Andy Smith, Managing Director at Severn Trent Business Services, has called for a radical change of culture in the traditionally asset-focussed water sector with companies becoming customer-led retail service organisations.

Andy Smith set out his vision of a retail water sector committed to exceptional customer service before an influential audience at the Water Event which took place at the NEC in September 2014.

Smith told delegates that when the market opens fully in April 2017, the numbers eligible to switch will soar to around a million customers from the current  26,000 businesses now able to switch water supplier. With the market value is estimated at £2.5 billion the potential for both customers and suppliers to benefit is enormous.

According to Smith, the market will undoubtedly do more than change the basic mechanisms for deciding on a supplier. It should - and it must –drive a greatly increased emphasis on customer service transforming the companies that provide the services as a result.

"Customers simply cannot be taken for granted"

Smith’s experience has taken him into some of the biggest, most heavily scrutinised sectors in the world, where customers simply cannot be taken for granted and customer service is constantly evolving and improving.

Smith said Severn Trent Water has been actively planning and initiating change for some time to ensure customers reap the benefits of the new market, sooner rather than later.The firm has already established its customer service credentials through projects like its work with the Ministry of Defence across the north and east of England. Under the contract, which is worth some £1 billion in total revenues , Severn Trent is responsible for all water and wastewater management and treatment at over 1500 sites in the MOD estate.

The contract, including leak detection and asset management,  was the first major PPP in the UK water sector, a significant project covering the entire country and outside the regulated water industry.

Andy Smith said:

“This contract has been invaluable in developing industry best practice, and above all in delivering and tailoring services to match what the customer needs. It enables the MOD to focus on its core activity, whilst we take care of water management, a message we have taken with us in our services for other customers.”

“Customer perceptions of the service has not improved”

However, Smith said that despite huge improvements right across the industry post-privatisation, one thing that has disappointingly not improved is customer perceptions of the service provided by the sector which has been soured by issues such as leakage, flooding and rising bills:

“This began with post-privatisation disillusionment – people viewing water as a commodity for the first time - and has gathered pace, fuelled by climate change and the culture of increased customer expectations shaped by other sectors - notably retail - as well as on-going infrastructure challenges. “

Describing the issues as “particularly toxic in a competitive retail environment”, Smith said they now needed to be addressed in new and much more creative ways.

“Water industry needs to act on what it has seen and learnt from other sectors”

Smith commented:

“Going forward, we have to take more than one leaf out of the retail customer services book. It is a given that we will need to get regulation right, and avoid the challenges of lack of transparency legitimacy and credibility that surround the banking, power and telecoms sectors – tariffs so complicated that it’s impossible to understand them, perceived high profits, and broken regulatory systems.”  

“We need to act on what we have seen and learnt from other sectors so that all of these issues need to be fixed urgently, and must not be allowed to take root in the retail water industry.”

In his view this will require, among other substantive changes, exceptional customer service, citing  Scotland where competition has driven delivery of innovative customer service and customer satisfaction has increased by 25% in the first five years.

Radical change of culture needed

One of the keys to achieving this success would be a radical change of culture in an industry which has traditionally been asset focused, which Smith described as  ‘Concrete and Pipes ‘R Us’. In the new service economy it was necessary to go well beyond the concrete, plastic and steel.

In the future companies  will need to measure up to standards that have been set outside of the water sector, with retail as the new benchmark and the “obsessive focus” on the entire customer experience found throughout that sector. Smith highlighted a number of key lessons which needed to be learnt, including:

• customers must above all, find suppliers easy to do business with – which means a single bill, a single point of contact, and proactive communication
• a focus on people rather than process
• listen to what customers are saying and empathise with them
• a need to be open and transparent
• deliver resilience and sustainable solutions.

In Smith’s view companies will have to evolve from being ‘utilities’ – providers of water and wastewater networks and treatment - to ‘service organisations’, which means developing the skills of employees  to enhance the customer experience. The sector needed to look at the lessons from companies like Amazon - which has regularly headed the American Customer Satisfaction Index.

Severn Trent has adopted Amazon CEO Jeff Bezos' approach of  leaving an empty chair at boardroom meetings as a reminder of the real boss – the customer.

Role of utilities is shifting

In Smith’s view the role of utilities is also shifting - companies will need to develop new business directions to complement their core (brand diversification). Utilities are already moving in this direction –some of the larger companies offer service agreements that extend beyond the utility they provide, for example power companies that offer insurance cover for plumbing and drains.

In terms of diversification, water retail companies could provide enhanced reliability and resilience, create efficiency programmes and undertake water management and create opportunities to diversify the way they interact with customers to deliver added value.

Andy Smith warned that companies that fail to match expectations face adjudication online, with social media now the medium where complaints are made. If companies were not careful they could be defined by negative feedback, which spreads fast and widely.

The new customer service model encompasses ‘networked experts’ – peer-level feedback - and in-house expertise, with forums and peer groups that provide expert-level support on virtually every issue across every sector which the water sector needed to participate in. Retail water suppliers will need to have a deep understanding of customer groups and segments in order to create the perfect blend of accessible digital channels and personal service.

In his view, the absolute baseline for what good service look likes are bills that are correct every time, and excellent value for money. Smith said that given that retail water margins may well be quite slim, it was probable that cost – volumetric charges - will not be a major differentiator.

Instead, customers will choose suppliers based on the quality and suitability of the services they are offered, including:

• call centres with empowerment;
• leak detection and water management;
• dedicated personnel that provide sector-specific, expert advice;
• consolidated, coherent billing;
• reduced costs and added value services that deliver for businesses’ sustainability strategies, CSR agendas and bottom lines.

Innovation would be key, with suppliers suggesting strategies that help customers to cope with climate change, preserve the environment, minimise risks or leverage renewable energy. Regulation will also have to be flexible and must not impede the development of the market. Innovation must be a supplier led process, with the roles of Government and regulator respectively to provide some fundamental R&D support and to create an incentive structure with the right balance of reward for assuming innovation risk.

He concluded by saying:

“ Great customer service ultimately entails delivering something that customers are delighted to pay for. Don’t expect cost to be the major differentiator, understanding customers and market segmentation are key to providing that exemplary bespoke experience that is required at the front end – a service matched to customer needs, rather than the tired, disliked one size fits all approach.”

Click here to read Andy Smith’s speech in full.