Xylem … Reinventing the Business of Water … How an industrial spin-off became a $9 billion global water leader … and what its journey teaches us about market making, future brands and solving problems that matter

June 1, 2026

Water might be the world’s most important resource, yet we have traditionally managed it as if it were abundant.

Climate change is intensifying drought and flooding. Ageing infrastructure loses enormous quantities of treated water. Growing cities need more resilient systems. Industrial growth increases demand for clean water. New contaminants require more sophisticated treatment. Semiconductor fabrication needs extraordinarily pure water, while the growth of AI and data centres creates new demands for cooling, energy and water.

For most businesses, these are external risks.

For Xylem, they are the market.

Xylem has evolved from an industrial equipment business into something much more ambitious: a global water-solutions company seeking to make water systems smarter, cleaner, more resilient and more efficient.

Its story demonstrates a powerful principle of strategy: the greatest opportunities often emerge when you stop defining your business by the products you make and start defining it by the problem you can solve.

Born from ITT, built around water

Xylem does not have the conventional founder story of an entrepreneur starting a company in a garage.

Its origins lie within ITT Corporation, the American industrial conglomerate whose history stretches back to International Telephone & Telegraph, founded in 1920. By the early 2000s, ITT had accumulated significant businesses in water and wastewater equipment, pumps, analytics and fluid technologies.

In January 2011, ITT’s board decided to separate the corporation into three independent public companies. Its defence operations became Exelis; ITT continued as a more focused industrial company; and its water businesses became Xylem.

Xylem Inc. was formally incorporated in Indiana in May 2011 and separated from ITT on 31 October. Trading began on the New York Stock Exchange under the ticker XYL on 1 November. ITT retained no ownership after the separation. The company was initially headquartered in White Plains, New York, and Gretchen McClain, previously president of ITT’s Fluid and Motion Control business, became Xylem’s first chief executive.

Even the name expressed its new purpose. Xylem is the tissue within plants that transports water from the roots upwards. It gave an engineering business a more natural and human identity centred on the movement and essential nature of water.

The new company was hardly a start-up. It arrived with around 12,500 employees, operations in more than 150 countries and $3.8 billion in annual revenue. Its portfolio covered much of the water cycle, from collection and distribution through use, treatment and eventual return to the environment.

The opportunity created by independence was not to invent a water company from scratch. It was to reimagine what a water company could become.

From equipment to intelligence

Initially, Xylem was largely an industrial technology business. It made pumps, treatment equipment, testing technologies, controls, valves and other systems required to move and manage water.

These remain essential. But Xylem gradually recognised that the next revolution in water would not come from physical engineering alone.

It would come from intelligence.

Consider a city losing millions of litres of treated water through an ageing network. The traditional response is essentially physical: inspect infrastructure, repair leaks and replace pipes.

But which pipes should be replaced first? Where are the hidden leaks? Why is pressure changing? Where is consumption abnormal? Which assets are approaching failure? How should a utility allocate scarce investment?

Suddenly, the water problem becomes a data problem.

Xylem began building the capabilities to answer these questions. The $1.7 billion acquisition of Sensus in 2016 added smart metering, communications networks and data analytics. Pure Technologies subsequently strengthened infrastructure diagnostics and asset assessment. Its partnership with, and later majority investment in, Idrica expanded digital water management and software.

Each move pushed Xylem further from being a collection of equipment businesses towards becoming an intelligent water platform.

The strategic progression is important:

From moving water to understanding water.
From measuring infrastructure to predicting its performance.
From selling individual products to connecting systems.
From responding to failures to preventing them.
From equipment performance to customer outcomes.

This is what digital transformation looks like when it genuinely changes a business model rather than simply adding technology to existing products.

Making water intelligent

The shift becomes tangible when applied to a real water network.

A smart water system combines meters, sensors and connected infrastructure with software and analytics. Instead of waiting for a pipe to burst, utilities can identify abnormal flows. Instead of maintaining every asset according to a fixed timetable, they can target those most at risk. Instead of increasing water production to meet demand, they can reduce the enormous amount already being lost.

The product is no longer the meter, sensor or pump.
The product becomes a better-performing water system.

This represents a fundamental change in innovation thinking.

A product company asks: How can we build a better pump?
A customer-focused company asks: How can we move water more efficiently?
A market maker asks: How could we create a water system that wastes dramatically less water?

That final question opens an entirely different innovation space involving engineering, sensors, software, AI, data, services, behavioural change and new commercial models.

It also expands the market.

The Evoqua transformation

Xylem’s biggest strategic move came in 2023 with its approximately $7.5 billion all-stock acquisition of Evoqua Water Technologies.

Evoqua brought sophisticated water and wastewater treatment capabilities, together with a substantial service business and expertise in demanding industrial applications. The combination significantly strengthened Xylem in areas such as microelectronics, life sciences, food and beverage, power generation and the treatment of emerging contaminants.

The acquisition also illustrates an important distinction in corporate strategy. Some acquisitions simply make a company bigger. The best acquisitions change what a company is capable of becoming.

Evoqua expanded Xylem’s ability to combine water transportation, measurement, intelligence and treatment around integrated customer outcomes. That is particularly important because the future of water increasingly lies at the intersection of other industries.

Semiconductor fabs require ultra-pure water. Pharmaceutical plants require sophisticated treatment. Manufacturers want to reuse water rather than continually consume it. Cities need resilience against flooding and drought. Data centres need increasingly efficient cooling systems.

Water is therefore not simply an industry. Water is an enabling system running through almost every industry.

