and doing all sorts of work, are included. For DC Water we have highlighted several giant innovation efforts – most of which have succeeded (our innovative biosolids management program) and some of which have not (a cancelled project to implement solar at our facility.) Innovators are rewarded and highlighted for their effort and good ideas, even if some do not pan out. We also focus on including the whole organization – not just those parts usually associated with innovation (software, technical gadgets, science.). The video we have produced to highlight innovation features one of our veteran employees redesigning the pick that pulls off manhole covers, and building it by welding new pieces together in the machine shop. This is work by one of our veteran employees on one of the most simple of our tools. It is also a tool our team uses every day, so its improvement is meaningful and connects right back to demonstrating that innovation helps our own personnel too.
Message: Shower attention and acclaim on the innovators, and be sure to include people from throughout the organization. People will get the message and want to join the fun!
- Professionalize, Personalize, People. Innovation on specific projects or areas needs to be professionalized within the enterprise to institutionalize creativity. For DC Water we created one of the first Innovation Chiefs in the industry, created a matrix scheme with innovation champions in every division and worked with the Board to develop a strategic plan that was founded on innovation and creativity. Innovation must be personalized – highlighting people at every step (rather than the gadget or process, highlight the person who invented the gadget or adopted the new approach), include innovation goals in performance standards and reviews — make achievement of productivity improvements by people a core value of the enterprise. Then always hire people with creativity and innovation in mind. This final point is one of the most important – to incorporate creativity and innovation into the necessary bureaucratic functions of any enterprise, and see it then reflected in how people are hired, promoted and rewarded.
This seven step approach can build a culture of excellence and innovation in almost any enterprise. Most important is how each of the points builds on and supports the others – the whole is much stronger than just a sum of the parts. Developing a sense of mission and urgency is propelled by a communications strategy. Communications build awareness in our customers, but then also propels them to seek a higher standard of service from us in return. Employees understanding how innovation helps them in their job are more likely to be creative and innovative with others. Everyone on the team are motivated to perform to uphold our mission, and our pride in delivering it.
Go forth and conquer, not over a defeated adversary, but side-by-side with a growing band of trusty allies!