Ashfords Integrated Alternatives Ashford Integrated Alternatives AIA Uniting

Ashford’s Integrated Alternatives Ashford Integrated Alternatives (AIA) Uniting Utilities: Organisationally Practical? Dr Jens Roehrich & Dr Andrew Davies Innovation and Entrepreneurship Group Imperial College Business School

Research focus • Overall research question: How do integrated utility service providers (i. e. ESCo and MUSCo) create and capture value in long-term, complex urban infrastructure redevelopment projects? • Research objectives: – Developing a taxonomy of alternative business models for delivering urban water and energy infrastructure services in order to place the ESCo and MUSCo approach in a wider strategic context. – Examining comparative cases in detail, addressing the challenges involved in the development, implementation and delivery of integrated utility services. – Providing guidance on how to implement alternative integrated utility business models in different urban environments. © Imperial College Business School

From Value Chain to Value Constellation/Network Traditional: value chain Fails to capture inherent complexity of roles and relationships in economic systems – value creation Value constellation/network Understand entire value creating system Role and relationship reconfiguration value co-creation © Imperial College Business School

Research Approach • Primary and secondary data • Key phase of integrated urban utility delivery: – Design (masterplan) – this will involve ideas about MUSCOs, concessions (PPP/PFI/others), design, business model plans, user needs etc. Imperial College Business School

Comparative cases Elephant&Castle/UK © Imperial College Business School Ashford/UK Chula Vista/USA

Different degrees of utility stream integration Utility streams Business models End-customers Energy MUSCo Data Waste Increasing degree of integration Water commercial ESCo Individual utility companies mixed (various degrees) private

Value Chain (Ashford and Chula Vista) Product/Service components Client Contractors Added value Value creation

Ashford Counicl considered ESCo alternative for renewable energy • A former CEO of the Ashford Borough Council explains the purpose of this study and the importance of scale in urban development projects. • “[. . . ] we tried to engage the developers in all of this because we were basically saying look you know you are going to have to meet these very challenging environmental targets. So we got this study going and it modelled what would be the sensible choices in terms of sustainability and energy for different sizes of development. • So for a little group of ten houses or fifteen houses or five hundred houses or a couple of thousand houses up to six thousand houses, urban extensions basically it would be six thousand houses and we thought well if big developer what a consortium of developers are developing at that scale then we could at least illustrate for them what are the realistic choices because there actually quite different choices become meaningful at different scales. ”

Elephant & Castle • Redevelopment project £ 1. 5 bn • 70 acres • Design and build new pedestrianised town centre, market square, green spaces and 5, 300 new homes • Southwark Council led project 2002 -2020 • Lend Lease – developers • Huge challenge of outdated buildings and infrastructure, pollution, traffic, etc.

Value Constellation (Elephant & Castle) Value creation Systems integrator (consortia) Sub-contractors Client Added value Product/Service components Value co-creation

MUSCo challenge on E&C brownfield site • “The other thing that differs is that a lot of the projects we have dealt with in Veolia Multi-Utility Services has been totally new housing developments, Greenfield sites, so the installation of gas, water and electric, and in some instances telecoms, would be far easier to manage from an operational perspective, than what we are doing here on a brown field site. [. . . ] There is a lot of existing infrastructure that will remain in place and one of the biggest challenges is to find a utility corridor for us to install the network because one of the savings with this model of multi-utility is putting everything in a joint trench” (Commercial Manager, Veolia).

MUSCo team need strong capabilities • “I think the advantage of the Veolia Group is the fact that we’ve got this extra expertise in-house. If you were setting up, like some of our competitors do, for energy companies, they have to have the water and the waste and other people as sub-contractors. We would see that as a disadvantage simply because you are managing another entity to do something. So if you keep it inhouse, for us it seems to work better” (Development Director, Veolia).

Integration across investigated cases Organisational integration MUSCo (can include waste) Waste Design Build MUSCo Design Build Operate Finance Data Operate Finance MUSCo WESCo (can include Waste) Water Design Build ESCo Design Operate Finance Energy Build Operate Finance Utility stream integration

Conclusions Early involvement at master planning phase • Managing integration of utility services • Building capacity and joint working Utility stream considerations • Individual and integrated utility service stream(s) reviews (to understand costs, liabilities and implications before deciding on the degree of integration) Joint working • Development of open partnering between manufacturer, distributor and other project stakeholders is vital to project realisation • Ongoing cooperation between councils, utility firms, developers and other stakeholders Importance of council • Municipal push to deploy innovative business models (enabling or hindering innovation in delivering integrated utility services) • Leaders & customers of urban redevelopment projects © Imperial College Business School

Conclusions Value network / constellation • Changing firms’ strategies: from adding services to existing products; occupying new positions in the value constellation; developing new capabilities • Integrated utility services models emphasise whole value network • Focus on value-creating system itself, within which different economic actors work together to co-produce value Capability and resource developments • Organisations mostly do not individually possess necessary capabilities and resources to plan, finance and manage integrated business models • Capabilities are distributed across different project stakeholders (need to be accessed through a value constellation) • Acquire and build new capabilities; technical and organisational skill sets Developing business models • Resource-intensive and time-consuming process • Establish appropriate legal and commercial frameworks based on project specifics and characteristics © Imperial College Business School