People Are Telling Us What They Want From Cities, We're Just Not Listening.

We speculate a lot about what people want from their cities. But for the most part, the conversations about what people want are based on the perspective of entities with biases about residents’ needs. People in city government assume citizens want more services and for the city to spend more, but suggest there are not enough funds to do what is required. Vendors and businesses believe people want more of what they are selling, and that city government gets in the way. But what do the people truly want? What are they saying they want?

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Fully accessible libraries, PDs and fire stations via connectivity, collaboration tools and spaces to become community solution centers addressing local issues via facilitated sessions and providing needed services such as telehealth, mental health, job training etc."

The comment above was one of the comments by 100 respondents who attended the City of The Future conference and shared their perspectives on what they would do if they had no constraints. The responses were collected through a 25/10 crowdsourcing session, run by Douglas Ferguson of Voltage Control, which provided a peek into what residents actually see as concerns for their city. Even within the context of a conference that was all about the City of the Future, the responses were overwhelmingly indicative of a desire to see more humanity in the design and development of the ideal city. Only 1 of the 100 comments alluded to the ‘built environment’ as an additional need, recognizing  that we already have the infrastructure we need for granting access to populations in our cities that do not have the resources required to thrive in our cities. Transportation was another theme that came up, with 17.5% of the comments suggesting the need to upgrade and expand different modes of mobility, especially for those without their own means of transportation, a real issue in the vast Texas cities. Access to technology, unsurprisingly, showed up as a need, but it was apparent that it wasn’t as much of a priority as the vendors who tout their own products suggest. The message, if I can paraphrase, is that ‘we already have the technology we need, what we need is humanity and a willingness to provide access to all.’

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Something that was glaring and apparent to me, probably because of the lens through which I now look at cities, was near-invisibility of how most  cities are in a slightly precarious state when it comes to access to quality potable water. Most people in the US do not realize that we face a real challenge of providing access to water and they would be shocked to learn that there are cities like Sandbranch Texas, which has never had access to running water in its 138 years of existence. Cities across the US are currently facing one or more of 6 diverse access challenges:

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Image courtesy of The Environmental Finance Blog UNC School of Government Environmental Finance Center.

  1. Contaminated and at-risk wells

  2. Unsanitary onsite wastewater disposal

  3. Lack of basic indoor plumbing

  4. Customers with substandard plumbing

  5. Customers struggling to pay

  6. Contaminated water supplies

These issues on the customer side come from and amplify operational difficulties that the utility faces in providing water to its residents. To address this situation we will need both a willingness by those with ability to pay more for their water supply and companies that are willing to work with these utilities even if the work of equipping them with resources and tools is a slog.

The truth of the situation is that even as we focus on providing access to all city residents, most people can survive without access to the internet or even electricity. But no one, regardless of the number of sensors we have around cities, can survive without clean quality water.

Why There Won't Be A 'Nest For Water'.

With news yesterday that Google is finally figuring out how to fully integrate Nest products into its hardware suite of products (lovely ad below), I thought it would be a good time to dig into a thesis I have about the water industry. I believe the things that worked for Nest will not work for most of the hardware startups that are trying to ‘catch lightning in a bottle’ for the water utility industry. And I don’t think the strategy Google is using here will work, as I’ve expressed here, but I hope I’m proved wrong. 

How Did Nest Succeed?

Most utility industry folk, and investors who are bullish on energy-tech, point to Nest as the poster child of a successful product that snuck into the power utility industry and created a new ‘market’. By 2013 when we all really started paying attention to Nest, the company was started in 2010, they’d already raised ~$100M in venture capital having been founded by a group of ex-Apple product folk (Tony Fadell being the most popular amongst them). Nest took a dormant market lacking design thinking and created a brand. Beyond creating a brand, the Nest team did two things that helped them succeed

  • Design/Design Thinking: The team was obsessive about design — as evidenced by the ‘Apple-esque’ attention to detail that went into the product- and were focused on the ‘jobs to be done’ by old thermostats. The company took a go-to-market approach that no other company had thought to use in the thermostat space, the company decided to build a direct-to-consumer brand and committed to a consistent brand message that made the buyer ‘cool and trendy’. Even real estate agents saw the value in highlighting a Nest when selling a home, as shared in this NY Mag article, ‘It may or may not increase in actual monetary value, but it may facilitate a faster sale. Outside of the luxury market, it’s a new niche for us to consider. It brings a differentiating factor when you’re selling a house.’.

