Enthusiastic curiosity led Helen Gillett to join the water sector from telecommunications.
Affinity for Business’s managing director was formerly customer services director at BT Business, but was wooed by the lure of the new water retail market after a chance meeting with Affinity Water chief executive Simon Cocks.
“The more we talked, the more it was obvious that there was an opportunity to do something that I would learn a lot from and I could bring a lot to,” she explains, when she meets Utility Week at Affinity for Business’s office in Hatfield.
As a new-comer to the sector, Gillett has invested a lot of time up front swotting up on its background and drivers. The reading, alongside her experience in telecoms, has shaped her view of what is important when running a water retail business.
Customer choice, she concludes, is a good thing – but competition also has its hazards. Water retailers must tread a tightrope between offering consumer value and taking responsibility for sustainability. They must also take on board salutary lessons from parallel sectors about the compromises that scale can inflict on service.
Gillett has led sales in a number of different environments, but says her current role is the first time she has had to ask the customer to “please buy less” of her product. “That is not the natural instinct of retail,” she remarks. But it’s one she has quickly come to terms with because Gillett’s rapid self-education in the challenges of water sustainability has led her to a somewhat surprising conclusion for a water retail boss – competition may not necessarily the best thing for the sustainability of water – especially in the South East.
Water is incredibly cheap, she argues, and there are already customers who don’t think they should have to pay for water at all “because it comes from the sky”. Gillett is worried that multi-utility bundling, brought about by increased retail competition, could have a negative effect on water resources. “It could be great commercially for customers, but if it makes water the cheapest thing on the list and almost like it’s free, that’s not good in the South East of the UK.
“Competition, in all its glory, isn’t necessarily the best answer for the long-term sustainability of the region. That’s something I know we [Affinity for Business] take seriously, I’m not so sure other retailers necessarily do, particularly if they don’t have a water background.”
That said, Gillett observes that sustainability can also be “a good commercial driver”. “Then there’s also the fact that it means there’s likely to be water here in 20 years’ time and not the opposite,” she adds.
“We exist in the market because we believe there’s an opportunity”
Affinity for Business’s office is nestled within Affinity Water’s main office. However, Gillett has ensured some separation from the parent company – a separate book to sign-in at reception, and a locked door with a separate pass code. The office itself is rather small but airy. “If everyone was in, we wouldn’t all fit,” says Gillett.
Gillett estimates about two thirds of Affinity for Business’s employees automatically transferred from Affinity Water at market opening. And likewise, many of the company’s staff have migrated from the parent firm.
“There was a team that was responsible for the commercial stuff which happened for retail non-household,” she says. “Then there were activities which happened elsewhere, like the ‘debt team’ and the ‘correspondence team’ and those sorts of things, so we brought those together from the various bits of the business.”
As the company grew however, Gillett brought in external people, changing its demographic. “We’ve obviously been looking for different skills in some places. The people who were here before have been challenged, but in a good way because we’re growing. The vibe is pretty positive, everyone’s learning from each other. But there are a lot of new people.”
For now, Affinity for Business employs around 60 people and, although this could increase, Gillet is keen that the company maintains its small size and regional feel, insisting that “big isn’t necessarily beautiful”. Although Affinity for Business wants to be successful, its primary focus is not growth. “We exist in the market because we believe there’s an opportunity, and because we believe that we can do something for customers. I am quite passionate about that,” she says, adding that “big-scale national businesses aren’t necessarily the answer to every customer’s need”. “Having a healthy, smaller-scale, good quality offer in a market is really valuable.”
Examples from other industries have shown better customer experiences tend to come from smaller players – the ones which have “decided that customer experience is important”. “Some of them have successful business models, some of them really struggle. I’m hoping to be the former not the latter,” she adds with a smile.
Tight margins make water retail a relatively difficult market to operate successfully in, and Gillett says she hopes that “all the good will and skills” in Affinity for Business will carry it through and allow it to give customers choice. After all, opening the market to competition and everyone consolidating into a few big players, she argues, “is not choice.”
Gillett, then, is firmly of the belief that variety is key to a well-functioning market, but: “There is a value in knowing your region, knowing the customers in there, sharing the economy, sharing an objective around that economic growth…I don’t know that big is beautiful.”
Asked if she thinks incumbent retailers – such as Affinity for Business – have an advantage over new entrants, Gillett says not necessarily, as there are pros and cons to each. “Brands are interesting things. If you are Severn Trent and United Utilities and you’ve come up with Water Plus, there’s no connection, but I bet you an awful lot of their customers still think of them as the old brand – for good or ill. If you’re a new brand, you have an opportunity to position yourself differently, but again, you’ve got to generate some awareness around it. So, it very much depends, on lots of stuff.”
Affinity Water itself has, in the past, been known as Three Valleys Water and Veolia Water. “Where you’ve had an industry where there is not huge commercial awareness because you can’t change supplier, there’s not huge brand awareness,” says Gillett. “Therefore, trying to get the customer to think of you in a certain way will only stick if you’ve got something interesting to say.
“The worst thing that could have happened would’ve been a big fat nothing”
“Therein lies a challenge for all of us – new entrant and associate licensee – as to what are we going to do to make our brands distinctive. I don’t necessarily need my customers to remember Affinity Water, I need them to think about Affinity for Business in a particular way, and I find that a challenge irrespective of what their perception was previously.”
In general, Gillett is pleased with how the opening of the market has gone so far and, although as a percentage of the overall market, the number of switches is “still minute”, “at least there’s been some”. “The worst thing that could have happened would’ve been a big fat nothing,” she says.
She is also pleased with how Affinity for Business has handled the opening of the market. “I think it’s very easy, when you’ve come from an incumbent position, you could say ‘well we’ve got all these customers, we just need to look after them, how hard can that be, it’s what we’ve always done’. Well, actually, there is a lot more to it than that.”
The question, she contends, is whether the market is going to build momentum or peter out. “Realistically when you look at the economics of the world and the stuff that’s going on, there’s inflation biting, there’s loads of uncertainty around Brexit, there’s stuff happening to sterling because of uncertainty politically. None of this can you plan for as a business in the market as we are. I bet if you asked Ofwat three years ago what macro impacts they expected, they wouldn’t have predicted most of what’s happened.”
And does she think domestic competition will come? “Probably it will, because it kind of would be odd if it didn’t. I think the challenge, from what I’ve picked up, is the incentive for consumers to switch – financially – are tiny. I know it’s not just about the financial incentives, but to generate the right work in the industry and the right outcomes for customers, there needs to be a big reason why, and that may be a bit of a challenge.”
However, she doesn’t see it happening earlier than 2025. “I don’t see how it’s going to be a huge priority – either politically or in business – while competing with all the other stuff that’s going on.
“I think part of the point about doing non-household first was that it was smaller scale, it was a step to learn from and to refine and improve, and then you go for the big-scale consumer thing. You need time for those things to happen, and I don’t think there’s enough time between now and 2020. There’s probably not enough time between now and 2022, really, so where does that put it on the horizon? Maybe 2025, it’s all just guesses.”
She questions whether competition will be needed at all in the domestic market, alongside the regulatory incentives introduced by Ofwat. She says she was “struck” by the service incentive mechanism which, although not perfect, creates a level of competition, with financial benefits and penalties, that works.
“There’s a lot more work to be done to really understand the benefits. And we all find it’ll only save us £8 a year, we might just stay as we are. Is it the most important thing? I doubt it.”