“When have we done our job? When you ask customers, what do you think of the water industry and they say: ‘yeah it’s good,’” Smith says of the 14 years he has spent immersed in making water customers happy.
Having worked on business strategy and new business development across myriad industries from retail and manufacturing to aerospace, automotive and oil, Smith spent a lot of time understanding what businesses were doing wrong and helping them understand their customers and competitors.
He joined the energy sector at the time of privatisation and stayed for five years before joining the water industry, initially in Scotland.
Before utilities he had moved on in roles more quickly, so why stay in the sector so long?
“The second thing – and this is particularly true of water – is the environment is right at the heart of the business. Other sectors pay lip service to the environment, but in energy and water, environment really is central to it.”
Having spent most of his career focusing on what consumers’ concerns and interests are, Smith sees strong parallels between satisfied consumers and a well-perceived industry. He warns that feelings of unfairness will never be resolved until companies’ incentives are aligned with the people they serve.
“Otherwise, you could get a situation where the consumers’ interests are at odds with the investors’ interests. And that’s why ultimately, if you can have regulatory incentives focused on improving things for customers, then it starts to square that circle,” he says.
He believes this makes the public service aspect of each company important to the management and investors.
“We’ve started that journey now, but not finished. We want to get to a point where more and more customers view this industry positively, particularly around fairness and value for money.”
In the past CCWater has accused Ofwat of being overly generous but the most recent price review showed a stronger stance from the regulator. Does it need to be tougher still?
“Maybe. But if we can get regulation pushing the companies to do the right thing for customers that’s the right direction. Otherwise you are going to see continuing problems.
“Until we resolve customers’ underlying feelings about value for money and fairness then the companies are going to be under scrutiny and the politicians and media will keep pressure on.”
It was these pressures that led to Jeremy Corbyn putting the utilities under the microscope during the election campaign. While it was not enough to prevent a Tory landslide, that does not mean the policy has lost all public support, and Smith believes it will only go away when customers feel listened to.
What is it, in Smith’s eyes and CCWater’s research that people actually want?
“They want safe, reliable service on the water and sewerage side, and they want that maintained; if there’s a problem they want it resolved with a minimum amount of fuss; they don’t want to be shocked by price spikes or changes. In the long term they want investment in the future – in environmental and maintenance terms. That comes through loud and clear in research.”
Getting the sector closer to that point of satisfied users has taken years for CCWater, steered by Smith, to now be in a position that customer-focus featured so prominently in the writing of business plans.
Smith worked at Ofwat back in 2003-04 and said during the 2004 price review it was remarkable how little input the customer had to that process. Aside from research about satisfaction with service, it was very limited. That research showed satisfaction was OK, but issues of priorities and value for money were not considered or addressed.
“We argued with Ofwat and the industry that you need to get customers much more involved in the whole regulatory process. Especially with changes in tariffs and introducing metering, we got companies to listen to customer concerns around those.”
He says the focus of the industry had traditionally been on engineering solutions and regulatory measures but CCWater began telling the sector to also focus on the people using the services.
“In the early days of customer groups, Ofwat would ask us “why do you need to do it?”, gradually we have demonstrated why.”
CCWater is involved with customer groups at each of the water companies to ensure their priorities are being listened to and met.
The link between perceptions of value for money and fairness has been a continuing issue and even those who are satisfied with the service aren’t satisfied with how much they are paying for it.
There are more social tariffs than ever before while more people are eligible for assistance with managing their bills. However, Smith says there is a lot more to do.
“We have made progress on affordability, but we haven’t fixed it, so I would call that unfinished business for the industry.”
With three million customers identified as struggling to afford their water bills Smith says the measures in the price review do not do enough.
“The scale of the problem is still greater than the current initiatives,” he explains. “This price review is a big step, which is pretty good progress – but the problem is not finished.”
Another piece of “unfinished business” before Smith steps down to climb Scottish mountains and play the saxophone (perhaps not at the same time), will be overseeing the watchdog’s involvement with any referrals to the Competition and Markets Authority following the price review.
CCWater provides oral and written evidence, which takes up to six months but may go on longer if there are multiple referrals.
“It’s a really interesting process. It dives deeply into the topics and all very detailed with heavy duty specifics.”
Companies have a month to request a referral from Ofwat or accept the terms of the final determination. Business plans will come into effect from April and for companies seeking a CMA referral they will follow the plan for the first 12 months regardless of the appeal.
He said he is also interested in keeping an eye on C-MEX to see how well it works as a replacement metric for the SIM scores. “We have been pushing Ofwat to put greater emphasis on customer perceptions in the way they regulate the industry. C-MEX will look customers’ views as well as complaints.”
The new system is being piloted and fine-tuned before coming into play from April.
“We think heavier regulatory emphasis on customers’ views would help companies to understand their customers better and segment them better. The greater emphasis the more the companies are likely to do. We think C-MEX will do that and we think it could do more in the future. It’s a step in the right direction and companies are really thinking hard about what C-MEX will mean to them, which is great.”
Another change to the waterscape could be greater competition in the domestic market. The opening up of the non-domestic market led many to assume the household market would naturally follow. CCWater was consulted on the merits of this and from a customer perspective and called halt.
“We did some research and felt there was only limited value to customers, and the non-household market hadn’t been fully tested, so we told government and Ofwat to hit the pause button. They listened and now we’re keeping a close eye on the non-household market to see how quickly conflicts can be resolved.”
Smith says the problems that plague the non-household market – many relating to customer data – could have been resolved easily but arguments between suppliers and retailers over responsibility have hampered progress and caused a surge in dissatisfaction.
“Complaints remain much higher than before the market opened up and our last survey showed customer satisfaction drop quite significantly. We hoped that customers having a choice would make them more content but it shows the opposite so there is a degree of urgency to solve customers’ complaints and problems.”
Although eschewing any more chief executive roles, Smith says he’s looking forward to having options and isn’t hanging his boots up yet. Whether that will be in utilities or another customer-focused role remains to be seen but Smith says he’s looking forward to more time to travel and conquer Scottish mountains.
“I’ll definitely miss the folks here – they do all the hard work. The industry has been really good so I will miss the cut and thrust of the water sector,” he says. “But I have faith that the folks here will keep the pressure on to encourage and prod to keep up the good work.”