That gives Xylem an increasingly large possibility space.

From industrial company to Future Brand

This is also why Xylem is an interesting example of the principles behind my Future Brand Manifesto.

Traditional B2B brands were typically built around engineering excellence, quality, reliability and expertise. These attributes remain important, but they are no longer enough.

The strongest future brands stand for something bigger than the products they sell. They represent a future worth creating.

Xylem’s long-running “Let’s Solve Water” idea captures this particularly well. It doesn’t say “Xylem solves water”. It says let’s solve water.

That small word changes the relationship. Customers, utilities, cities, industries, engineers, communities, governments and technology partners all become participants.

The brand becomes an invitation to collaborate.

Future brands increasingly move from:

Products towards outcomes and possibilities.
Audiences towards participants and communities.
Communication towards mobilisation.
Corporate purpose towards shared progress.
Describing today’s business towards enabling tomorrow’s opportunities.

That is as relevant to an industrial technology company as it is to a consumer brand.

Schneider Electric can stand for a more electrified and efficient world. Nvidia increasingly represents the infrastructure of accelerated intelligence. Xylem has the opportunity to stand for a water-secure world.

Its technologies make that ambition credible. But the ambition gives those technologies greater meaning.

Sustainability becomes the growth strategy

This also changes the relationship between sustainability and business performance.

In many organisations, sustainability remains adjacent to strategy: ESG targets, carbon reduction programmes, reporting requirements and corporate responsibility initiatives.

For Xylem, sustainability is increasingly inseparable from the market opportunity.

Every litre of water saved represents value. Every litre reused reduces demand on scarce resources. Every leak identified prevents waste. Every wastewater stream successfully treated can protect communities and ecosystems. Every more-efficient system can reduce the energy required to move and process water.

The bigger the world’s water problems become, the more valuable effective solutions become.

That does not mean social purpose automatically creates financial returns. It means that when a company builds distinctive capabilities around solving an increasingly important problem, positive impact and economic value can reinforce each other.

Xylem’s growth illustrates the potential. From $3.8 billion of revenue when it emerged from ITT in 2011, the company reached $9.0 billion in 2025, with revenue growing another 6% that year and adjusted earnings per share increasing 19%. (Xylem⁠)

Growth has come not simply from selling more equipment, but from progressively expanding the problem Xylem is capable of solving.

From market competitor to market maker

This connects directly with the idea of Market Makers.

Traditional strategy begins with the existing market. How large is it? Who are the competitors? Where is the growth? How can we increase market share?

Market makers start somewhere else. They ask: What new value could we create?

If Xylem defines itself as a pump manufacturer, its competitive arena is pumps.

Define it as a water-equipment company and the opportunity expands.
Define it as a smart-water company and sensors, communications, software and AI become relevant.
Define it around water security, and the opportunity expands dramatically again: climate resilience, infrastructure intelligence, industrial reuse, contamination management, semiconductor manufacturing, data-centre cooling and resource optimisation.

The strategic lesson is simple but profound: How you define your market determines how much opportunity you can see.

Xylem is interesting because its market boundaries have progressively expanded while its underlying purpose has become more focused.

Building the water intelligence flywheel

The pieces of Xylem’s portfolio increasingly reinforce each other.

Physical infrastructure creates access to water systems. Sensors generate data. Data creates visibility. Software creates intelligence. Intelligence enables optimisation. Treatment enables reuse. Services deepen customer relationships. Those relationships reveal new problems, which stimulate further innovation.

That creates a reinforcing water intelligence flywheel.

AI could accelerate it significantly.

Imagine water networks continuously sensing demand, pressure, leakage, contamination and asset condition; algorithms predicting problems before they happen; digital twins testing infrastructure decisions before billions are invested; industrial facilities dynamically optimising water use and reuse.

The opportunity is not to “add AI” to water equipment. It is to reinvent the water system around intelligence.

Lessons for every business

Xylem’s journey suggests six wider lessons for leaders.

Define the business by the problem, not the product. Products inevitably constrain thinking. Problems create much larger spaces for innovation.
Move from products to outcomes. Customers rarely want a pump, meter or analytics platform. They want reliability, efficiency, resilience and better economics.
Acquire capabilities, not just revenue. Sensus, Pure Technologies, Idrica and Evoqua progressively changed what Xylem could do and therefore what markets it could address.
Connect physical and digital innovation. Some of the greatest opportunities now emerge where engineering, data, software and AI converge.
Turn purpose into an innovation brief. “A water-secure world” can guide investment, partnerships and innovation much more powerfully than a conventional product roadmap.
Make markets rather than simply taking share. Redefining the problem can create more value than competing harder within yesterday’s category.

Solving bigger problems creates bigger possibilities

Xylem began as the water businesses of an American industrial conglomerate. Independence gave those businesses something more important than a new corporate structure.

It gave them the opportunity to redefine themselves.

From equipment to systems.
From systems to intelligence.
From water technology to water security.

And potentially, from water company to the intelligence platform for one of the world’s most critical resources.

That is the connection between Xylem, and my concepts of Future Brands and Market Makers.

A Future Brand is not simply a stronger expression of what a company does today. It gives the company credibility and permission to do more tomorrow.
A market maker does not simply compete more effectively for existing demand. It identifies new problems worth solving and creates new value around them.

And the best strategy doesn’t merely optimise what a company already is. It unlocks the value of what it could become.

For every leadership team, Xylem therefore leaves one compelling question: are you defining your future by the products you currently make — or by the problems that will matter most in the world ahead?

More from the blog