Ashford’s Integrated Alternatives

Ashford Integrated Alternatives (AIA)

Uniting Utilities: Organisationally Practical?

Dr Jens Roehrich & Dr Andrew DaviesInnovation and Entrepreneurship Group

Imperial College Business School

• 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.

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Research focus

From Value Chain to Value Constellation/Network

Traditional: value chainFails to capture inherent

complexity of roles and

relationships in economic systems –

value creation

Value constellation/networkUnderstand entire value creating system

Role and relationship reconfiguration

value co-creation

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• 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.

Research Approach

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Research Approach

Comparative cases

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Elephant&Castle/UK Ashford/UK Chula Vista/USA

privateprivate

End-customers

commercialcommercial

Business models

Energy

Water

Data

Waste

Utility streams

Individual utility

companies

MUSCo

ESCo

Increasin

g d

egree o

f integ

ration

mixed (various degrees)mixed (various degrees)

Different degrees of utility stream integration

Value Chain (Ashford and Chula Vista)

Product/Service components

Client

Contractors

Added va lue

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 are actually quite different choices become meaningful at different scales.”

Elephant & Castle

• Redevelopment project £1.5bn• 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)

Systems integrator (consortia)

Systems integrator (consortia)

Product/Service components

Client

Sub-contractors

Added va lue

Value co-creationValue 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 in-house, for us it seems to work better” (Development Director, Veolia).

MUSCo

Waste

Data

Energy

Water

ESCo

Utility stream integration

Organisational integration

Design Build Operate Finance

Design Build Operate Finance

Design Build Operate Finance

Design Build Operate Finance

WESCo (can include Waste)

MUSCo

MUSCo (can include waste)

Integration across investigated cases

Conclusions

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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

Conclusions

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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