Build back better                INDUSTRY COMMENT

how can the water industry respond?

Nic Clay-Michael reviews challenges and opportunities for water companies in the new normal, and suggests how to set up for success.

The past 12 months have seen global disruption on a scale that no-one could have predicted.  No business has been able to come through this period unchanged or unaffected in some way, and individuals are struggling too. With the potential of a light at the end of the tunnel however, now is a chance for businesses across all sectors to take a step back and look at what "Build Back Better" actually means for them and the wider industry, and what steps they should take to help their customers through the difficult aftermath.  With this in mind, what things should the water industry in particular be considering as they build their plans for the next few years?

 

Better "value" for consumers

Some companies took the challenge around Ofwat’s recent determinations on returns to the Competition and Markets Authority, arguing that their focus should be on delivering "value" to customers as opposed to Ofwat’s focus on lower prices.

 

Water companies’ own PR19 submissions argue that customers would not seek the lowest priced provider if the market were competitive, but rather look for "value for money" from their provider. There can be much debate about what that looks like – but there is growing evidence over the past year that shows an increasing customer appetite for "greener" and more sustainable solutions – a recent survey by IPSOS revealed that 65% of global respondents  said it was important that climate change is prioritised in the economic recovery after Coronavirus, for example. So how can water companies and retailers work to deliver a better value "experience" for their customers and what elements of their business should they look to improve?

The work we’ve done with utilities around the world shows us that a focus on driving the right kind of automation can deliver real ‘value’ for both customers and businesses, freeing up staff to focus on more value laden tasks and increasing employee satisfaction.  Using the right technology to deliver great quality digital experiences for customers can also improve satisfaction whilst driving down cost to serve. All this results in a better overall customer experience.

There also needs to be a focus on investment in building hardship tariffs or interventions that identify and support vulnerable customers - this needs to be a core part of any recovery activity, especially for those looking to secure their ‘social contract’ with customers.

 

Managing debt and data

Ofwat has already acknowledged that customer debt is likely to increase over this period, and in the non-household market has recently given suppliers guidance on how they expect them to handle it with their customers.  In April 2020, Ofwat indicated that 2% was an indicative threshold for bad debt impacting the market, but its recent PN 06/21 consultation has shown that it expects arrears to rise above these levels and is consulting on adjusting the price cap to enable retailers to recover debt over this 2% cap. 

 

While this is reassuring news for the wider industry, it doesn’t mean that retailers should sit back at this stage.  Putting in place now the measures needed to recover debt means having a robust and accurate view of total liabilities, but also having the flexibility to offer Covid-19 affected customers a “reasonable repayment plan” tailored to their individual needs (as required by the Customer Protection Code of Practice). Time should be taken now to ensure back-end systems can handle this flexibility, without causing knock-on issues.

 

MOSL has recognised the issue that bad data causes the water industry, and in recent months has pulled forward its data analytics programme. This shows just how important this issue is – poor data quality has an impact on the delivery of other improvements throughout the market.  Do the systems you have in place enable better data management and flag up issues – can you apply automation to check inputs for example?  Are there integrations that can be made to avoid manual inputting of data to reduce errors?  A focus on data quality will drive benefits throughout the business as well as improve the overall customer experience.

 

Online acceleration

A recent report from McKinsey has highlighted how the pandemic has accelerated technological change, and nowhere is that more obvious than in online servicing.  The over-night move to work from home created multiple issues for all providers of customer service as they rapidly set up their teams remotely, which created an immediate impact on service levels across industries.

The lockdown also led to most consumers making most of their purchases online. McKinsey has highlighted how almost overnight the general trend to digitalised shopping and servicing was rapidly accelerated by three to four years – and many businesses found themselves left behind.

Global utilities now should be looking at how embedding and improving online sales and services can present a fantastic opportunity to deliver a competitive advantage, as well as driving cost efficiencies through their business units.

There’s a lot to think about as companies move into the world of the "new normal".  Suppliers must consider the social contract they have with their customers, how debt might impact their bottom line, how they can manage recovery and how data quality can improve, all whilst considering how they can ensure their systems and processes are set up to meet the demands of the future consumer.  Now is the time to talk to your system providers to make sure you are ready for what is to come.

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Nic Clay-Michael is the product manager at Gentrack.