Franklin, Agnes & Fish: Why the UK water sector needs Adaptive Systems Planning

The storm season in Autumn 2021 began with storm Arwen which seriously affected large parts of Scotland and the North East of England. In 2022, major disruptions were caused by the meteorological onslaughts of Dudley, Eunice and Franklin. In 2023, the UK already faced the consequences of numerous storms, namely Otto, Noa, Antoni and Betty. Now that the autumn and winter seasons are approaching, and we prepare for the next announced storm Agnes, a number of observers have drawn comparisons with the storm of 15th October 1987 when BBC metereoligist Michael Fish infamously opened the programme by saying:

“ Earlier on a woman rang the BBC to say she'd heard that a hurricane was on the way. Well, if you're watching, don't worry, there isn't. ”

Michael Fish

The broadcast of course preceded a terrible overnight storm which saw gusts up to 115mph, claimed the lives of 18 people and flattened 15 million trees.

Predicting the future

The good news is that we are now more capable than ever before of predicting the short-term weather. Today, a 7-day forecast is accurate about 80% of the time. The bad news is that the level of uncertainty associated with medium- to long-term forecasts is still significant. Even when considering climate change impacts in the short term, opinions are often divided and there is considerable uncertainty on the nature and severity of the physical impacts, at both a local and national level.

Will it result in drier summers and wetter winters or the opposite? Both are possible within current predictions.

But what about predicting the impact of other events and circumstances that affect our personal and professional lives? Even as the pandemic gathered momentum, who would have predicted two years of intermittent lockdown and all of the associated changes to our working lives, for example hybrid working, now firmly established for many people. More recently with the tragic events unfolding in Ukraine, there is no doubt that many things previously thought impossible are all too possible.

As David Black, Ofwat’s Chief Executive pointed out during his address at the 2021 Water Security Conference:

“ I am also cautious about our ability to predict the future. The experience of the global pandemic since 2019 has been of dramatic change and we can be confident that the next 30 years will also spring some epic surprises too. This underlines the need for resilience and an adaptive approach… a shift to an outcome-based approach will better enable nature-based solutions and a whole system approach.”

David Black

Chief Executive, Ofwat

How to deal with uncertainty

The UK Water Sector does not just have climate change to contend with. Transformation and adaptation across multiple dimensions will be required for the water sector to achieve the outcomes expected from it over the coming decades. These include, but are not limited to,  a 50% reduction in leakage by 2050, improved environmental compliance, moving from service to value-based outcomes and a transition to net zero for both operational and embedded carbon. Set against rapidly increasing affordability challenges for customers, changing demographic,  and growing economic and geo-political instability, these challenges might seem impossible to deliver.  

Cutting across all of this, one thing that we can confidently say is that one of the biggest challenges facing the UK water sector is how to deal with growing uncertainty. Medium to longer term planning has never been a strong muscle within the sector, with responsiveness and heroic recovery culturally more accepted as the modus operandi.

Given the relatively low maturity of current medium to long-term planning capabilities, dominated by a 5 yearly Price Review process, it is not a challenge that many in the sector are comfortable with. But unlike historic examples of companies that failed to adapt to unprecedented change, such as Kodak or Nokia, water utilities are too essential to fail. They must find ways to respond effectively to this growing uncertainty and cannot afford to be paralysed by indecision, forever waiting for concrete data and easy decisions. While every effort should be made to obtain the best available data and minimise uncertainty, we must accept there will be considerable residual uncertainty. We need new, robust tools to navigate this challenge.

During the pandemic we all witnessed many governments fail to deal effectively with rising uncertainty and the economic and social volatility which ensued. Many followed either a naïve course underpinned by misplaced confidence or suffered ‘analysis paralysis’, missing the chance to act proactively as they waited for conclusive data before implementing their strategy. Very few established strategies and tactics that allowed for adaptive course correction as the evidence base evolved, facts became established, and constraints arose. 

So, how will the UK Water sector deliver the required transformation of their industry and adapt its approac to an uncertain future? On the matter of uncertainty, scientist Brian Cox gives us some sage advice:

“ Look across the political landscape of any country, identify the people with blustering certitude and don't vote for them.”

Brian Cox

Scientist

While Brian is clearly referring to experiences outside the water sector, the same principle applies. The underlying message here is that we should beware of anything and anyone that claims to be able to eliminate uncertainty. When operating within a complex system, there is no ‘single right answer’. Hence the need for a resilient and adaptive approach, as previously highlighted by David Black.

So, if we cannot eliminate uncertainty what is the answer?

New decision making capabilites are required

We need to develop new decision making capabilities that can navigate that uncertainty in an effective way. Fortunately, a wildly successful methodology and approach already exists. This approach has been proven to not only effectively manage uncertainty, but to actively embrace it.

