There’s a reason British Gas has been one of the industry’s great survivors – its willingness to reinvent itself.
In the 1960s, for instance, it embraced the home energy revolution that was central heating – the home was re-imagined and British Gas helped install it all.
And just seven years ago, in 2012 when things looked very different even from today’s market, its parent company Centrica conceived Connected Home, the division behind its Hive business. Now in a million homes, it began by giving consumers fingertip control of their heating and hot water remotely through a phone app, later also supporting a growing family of smart home devices – from light switches to security cameras.
It had become obvious to Centrica, reveals Connected Home’s managing director Claire Miles, who took up her role in January 2018, that home technology had been about to become “a very big deal”. And its instincts were right. The division is now a star child of Centrica’s stable, and the number one connected home player in the UK.
A strong growth strategy has seen it establish a presence in six territories. As well as the UK and Ireland, it is active in Canada and France, with recent development focused heavily on the US and Italy. And the company’s November trading update reveals that, since the start of 2018, 280,000 new Connected Home customers have been added, with 767,000 devices sold and gross revenue up 50 per cent for the ten months to the end of October, compared with the same period the previous year.
Miles is therefore a very busy woman, but we are finally catching up at Connected Home’s offices in Aldwych. Appropriately, there’s that achingly cool buzz, stereotypical of tech businesses, permeating the place, along with the customary aroma of coffee beans. It’s a million miles away from the British Gas showrooms of old, or even other parts of today’s group.
An enthusiastic Miles explains the thinking behind the concept. “The home was becoming the last thing to connect. You could take your car in for a service and someone could plug it into a computer, your office was connected. And we started to see all these devices emerging that we thought represented a major opportunity for us to provide more progressive, intelligent digital services to customers in the future, to modernise what we’d been doing for years through home care – where we had been going into homes, fixing things, helping people’s homes run more smoothly.”
Up until then the brand’s market-leading home services model had centred on boilers, central heating systems, electrics, plumbing and drains, and kitchen appliances – with various levels of home care cover available and a field force of engineers managing any issues. But it seemed like time to expand the offering, and to head off rivals from outside the industry launching into the smart home market.
“We could see the trends, we could see we had a right to play in that space. You could imagine the future in 2012, of everyone suddenly getting all these gadgets in their home and all these possibilities. We thought, who would be the organisation that you would want to put them in and help you use them to modernise your home? It was that concept that helped us come up with Connected Home.”
But, she says, they also realised this was a high-tech area – not a core skill at British Gas. Nor did the company want to farm its ideas and decades of market insight out to a third party, so the division’s Hive business was born.
Incidentally, it had been that very insight, through British Gas engineers, that led to the creation of the first product built within Hive – its smart thermostat. They’d discovered that most customers had no idea how to use the ugly, old ones often stuck on walls in dark corners, and would call them out simply to reschedule timers.
“We were extremely fortunate to have this huge team of trusted engineers going into people’s homes showing customers this new product,” Miles acknowledges. “It was really through them that we started to drive adoption. They’ve sold hundreds of thousands, they really helped build awareness of Connected Home products and the Hive brand.”
This chance to connect more with consumers is what drew Miles, who has a master’s degree in mathematical modelling, to the energy sector. She has held various consumer roles since joining the company nine years ago from a career in finance. Previously, at General Electric’s GE Money division, Santander and HSBC, she’d honed her specialist maths and data skills around targeting and customer segmentation.
But a passion for energy shines through when she explains her move in 2010 from credit cards to smart homes – and, importantly, “end-to-end fulfilment” for consumers.
“The credit card market is a brilliant place to be. It’s very data rich. But I was genuinely interested in the whole energy trilemma. And I firmly believe that it’s not until you have the responsibility of going through the front door that you really understand the extremities of customer service, the importance of it, the risks associated with it, and the significant opportunity you have to surprise and delight customers and build trust.”
