Culture change required in water

One of the most notoriously difficult tricks to pull off in any business is trying to change an organisation’s culture. Yet, this is exactly the test now facing every water utility company in Great Britain.

Within weeks, Ofwat will open up part of the English and Welsh water markets to retail competition; non-domestic customers will be able to change their supplier of water or wastewater (or both) from April 2017, bringing them into line with those in Scotland, where non-domestic retail has been in operation since 2008.

Today, apart from large industrial businesses, non-domestic customers in England and Wales have no choice but to take water services from their regional utility. From April 2017, while the local utility will remain responsible for keeping the water (and sewage) flowing, most businesses and organisations will be able to switch to rival water utilities or entirely new entrants to the market..

The retailer will be responsible for billing, customer support and water saving advice. The utility will act as wholesaler to not just its in-house retail team, but also to rival retailers who win over B2B customers within its region.

And this is just the thin edge of what could become a very big wedge. There are discussions in place (led by Ofwat) to open up the retail market from 2020 to householders as well, creating a genuinely mass market.

Adapting to this new business environment will not be simple for water utilities. For decades, their prime focus has been pipes in the ground, managing substantial assets and infrastructure; their key performance indicators have revolved around engineering and operational targets.

This mindset isn’t prepared for the cut and thrust of a fast-changing, sales-driven retail market, in which you have to fight to retain each customer. So what do utilities need to do to prepare?

The most critical shift for utilities will be tackling their culture. Each provider needs to approach the retail challenge by introducing a customer-facing culture, and that requires proper leadership. At the same time, the utility needs to maintain its engineering culture within wholesale; but even there, it will be fostering new relationships with many retailers beyond its own in-house retail team, requiring its people to adopt a more outward-looking and responsive perspective.

Experience shows that culture change should be driven from the very top of the organisation. Leaders need to present a clear vision of the change required to adapt to these new challenges and a well-designed strategy to deliver a retail-orientated culture – and show the strength of conviction to maintain continuous pressure for change in the long term.

Water utilities will need to look at their leadership teams and assess how they equip them with the skills needed to deliver this retail-orientated culture. Where these capabilities aren’t available internally, they will need to look externally, with a clear employee value proposition to attract the best leadership talent.

However the organisation decides to tackle the leadership challenge, the impetus for change must be absorbed, accepted and deployed by each layer of management.

Warm words and slogans won’t be enough; employees need to be convinced that the shift to a retail-orientated culture is permanent. They will need to see practical action being taken by the leadership, such as identifying new roles and skills required by retail and then swiftly recruiting internally or externally to fill those gaps, ensuring all candidates have the right outlook and behaviours.

Water utilities will need to compete for talent with new entrants to the market. These will probably include energy retail companies, which already have a relationship with customers in each utility’s region and boast hands-on experience in delivering customer satisfaction, innovative billing techniques and user-friendly online interfaces.

So, part of the challenge will be for each utility to review their employee value proposition to ensure they are competitive within the retail talent market, and to think hard about the new career opportunities and incentives they can lay before prospective recruits or existing employees.

This sounds like a lot of work, and that’s because it really is – and successful culture change takes years, not months or weeks … yet, it will be a vital component of any successful water retailer.

We anticipate that some water utilities will get a wake-up call in April 2017, realising that the preparations they have made to get their people ready for even this toe-in-the-water B2B retail market are inadequate.

If that’s the case, they need to raise their game; the really big test will be from 2020 when the whole market will likely open up to competition, giving water companies three years to get their proposition and people planning sorted.