“ We have to embrace doubt and uncertainty. We shouldn't be afraid of it. That's what research science is. ”

Brian Cox

Scientist

Contrary to the layman’s understanding, the scientific method is all about exposing and managing uncertainty. It is not about unwavering confidence in established theories and absolute truths. The heart of empirical science is about scepticism, enquiring, asking the right questions.  All scientific knowledge and theories are only our best interpretation of the evidence available.  Science is not a collection of absolute truths. Scientists are delighted when we are wrong because it means we have learnt something.

Planning needs to be truly adaptive

We are not arguing that water utilities need to start doing primary, scientific research. That is not their purpose and nor would that, in isolation, deliver the outcomes they require. The point is that water utilities need to adapt a core principle of empirical science: all knowledge is provisional and must be constantly tested and updated as new evidence becomes available.

In a nutshell, water utilities need to get better at both planning and the testing of those plans. Specifically, it means that plans (long-, medium- and short-term) must be truly adaptive within a changing context. Plans must be constantly re-evaluated and revised as new evidence emerges. That means that the development of a 5-year asset investment plan cannot take 3 years to prepare and then be set in stone for 5 years.

Adaptive planning and systems thinking

Such planning capabilities need to be integrated within core processes and operating models, enabling more dynamic and flexible planning as a core capability. While Adaptive Planning is not new, it is a relatively new approach for the Sector. Cited by Central Government, Ofwat and other Regulators as a means by which organisations can deliver more agile and therefore resilient services, four key things must happen to significantly improve the planning function:

• Plans must be rolling and updated more frequently

• Planning must become faster and more automated

• Longer planning horizons must be incorporated

• Short-, medium- and long-term plans must be connected so that changes at one planning level can be reflected in all the other levels to ensure alignment between strategy, implementation and operations.

But that is not where this new capability ends. Future planning capabilities need to embrace both Adaptive Planning and Systems Thinking, considering and reflecting the relationships, constraints and trade-offs which characterise and affect the performance of complex, interconnected asset systems. This ever evolving and dynamic context gives rise to an almost infinite array of possible future scenarios. In order to reflect and cope with the complexity of our new context, planning capabilities need to be both adaptive and systemic.

Mass scenario analysis

While all this may seem daunting, there is one key enabler for Adaptive Systems Planning: Top-down Scenario Analysis needs to become a core capability. Through the use of advanced technology, companies are building a capability for rapid and automated scenario analysis. Top-down scenario analysis tools dynamically represent the whole value-chain and rich context, enabling companies to:

• Test and evaluate a huge number of strategic options and context changes to develop resilient strategies which maximise the trade-off between cost, risk and resilience.
• Ensure inter-dependencies and knock-on effects from a change in one part of the business are fully accounted for across the whole value-chain.
• Respond to short term shocks by rapidly re-optimising the plan to deliver the next new optimal, particularly useful following a sudden and sustained unplanned outage of a major asset.
• Ensure that decisions across all planning horizons are connected and aligned.
• Test the point at which plans become uneconomic or unfeasible providing no regrets pathways and avoiding stranded assets.
• Undertake extensive sensitivity analysis to really get under the skin of uncertainty, stress testing strategies in ways which provide unprecedented board level assurance.

“ The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails ”

Wiliam Arthur Ward

Digital Business Twin to support decison-makers

We provide digital representations of complex systems known as Digital Business Twins (DBT). These DBTs are deployed in a variety of industrial sectors to support planners and decision makers. Clients are now using DBTs to run thousands of complex scenarios to inform their ongoing strategy development and delivery. The work undertaken by National Grid Gas Transmission to explore and define the transformation of their gas transmission network to carry hydrogen provides a great example.

Thanks to elastic cloud services, the solve and cycle times for these complex solutions are now so low that it is possible to run thousands of complex scenarios in only a few days. In a single week, National Grid ran over 2,000 connected-network design scenarios. This is not possible through more traditional Asset Investment Planning solutions, which group assets into pre-constrained portfolios before optimisation. DBTs provide planners with a rapid, whole systems scenario analysis tool, enabling the prospect of a new and highly prized organisational capability: Adaptive Systems Planning.

While we know for certain that the next storm to hit the UK will be called Agnes, dealing with its implications, scale, nature, location and consequences remain uncertain. This is our reality for the weather and many, many other aspects of the context in which we exist and function. As custodians of an asset base which protects the environment and enables the health and wellbeing of our citizens, the UK water sector has to embrace new planning methods and build capabilities which embrace uncertainty.

In summary, tools exist to make uncertainty more comfortable, and they are already being used by leading companies to plan and assure resilient and efficient services for many years to come.