My what a difference a few years makes! At this time in 2000
I wrote a similar article highlighting the changes I saw happening in the water
industry. Based on what I said then, the future is upon us now.
First, the Internet has changed our industry. Following the
general business trend, most suppliers are using some form of online business.
Product selection is a mouse click away, frequently asked questions (a.k.a.
FAQ’s) are handled 24/7 and many products can be ordered through
e-business portals. Suppliers have been able to cut front-end costs, and purchasers
have more information available. For standard products and applications, this
trend to “automate” has improved business processes and saved money
for everyone. The discipline has forced suppliers to better define products and
users to better understand need vs. want.
However, if your need isn’t
“cookie-cutter,” then the new online world lacks that personal
touch. Distributors and dealers have stepped up to offer broader service to a
larger area. They have increased their lines and services to offer the customer
more. The changes have driven distribution channel consolidation, but many are
finding ways to offer that added customer service relationship.
Consolidation has hit the water industry in a big way.
General Electric acquired Glegg, BetzDearborn and Osmonics to form GE Water
Technologies under a new GE Infrastructure group, while maintaining the
SmartWater products under GE Appliance. GE Water Technologies is organized
around industries, offering complete water care such as contractual services,
mobile water, water treatment systems and chemical management. Pentair has
consolidated many companies such as K&M, Plymouth Products and Everpure
into its water group to offer a one-stop supply of components and systems.
USFilter, a unit of Veolia Environmental, has shed certain assets to focus on
turnkey solutions for major industry and infrastructure. Ondeo combined
Degremont and Nalco to form a global equipment and services company. ITT
Industries acquired several businesses to combine with its strong pump group,
focusing fluid technology solutions on a large customer base.
The big corporations will continue to pursue additions to
offer broader solutions to their customers. Industrial pure water will become
an outsourced utility of sorts in most industries. The packages offered will
include benefits never offered before by the smaller independent companies.
Customers will be able to pay by the gallon, finance capital costs and gain
operating and maintenance services. Consumer water treatment will continue to
become an appliance with ease-of-use and purchase a primary driver. The bigger
corporations will offer standardization, scale and improved distribution to
lower costs.
But where is the innovation?
Innovators created the water industry. The companies that
were consolidated were mostly first generation businesses where the operations
grew beyond the founders or the sale price was too attractive to turn down. As small
businesses, they were willing to take chances and nimble enough to move
quickly. Yes, the new larger consolidators have provided needed discipline to a
maturing industry. However, by their very nature as larger enterprises, they
have more difficulty driving the same level of innovation our industry has
become accustomed to and even expects.
These entrepreneurs drove exciting technologies such as
reverse osmosis, ozone and electrodionization, which changed water treatment
forever.
Many companies still exist that still have passionate
entrepreneurs at the helm. Koch Membrane Systems is rumored to be investing
heavily in research and development with many Asian companies starting up or
following suit. In fact, western companies had better look out for the
innovation and speed of the new Asian competitors.
As consolidation has happened, many people have left the
larger companies to join smaller firms or start their own. PentaPure is a
perfect example of 4X growth business under new innovative leadership. There
are many more examples including new distributors and dealers.
Consolidation and Innovation Can Coexist
As the next wave of entrepreneurial companies drives for
their brand of change or innovation, the larger consolidated solution providers
will not stand still. They may not be as nimble or daring, but their processes
and resources will allow them to follow with comparable or improved technology.
We need both kinds of companies in our ever-maturing industry. Change drives
change and standardization will create demand for more innovation.
In the end, the customer will continue to benefit with new
technologies, a broad array of services, and lower prices. The years ahead will
be exciting and I hope to be around to participate in the change and innovation
process.
Consolidation Doesn’t Have to Damper Development