  • Distribution Strategy and Channel Clarity: There was also another distribution play that Nest tapped into; the energy efficiency programs being run by utilities. Most electric utilities had just started to focus their attention on getting energy efficiency (reduction of energy usage in your home without reducing quality of life through interventions like changing lightbulbs, sealing home/windows to keep heat in, etc.) programs into customers homes and along came this beautiful Nest device that was selling direct-to-consumer and enabled the power utility to achieve the mandated energy efficiency reductions. Or at least claim to do so. Many utilities partnered with Nest to make the product part of the energy use reduction packages and it aligned with their ‘rent-on-asset’ business model. Nest also partnered with solar companies, hardware stores (Lowes/Home Depot) etc. and utilized the traditional retail model. 

  • Jobs-To-Be-Done translating into Product Strategy: For the ‘comfort’ connected home use case (‘safety/security’ and ‘convenience’ being the other two connected home use cases) the thermostat is easily the most important product in the home. There is a clear job that the thermostat does and (using experience design and technological advancements like predictive analytics) Nest made that job much easier for the average home dweller who will always desire to feel warm when it is cold or cool when it is too hot. Had the company started with one of the other products it now has it would not have seen as much success. 

These three things worked in sync, the company had impressive growth and it led to an eventual $3Bn acquisition of the company by Google in 2014

Great story all around (despite some of the stumbles afterward); Nest succeeded in a graveyard of energytech companies, power utilities got a partner that could show them what is possible when you utilize design thinking and consumers got a product that works (most of the time) towards reducing their energy usage. Win, win, win, win. 

But there won’t be a similar story in the water industry.

Interactive Water Quality Report

Why There Won’t Be A ‘Nest For Water’.

What about those three levers above explain why there won’t be a ‘Nest for Water’?

  • Design/Design Thinking: There is no corollary product to a thermostat in the home. While there can be many designs to beautify the faucet, the one common thing across all homes with plumbing, there aren’t many ways to i) change the experience of collecting water from a tap. Nest could ramp up the convenience factor of getting warmth or cooling from your home but there is no designing away the act of collecting water to drink, bathe or wash. ii) There is also no water product that can aesthetically convey what Nest did in a consumer home.

  • Distribution strategy and Channel Clarity: There are ~3K utility regions in the US and some regions are covered by the same parent company. While there is some consolidation going on within the water space, the EPA suggests that there might be 150k water systems (from public wells, municipal water systems to public companies) in the US alone! This fragmentation and difference in the structure of the water system underscore a nuance that most folks outside the industry do not understand; the motivations for why the decision makers at a water utility/system would do things a certain way are different depending on the make-up of the stakeholders. Where the Nest product clearly aligned with both energy efficiency and business model, there are no clear alignments that a water ‘Nest’ can provide to a utility. 

  • Jobs-To-Be-Done translating into Product Strategy: There is one primary job-to-be-done attached to electricity; energy. Considering the number of jobs-to-done attached to water (cleanliness, quenching thirst, cooking food, energy, etc.) all the best to a company that expects to move the needle by picking just one of those at the expense of the others. And, show me a company that tries to address all the jobs-to-be-done by water and I will show you a company that is bound to fail.

The Bigger Problem

There is an even bigger problem with the water industry and it is that consumers do not pay for the true value of the water that comes out of their taps. We do not realize that what we pay for is not the actual water but the cost of the resources and infrastructure that goes into ensuring the water we drink is potable. Unlike the power industry where it is salient to us when there is a problem (during an outage) or at the end of the month when we pay our electricity bill for the power we used, the water industry has (up until now) no mechanism to communicate the hard work that goes into clean water coming out of your tap.

So is it possible to succeed in bringing in new technology to this fragmented and conservative industry? Obviously, our answer at Varuna is a resounding ‘Yes!’. It lies in truly understanding the levers that matter to the water utility vs the levers that matter to the consumer and finding a product (or products) that align with those levers. It comes from sitting in conversation with the utility and the consumer and listening to them till they highlight the nuances that will provide the most value. The answer is…we actually can’t tell you that :) but we believe we are close to truly understanding it. So to the question ‘will there ever be a Nest-for-Water?’ our answer is ‘No’. There will be successful water-tech companies, they just won’t look like Nest. They’ll be bigger and more impactful.