​Developing a clear value proposition for everyone involved in water management processes

In an interview, Huw Pohlner discussed the necessity of developing clear value propositions. This article explores, more closely, what is meant by a value proposition and how it can be applied to water management at the community level as well as at the larger-scale, using water recycling as an example.

Water is vital to nearly everything we do, but its value can be incredibly challenging to quantify, particularly when there are many stakeholders involved in a water management process that depends on water valuation.

Value is subjective, while the price is absolute. To create a value proposition we need to look at the perceived benefits of a certain water management process, versus the perceived cost.

Three elements of a value proposition

Value propositions are used in the business world for developing consumer products or services. The three components of a value proposition, adapted from business products to water management approaches or services are:

  1. Identifying user benefits
  2. Linking these benefits to mechanisms (projects, services, policy instruments) for delivering value
  3. Understanding and articulating why the mechanism proposed provides greater value than other alternatives

If a water management project or initiative does not provide value and is not superior to the alternatives, an authentic value proposition cannot be made, and the project should probably not move forward.

Getting stakeholders on board

In developing a value proposition, it is important to distinguish between value and price, so that all stakeholders understand why valuing water is more complex than simply attaching a cost to it.

By asking questions about benefits, for example, ‘What are we getting out of using this water in a particular way?’ we can understand that water’s value for physiological needs, cultural needs, and psychological needs.

In looking at the perceived cost of a service, we need to ask questions about more than just the financial cost. Time investments, and impacts upon quality of life, also factor in water management costs. For example, creating a well that is not central to a community could be less expensive, for one reason or another, but if the people who need that water have to walk for kilometres to access it, they are spending a great deal of time and energy to get their water, which can impact upon quality of life.

In water management processes, then, stakeholders need to ask themselves how they can balance the costs and the benefits of each practice. Does something with a higher cost balance out with greater benefits, and vice versa?

A value proposition example: recycled water

In some contexts, specific tools exist for developing a value proposition. The Commonwealth Scientific and Industrial Research Organisation (CSIRO) had researchers develop a tool to calculate the net present value of a water recycling investment, factoring in various pieces of information to create a value proposition supporting the reduction of freshwater used in the agri-food sector, by increasing the usage of recycled water.

For the case of implementing water recycling, the tool looks at:

  • how recycling water can affect product value;
  • how overcoming a water constraint could allow for an increase in production;
  • how resources could be recovered through the treatment process;
  • how pollution could be reduced; and
  • what types of infrastructure offset could be available.
  • that, minus the investment cost for the treatment of water, creates the net present value.

While it is a simplistic look at creating a value proposition, it is a good start in putting everyone on the same page and considering the costs versus the benefits of recycled water.

There is also a range of other tools developed in Australia and elsewhere that can be used to explore multiple, sometimes competing, objectives or benefits to be gained from making decisions about water and thus to understand and define a preferred value proposition.

Partnership and equality in creating value propositions

Ideally, all stakeholders should be given ownership over the process of valuing water.

Huw Pohlner, a multidisciplinary water resource management and Asia engagement specialist with water advisory firm Aither, saw this need for a well-rounded view in his work with the Australia-China Youth Association.

“While it might be the case that the one side of that partnership has a lot to share in one area of knowledge or experience, it will always be the case that there will be just as much that the other partner can share,” says Pohlner. “Often, if the other partner is allowed to share that information, those experiences, the information that’s being passed to them from the other partner will be able to be structured in such a way that it will be much more useful or much more appropriate to their particular settings.”

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