Where the whitespace is in digital US water utilities

First published on LinkedIn, September 2023, while I was a Principal at Amane Advisors. A follow-up to Water's digital divide.

Earlier this year I wrote about the 'digital divide' in the US water utilities sector, and the challenges that stop utilities — particularly at the smaller end of the market — from adopting solutions they badly need. In short: digital transformation ranks low on leaders' day-to-day priority list, utilities are strategically and culturally risk-averse about implementing change, teams and data sit in silos, procurement timelines are long, and an ageing workforce has to be managed in a competitive talent market.

It has come up in many of my conversations with utility leaders, investors and startups since — with emerging companies lamenting how hard it is to gain a foothold, even with powerful and cost-effective solutions. The problem is compounded by the shape of the market: a small number of very large utilities, and tens of thousands of small ones. Having supported a number of projects across the digital utilities sector, I can say with some confidence that competition to hook those 'blue whale' utilities is fierce — and it often produces even longer procurement processes and pricing agreements that stop growth in its tracks.

Whether you're a technology provider, a utility or an investor, it matters where the greatest number — or greatest value — of opportunities actually lie. Where there's ample whitespace to grow, quickly, with the least resistance.

What we've found is that many technology providers simply aren't paying attention to where the real opportunity is: the 40,000–50,000 smaller utilities that also desperately need their solutions.

This is the segment where the unicorn potential lives. Carving out space in it requires a rethink of three things.

1. Rethink the product

When a technology company targets the country's largest utilities, it designs accordingly: feature-rich, complex integrations, enterprise-level support. Those products come with long development timelines and enterprise price tags — out of reach for tens of thousands of potential customers.

Smaller utilities have the same challenges as their larger counterparts, just at a different scale. The product has to be adjusted to suit. This is counterintuitive for a growing company, where the instinct is to add features. But adjusting doesn't mean sacrificing quality — it means prioritising simplicity, ease of integration and manageability, to match the realities of smaller teams and budgets. It also means the product must be deployable remotely rather than requiring on-site installation.

It's closer to a minimum viable product than a most valuable one. The work is to figure out what the 'lite' version looks like: five or fewer core features, and value from day one.

2. Rethink the price point

This isn't a ploy to get providers to lower prices. Enterprise price points don't work at the smaller end — but the right pricing strategy also stacks the unit economics so the provider can grow sustainably.

One problem with focusing exclusively on large utilities is that acquiring them often becomes too costly for a growing company. Long sales cycles and revenue models that grind down margins create instability and shorten runway. But there are tens of thousands of smaller utilities in the US alone, which is a market you can crack with the right price.

In keeping with a 'lite' product, the price point needs to work at roughly one-tenth the cost of an enterprise solution. Tailored properly, that makes the solution accessible to a far wider segment and keeps your own operation sustainable.

3. Rethink the go-to-market

The final step is finding ways to reach and influence customers at scale. The tried and trusted approach to a large utility is a key-account sales and servicing model: build a strong relationship, reduce the perceived risk of adoption by running complex pilots. High touch, to say the least.

For smaller utilities, a self-service model accelerates both sales and implementation. This is closer to a traditional SaaS motion, where the goal is to sell at scale — online channels reaching wider audiences than 1:1 meetings at an industry event ever could, a marketing funnel aligned to prospect maturity and sales-readiness, and automation keeping the pipeline flowing.

As above, a product that deploys remotely is ideal for this segment: it protects margin and lets a small business grow quickly.

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I realise this is all much easier said than done. But it's the tough reality in which real entrepreneurs thrive, and sometimes redefine how things are done.

The digital transformation of US water utilities is an untapped frontier, but the approach has to be strategic. Companies and investors who proceed on the belief that all utilities should be targeted and serviced the same way are destined to fail. With deeper insight into the challenges within each segment — and the opportunity at the smaller end — providers and investors can bridge the digital divide and build something that actually grows.