Although smaller than the core energy supply business of retail gas and electricity, the services arm has always been important to the UK operation. It’s something Miles says it is “enormously proud of” – with the proportion of British Gas’s seven million customers now signed up to take its gas, electricity, and home care services standing at around two million, between 20 and 25 per cent overall. “We would of course love for that percentage to be higher,” she says, although acknowledging that research shows different cohorts of customers out there – some wanting one provider to look after everything, others favouring a “jam-jar mentality”.
The home services model, technological or otherwise, is a diversification plan variously adopted by several energy suppliers, and now a key area of market differentiation as margins shrink and the price cap kicks in.
“Our strategy has always been to provide wider and deeper relationships with customers in their homes,” says Miles. “We of course love to supply their gas and electricity, but the way we think we can create meaningful relationships is through other services.
“The home care services business has always been there, but we have expanded our range to deliver a better experience, products that are more relevant to a wider range of potential customers, and to personalise as well – one of the trends we see customers expecting these days.
“Consumers want to control more in their home, they want things to be on their terms. Addressing all of those trends sits behind our strategy of how and what we do to become a 21st-century energy services provider, which is our stated ambition.”
I ask if she feels hamstrung at all, being part of an energy giant facing nimbler challengers?
“There is no doubt it is difficult to compete from a cost perspective with those new entrants, because they don’t have large infrastructure. But we also think we deliver a much better service. And we think we’re more trusted than some of those small suppliers.
“We have experience and capability and infrastructure and resilience that allows us to have more longevity, and that means we are worth paying for over the long term, which is what I think our brand stands for in the UK.”
Yet British Gas’s customer losses have been well documented. In the first half of 2018 it lost 340,000 accounts – about 270,000 customers.
“We’ve seen customer losses as the number of competitors has increased. At the same time, though, we have implemented an extremely successful loyalty programme, British Gas Rewards, with over a million customers now enrolled. That’s had a really positive impact on customer retention and continues to grow as a scheme for us.
“So, we believe we still represent a fantastic proposition for many customers, and as we do broaden our products and services, we hope that we will at least stabilise our customer numbers and grow our relationships going forward.
“From our perspective, then, it’s incredibly important to differentiate in order to stand out.”
On that note she references Centrica’s five “participation pillars”: energy supply; home services, such as boilers and electrics; peace of mind, including insurance products; home energy management, including smart metering and its smart thermostat; and, finally, home automation, into which some of the Hive products fall, such as light bulbs, sockets and switches. Over time, the plan is for the business to be more weighted across the four pillars other than energy supply. “As our strategy has evolved over the years, our ambition is to be much more of a services provider than an energy provider.”
But smart home competitors abound – the most well-known is Nest, now owned by Google. And although the company loves devices, says Miles, future strategy will take account of how this space is now incredibly competitive. Meanwhile the growth of voice activation in customers’ homes, thanks in no small part to Amazon Echo’s voice assistant Alexa, means it is becoming less likely that customers will buy all their devices from one brand – because Alexa creates interoperability.
And that’s the real challenge, says Miles. “Where we think we can have success and carve out a place for us, is by providing meaningful services that those devices can enable for specific case uses.”
It’s the thinking behind Hive Link, a new product designed to give carers – formal or informal – peace of mind about a loved one. A series of sensors, such as on the front door or kettle, can be installed to monitor daily activity. A “learning algorithm” then takes this data and identifies a behaviour pattern. It can spot if anything unusual occurs or fails to happen. Notifications are sent to an agreed “sharing circle” of family and friends. The proposition, developed in partnership with Carers UK, comes with no cameras, said to be a key factor in its acceptance by those being cared for. It’s a theme that is close to Miles’s heart. Her mum, who lives 300 miles away from her in Durham, has Parkinson’s Disease, and it is a peace of mind tool she is finding reassuring.
Before my hour is up, I ask Miles for her thoughts on our New Deal for Utilities campaign and what area of policy support might be on her wish list.
Quick as a shot she answers: “Broadband.” Some of the coverage gaps across the UK can deny access to services for those in rural parts of the country, she says.
And, for Miles, being connected is key.