Industry comment

How does customer engagement co-exist with political ambition?

by Rob Sheldon

I’m not talking about Brexit – but you could be forgiven for thinking that I am, as there are many that believe – whatever your views – that it can be difficult to align political ambition with public views, particularly if these are polarised. I'm asking whether we can see the same enactment in regulatory decision-making – and here I’m particularly referencing the current water sector business planning process.

Over the past few years all the water companies that are regulated by Ofwat have engaged in an extensive programme of customer insight – with the end game being that they should be able to demonstrate that their plan is fully underpinned by customer views and preferences.

Each of the companies has invested heavily in terms of internal resource and consultancy/agency fees to facilitate this argument. There have been qualitative and quantitative programmes and talk about gamification, willingness to pay, co-creation, golden threads, caps and collars, business as usual, triangulation and acceptability testing – certainly enough jargon to keep us all awake at night.

The process hasn’t yet reached the final climax but we know enough to determine where each company currently fits into a league table drawn up by Ofwat. And it’s probably fair to say that the euphoria which surrounded the delivery of what were typically felt by the companies to be customer-driven business plans has been replaced (for many) with deflation as their edifice has been challenged.

And the interesting thing is that it’s difficult to determine a pattern between how the customer engagement process was rated by Ofwat and the rating of the ultimate business plan – e.g. an A for customer engagement didn’t necessarily translate into a similar rating being accorded to a potentially customer-driven business plan.

This leads to a number of potential questions:

• Did even the best customer programmes ‘fall short’ in the regulator’s eyes?

• How easy is it to assess multi-faceted customer engagement programmes?

• And what weightings should apply to all the different components?

• Is the regulator merely trying to say ‘please try harder’?

• Or, are there important political and economic arguments that can potentially trump customer views?

We’d be interested to hear your opinions – visit www.accent-mr.com

Rob Sheldon is managing director of research specialist Accent.

Responses

 

From Paul Metcalfe, Director, PJM Economics.

Rob Sheldon’s post made the interesting observation that Ofwat’s overall rating of companies’ business plans appeared not to be driven by customer engagement scores.   However, it appeared to pre-suppose that business plan status should be perfectly correlated with customer engagement score rather than this rightly being one factor amongst many.  The interesting issue for me is whether the weights given to the different factors were appropriate.

With this in mind, being quantitively inclined, I ran a simple regression of the overall status scores against the scores for each of the various sub-categories: ‘Engaging customers’, ‘Addressing affordability and vulnerability’, ‘Delivering outcomes for customers’, ‘Securing long-term resilience’, ‘Targeted controls, markets and innovation’, ‘Securing cost efficiency’, ‘Aligning risk and return’, ‘Accounting for past delivery’, and ‘Securing confidence and assurance’.

To keep things simple, I scored all of these variables continuously.  For overall status, ‘Fast-track’ was given a value of 1, ‘Slow-track’ a value of 2, and ‘Significant scrutiny’ a value of 3.  For the various sub-categories, an ‘A’ grade was assigned a value of 1, a ‘B’ grade got a value of 2, etc.

Of course, it would be easy to pick holes in the methodology used here; but I think there are still some useful things to be learned and the results were interesting:

  • as per Rob Sheldon’s post, customer engagement was not the biggest factor at play – it turned out to be mid-ranking as an influence on overall status – still important, but not the be all and end all by any means;

  • cost, resilience and past performance were the most important drivers of overall status – two out of three ‘B’ scores on these three categories appears to have been sufficient to give companies a fast track rating; and

  • "targeted controls, markets and innovation" appeared to have a negligible influence.  

Are these findings truly a good measure of the relative importance of the various factors? Now that’s one to ponder.    

Summer is coming

 

Summer water stress could be the new normal, and businesses need to deal with the risk – as Waterscan told customers at its April Retail Forum.

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