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The Digital Transformation of Small Utilities

Updated: Oct 12, 2023

According to the U.S. Environmental Protection Agency (EPA), there are more than 50,000 drinking water and wastewater utilities in operation in the United States serving a population of less than 10,000. These utilities face the same challenges of their larger counter parts and more, including lack of financial resources, economies of scale, and long-term planning; management limitations; aging infrastructure and workforce; ineffective treatment technologies for modern day pollutants (e.g., PFAS); partial digital transformation; difficulty keeping up with current and future regulations; achieving service levels; and meeting customer expectations.

One challenge of specific interest is “partial digital transformation,” because completing such a transformation could help overcome several other challenges. Unfortunately, according to Eric Bindler, senior research director at Bluefield Research overseeing it’s digital and municipal water research, “small utilities are in much earlier stages of their digital journeys than their larger peers.”

The first three industrial revolutions have passed. The fourth industrial revolution, or “Industry 4.0,” is now upon us. Industry 4.0 is transforming modern society and economies through innovation brought about by advancements in digitization, interconnectivity, data analysis and automation. The elements of Industry 4.0 integrate physical production and operations with smart digital technology, machine learning and big data to create a more holistic and connected world. The result is productivity far beyond what has been seen in the past three industrial revolutions.

However, the water industry in general has been slow to adopt new technology. From a technology adoption perspective, water utilities are “laggards,” meaning they are typically the last to adopt an innovation. Therefore, the industry is not fully realizing the benefits of digital transformation. Many large and innovative smaller utilities have completed the digital transformation of Industry 3.0 and are starting to adopt the technologies and innovations of Industry 4.0. However, thousands upon thousands of utilities are mired in past innovation cycles for reasons mentioned earlier, especially lack of resources and resistance to change.

The path forward to improving the performance of small utilities through digital transformation is collaboration and partnership with larger utilities who have completed the digital transformation and offer economies of scale and scope; with government agencies who can provide funding and streamline regulatory hurdles; with industry associations who can help align stakeholders behind a common vision along with the consultancies and technology providers who receive income from water utilities. A rising tide lifts all boats.

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