FEW bosses take a job knowing they have practically all the market to themselves and a product that no one can do without, writes Terry Murden.
But five years ago, when Mark Powles became the first chief executive of Business Stream, the commercial arm of Scottish Water, he faced a new challenge. The Scottish non-domestic market was being opened up to competition and he had no way of knowing how many customers he might lose.
This week, as he prepares to mark the anniversary with staff at its head office at the Gyle, Edinburgh, he is armed with statistics to back up a record of performance that has enabled Business Stream to retain 95 per cent of the market and save customers £75 million in discounts and consumption costs. It has been hard won, but a result of re-modelling a public utility on private sector operating methods.
“This is where market forces can benefit customers over regulation,” he says in his rich Brummie accent. “It gives customers a choice and they feel they can influence the service they get.”
He lists the changes that he says have been for the better: electronic billing, the hiring of specialists to install smart meters, reduce leaks and improve waste treatment. Under an arrangement whereby Business Stream only gets paid when its cost-saving measures cut customers’ bills, it means both parties benefit.
Powles has now been drafted in to help open up the English market to competition. He has joined something called the High Level group, a combination of government and industry figures who will give guidance on how the long-discussed plan will finally be introduced. “They have been brought to the altar a number of times but been knocked back,” he says.
A target date of April 2017 has now been settled for implementation in England and Powles is excited by the prospect of Business Stream being able to target a new market of one million business customers worth £2 billion.
But there is a lot to discuss. Although few rivals have broken into the Scottish market in any significant way there has been widespread approval for what has been achieved in terms of improving the service for customers and creating a more inclusive culture.
However, the solution for England is not as easy as simply adopting the Scottish model. There is only one wholesaler north of the border - Scottish Water - while in England there are 21 integrated water companies and not all of them may want to become retailers. Also, the English customer pays in arrears, while in Scotland they pay in advance. It makes a difference to working capital requirements.
There is already some limited exposure to competition in England. Business Stream has won one contract with the Suffolk turkey farmer Bernard Matthews and has two one-off projects with Marks & Spencer and the Co-op. But the government agreed to allow water companies to compete for business from among 27,000 of the biggest firms so the impact so far has been negligible, largely because margins are too tight.
“A lot of the demand for change [in England] is on the back of what has been achieved in Scotland,” says Powles. “There has been a lot of investment in England and the stats are impressive in providing better infrastructure and water quality.
“But the customer does not feel the love. Things are done to them rather then with them. There are no levers for the customer to pull. It is different in Scotland. Whether or not the customer switches supplier they at least have the choice.”
He was headhunted for the job after a career spent at a number of regulated businesses including Sealink, under the ownership of British Rail, and National Express, where he set up the hugely successful online retail division, Qjump. He spent 18 months as operations director at life company Aegon’s independent financial advice business Origen and found the challenge of Business Stream fit with his fondness for being in at the start of something.
He believes the Scottish market is still immature but the company is developing at a fast pace. Under his tenure it has extended its range of services from six to 60 and built up the payroll from 130 to 290. There are no plans to change its status or relationship with Scottish Water, nor is there any demand for it to have access to wholesale markets for capital.
Its ability to hold on to most customers was helped by the failure of a couple of early entrants, but Powles does expect competition to increase, particularly when the English market opens up and companies can see greater opportunities. Severn Trent, Thames Water, United Utilities and Wessex Water are among those who have won or tendered for business in Scotland.
Business Stream’s brand awareness has grown from zero in 2007 to 70 per cent which he describes as “pleasing” and he says it is starting to get known in England.
The market in Scotland has also grown. There are 100,000 customers but the number of sites they operate from has grown from 130,000 five years ago to 147,000. The biggest prize is the public sector which represents 20 per cent of the market.
“Fifty per cent of customers have market tested us,” he says. “So it has not been an easy task to retain or win them. We have had to fight for every one.”
Education: Bournville Grammar School, Birmingham
First job: Management trainee at the Co-op
Ambition while at school: Something serving customers
The car you drive: A Jaguar XF
Favourite music: Mumford & Sons, Billy Joel, Sting
Can’t live without: Water
What makes you angry? When we drop the ball. Or when Aston Villa lose.
Best thing about your job: The variety.
Any mentors or heroes? Steve Jobs [former Apple chief] for his big brain, Sir Terry Leahy [former Tesco chief] for his ability to manage detail.
Other interesting fact: Was a teenage disc jockey.