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Water: turning a value-chain risk into an ecosystem opportunity

The move from “water management” to “water stewardship” includes the consideration of water risk in the value chain — the value chain consisting of upstream supply chain, operations and downstream product use.

This concept, which I discuss in “Getting Ahead of the Ripple Effect,” published in 2013, essentially was viewed as a linear relationship between a range of stakeholders to address water risks and other challenges and opportunities essential for their business operations and growth.

While still a valid way to visualize a value chain, this framework is being transformed by several global trends — particularly by “digitization, connectivity and new modes of collaboration,” according to “Business Ecosystems Come of Age.” Important core structures of the industrial economy quickly and dramatically are reshaping, as many long-standing boundaries blur and dissolve, it found.

This transformation to "business ecosystems" was also defined by James Moore in a 1993 Harvard Business Review article:

Successful businesses are those that evolve rapidly and effectively. Yet innovative businesses can’t evolve in a vacuum. They must attract resources of all sorts, drawing in capital, partners, suppliers, and customers to create cooperative networks. . . .

I suggest that a company be viewed not as a member of a single industry but as part of a business ecosystem that crosses a variety of industries. In a business ecosystem, companies co-evolve capabilities around a new innovation: They work cooperatively and competitively to support new products, satisfy customer needs, and eventually incorporate the next round of innovations.

This transformation to business ecosystems can be defined as dynamic and coevolving communities of diverse actors who create and capture new value through both collaboration and competition. This transformation is illustrated below.

In the world of water, “collective action” is well established as key aspect in addressing complex water issues such as access to safe water, sanitation and hygiene (WASH) — essentially an ecosystem of stakeholders.

While greatly simplified, this below graphic illustrates the various categories of stakeholders coming together to address water challenges or water as a “wicked problem.” 

The opportunities for this collection of stakeholders are in addressing water risks but also creating new solutions in water scarcity and quality. The formation of water technology “incubators, hubs and prize competitions” illustrates how ecosystems are formed to tackle water issues and create business opportunities.  

This transformation of value chains to business ecosystems is also occurring in traditional supply chains. The traditional supply chain model is moving towards “value webs” of stakeholders to deliver goods from suppliers to consumers. 

Supply chains evolve into value webs.

This transformation to business ecosystems and “value webs” for traditional supply chains raise several questions as it relates to “water as a wicked problem.” They include the following:

  • How do water scarcity and quality issues affect all stakeholders?
  • How do these stakeholders in an ecosystem mobilize to address these issues?
  • What are the new products, services and business models that emerge from these ecosystems that create value for all stakeholders?
  • What are the potentially new relationships between the private sector, public institutions and society within these ecosystems to address these issues?

These are some questions that are being addressed as water related risks affect business growth, economic development and social well-being. 

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