Controlling the value chain

Water recycling company, New Water took a new approach not only with its offer but also with its entire supply and delivery, helping it grow to be a $5 million business.

Founder and owner Mal Gordon, a plumber, came up with two innovative water recycling systems. One, the Rain Reviver, captures and stores rainwater underground, while Aqua Reviver is a grey water treatment system that can save households up to 100,000 litres of water a year.

In 2004, Gordon met Louis Carroll, who agreed to finance the project, bringing in Andrew Pearce as CEO. Initial start-up costs were $2 million with the research and development work that needed to be carried out.

Initially, New Water was to sell its systems via third parties such as Bunnings. But the team realised that the complexity of the products would make it hard for other staff to explain to customers, so they took the brave step of remodelling its entire process.

“When we started the business we took a traditional approach and decided to create a clever manufacturing company which would, like most manufacturers in the water industry, sell through third parties,” says Pearce.

“However, it became clear that the industry is unsophisticated and fragmented and also typically over promises and under delivers. Thus to ensure we could actually build a successful business we undertook a radical change and created a totally vertically integrated business where we own the entire value chain from sales through manufacture to installation.”

“This means we have total control over the customer relationship and execution of customer promises leading to happy customers who refer us new business.”

So what lessons should start-ups take from New Water’s example?

“We learned that to grow and survive you have to question established principles even if it means greater cost in the short-term to survive in the long-term,” states Pearce.