digital ocean of customer experiences

Some time ago I had a talk with my old acquaintance – an owner of a company providing engineering services. I knew that the last two years he had invested in marketing some engineering software. As the product was great and already had well-established markets in other countries, I expected to hear the story of success. Instead, after a long pause, he said that it was a mistake.

What makes an impeccable product successful is a successful business strategy. It details how a company makes money. Product and strategy form a virtuous circle – improvement in one part triggers a favorable change in the other.

Strategies are scrutinized, categorized, and turned into general patterns. Businesses cherry-pick the best and adapt them to ever-changing market conditions.

Unfortunately, digitization keeps on destroying well-established patterns and turns strategy into re-emerging art.

Engineering services providers (ESP) in the water industry are not in the vanguard of pattern creators. They focus on solicited projects and open EPC/PPP/O&M tenders at a minimum price. Here virtual circle of product – strategy hardly works as all ESPs are believed to produce the same quality products. Quality being not a differentiator is crucial for companies promoting de-centralized solutions in water and wastewater treatment.

ESPs keep on demonstrating their unwillingness to change these patterns on a succession of forums (IDA, WEFTEC, The Future of Desalination, etc.). They send a clear message to the world – the future is not digital. For example, out of over 300 abstracts submitted to IDA 2022, only 7 talk about digital water.

Is it shortsightedness or a deliberate choice? I am prone to think the latter. Today CEOs understand quite well that digitization is not low-hanging fruit anymore. The gradual piece-by-piece transformation of conventional business – the only choice they have - is considered a sure way to fail.

To meet the customer's run-away digitization requirements, companies should rebuild themselves into digital twins literally overnight. This ambitious goal requires a different breed of engineers, big investments, and a lot of coding, to say nothing about new knowledge. To succeed, both digital and non-digital counterparts shall run in parallel for some time. No stakeholder may accept such a scenario. That's why CEOs select not to go digital, and it is the right choice.

Being centered on core products and thus chained to the highly contested Red Ocean market, CEOs implicitly invite IT startups to try and conquer the Blue Ocean of hidden opportunities. (Blue Ocean Strategy term first appeared in the book of the same name by W. Chan Kim and Renee Mauborgne.)

This endeavor needs a strategy not to create a new Red Ocean again. A classic example of the incessant re-creation of Red Ocean is upgrading the business with the best-of-the-class software and hardware available on the market. It is the main assignment of the digital innovation officers and directors in big companies.

Blue Ocean's strategy choices

Blue Ocean's strategy tries to find a niche by playing with two dimensions - lower costs and product/service differentiation - to better meet customer needs. One dimension only returns business back to the Red Ocean. As an introduction of IT technology invariably leads to lower costs, we may focus our attention on service differentiation and a third dimension - customers.

ESP's aversion to digitization has a ripple effect on any IT startup strategy. It boils down to two questions.

  1. Which customer to target – ESP or its customer?
  2. What to put first – engineering or collaboration?

As IT startups are usually founded by industry veterans locked in past expertise and experiences, the first answer is straightforward. It is an ESP like a former employer. Not surprisingly the product is often advertised as the digital twin of the startup founder's ex-duties. Naturally, such a product is not meant for collaboration as it hardly exists in engineering companies.

As a rule, this strategy is crowned with agreements on mutual promotion with leading ESPs or OEMs. While these agreements may seem like an achievement, in reality, they are an attempt to outsource the responsibility for success to the entity least interested in IT technology. As an experience of Augury shows these agreements quickly turn into lessons learned. Companies like Grundfos and Baker Hughes are just milestones on the route of Augury to the heights of machine health AI-based diagnostics. It seems like Transcend ( engaged in wastewater plant design automation beats the same way judging by the recent agreement with Royal HaskoningDHV.

The pitfall here is that the success of IT technology is always hidden behind the success or failure of the conventional one. Being in the wake puts limits on technology development and eventually makes it lose its identity.

It is epitomized by Synauta engaged in desalination plant operation optimization. The startup was expected to consolidate the AI business across the water industry. Instead, it disappeared from the network's horizon after being acquired by Gradiant belonging to the water industry mainstream.

The second pitfall of the engineering-first strategy is an overvaluation of the engineering automation effect. It is compared with start-from-scratch "technology" instead of the copy-and-paste one used in 90% of all the projects. The latter is bad as it recreates business-unique disparate standards littering the highway of digitization.

The seriousness of this point may be illustrated by the wastewater treatment plant design generator from Transcend. The product's name is judiciously attributed with a "preliminary" word bearing the whole burden of the copy-and-paste curse.

Undoubtedly, the biggest part of this burden is P&ID-related graphics. And not only in the water industry. Recently I was contacted by a digital innovation director of an oil & gas company. She asked me a single question – Does have a commercial-ready AI-driven technology for scanning P&ID data to a database? To break the curse of legacy?

Changing the perspective

Above mentioned strategic points may be viewed as hurdles or boosters depending on the selected perspective.

From the CEO's perspective, the engineers account for less than 30% of the staff and hence, are not a dominant contributor (!) to engineering services success. In other words, 70% of digitization effort shall be invested into business management common to all companies. It is what turns engineering output into value.

This contributor is a fast lane to the customers of ESPs and a collaboration platform for virtual business consolidation. It puts any business above the competition.

Shifting the perspective to a bigger part of digitization not only turns it into revenue-generating (due to a much bigger market) but makes any advances in engineering a bonus.

Business management is all about people and, hence, collaboration. In other words, collaboration technologies shall account for 70% of the ESP digital twin, the remainder being the engineering.

The ESP digital twin will easily win the ESP customers with unmatched speed, quality, transactions transparency, information sharing, and new services.

Collaboration is not bounded by the corporate space: it extends to vendors, freelancers, partners, and customers.

A new element of business management is network analytics. It is a cheap and sure way to disrupt company marketing. It feeds critical thinking and triggers constant questioning of what the company does.

Examples of unusual collaboration technologies are a merger of project scheduling, costing and progress control, contractor interface management, virtual meetings like HAZOP brainstorming enhanced with project navigation online, messages hyperlinked not only to images and videos but business objects, etc.

Some interesting examples of new revenue-generating opportunities are OEM data collections for industry trends forecasting, digital-twin-based simulators for operation personnel training, or smart advertising for engineers. It will be discussed elsewhere.

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