With digital firmly at the heart of many companies business strategy, we look at why digital adoption and digital investment within the Water sector remains so low and what this means for the future relationship with the customer.
I recently had the good fortune of working with a new client, Bristol Water, a water-only company based, unsurprisingly, in Bristol, but serving around 2 Million + customers in the South West of England, from Tetbury in the north, through to Glastonbury in the south.
Comparisons with Financial Services
Having spent much of my career working in Financial Services, the opportunity to work in the utilities sector was both, excuse the pun, refreshing and one I was keen to grasp with open arms.
You see, whereas in Financial Services, where digital-as-a-discipline has developed over many years into a mature and complex operation involving well honed organisational structures, cutting-edge technology, specialist resource and an agile mindset, Water is still very much at the start of its journey toward digital maturity.
In Financial Services, digital has been at the centre of the business transformation agenda since Internet Banking came to prominence at the end of the late 1990’s. The UK’s first internet banks started to emerge in 1997, with subsequent investments in mobile banking in the mid 2000s and most recently open banking in 2018.
Throughout this time, Banking has seen its share of revenue, delivered by Digital, go from zero through to (in some cases) in excess of 80%. Those are the statistics for the traditional banks. If you look at the competitor banks, such as Monzo and Revolut, 100% of their sales and typically 80%+ of their customer support queries are handled digitally.
Comparatively, the water sector isn’t even in the same ballpark, falling far below these levels, with some water companies reporting fewer than 30% of customer contacts being made through digital channels.
Lack of competition?
So what are the reasons behind such low digital penetration in water? Could it be that the lack of competition in the market is stifling creativity? Perhaps the engineering-focus of the organisation is at odds with the disruptive nature of digital? Or could it simply be that the internal unfamiliarity and lack of knowledge that exists about digital’s potential within the water sector limits its influence?
Among the many reasons put forward for this lack of digital progress, the one that is often stated more than any other is that as water companies are a monopoly industry, where, as a result of no market competition there is no catalyst for investment or a change to the status quo.
While this may indeed be an accurate portrayal of some public sector services, having had first-hand experience of the water sector for the past 2 years, in my view this argument in isolation belies the complexity of the issues facing digital adoption, and at best only goes part way to explaining why the market is so slow to respond.
While ‘customer competition’ may not be present, there exists significant ‘peer group competition’ between water companies for status, whether that status comes from being the most highly performing in the SIM or C-MeX league tables, or simply from being recognised as higher performing than their peers in the host of awards available to suppliers in the utilities sector.
While some may argue that internal peer-group performance may be a poor proxy for true customer competition, the discussions I’ve been party to would indicate it performs as a significantly powerful motivator for change and improvement without there being a requirement for additional customer competition.
Another prominent argument is that as a utility, Water is effectively an engineering company and as such the engineering comes first and the customer engagement second.
This argument, while valid, should however be seen in context. Most water companies will have a long and rich heritage. These are companies that in some cases can trace their history back to the 18th century, when piped water and sanitation started to gain traction and wide-spread adoption.
Ever since these times, the network, consisting of the supply pipes, pumping stations and reservoirs has been the ‘core business’ of a water company. These companies were never dot-com boomers, they were established long before the industry that coined, the term ‘digital first’ even came into being.
However, times have changed and it would be unwise to give too much credit to the water companies based on history, heritage and ‘how things used to be done’.
Ultimately, like all companies facing increased digitisation, the Water sector needs to recognise and respond to the threats and opportunities of increased digitisation and undergo digital transformation in response to the needs of today’s consumers.
In a recent round table interview hosted by WWT, Jeremy Heath, Innovation Manager for SES Water said,
“Customers don’t compare us to other water companies. They would say that they expect us to work like Amazon, and know if something has gone from before the customer has to call”
It’s a poignant statement and one that highlights the sentiment that consumers no longer give any ‘free passes’ for legacy companies. Remember Kodak? In todays marketplace, you’re not only in competition with yourselves and your peers in the sector, but being compared directly with the very best digital companies the world has to offer.
Build digital maturity
So what can water companies do to establish greater digital maturity within their respective organisations?
The first step in building digital maturity, or undertaking any digital transformation is to develop a clear and cohesive digital strategy that supports, and is fully consistent with the Business Plan and company KPI’s
While there are many models for digital transformation, most water companies will want to focus on the following 4 central themes:
- Digital Experience
- Mature Digital Business
- Digital Capabilities
- People & Culture
It’s important to remember that no single one of these themes has greater value from any other. They are all designed to work in synergy, with improvement in one area providing additional benefits to the whole.
Most businesses will find that they already have existing capability in place against each of these themes. To ensure your organisation focusses resources and investment to the areas most in need of transformation it may help to first undertake a digital transformation maturity audit. This will highlight areas of strength and areas where further development is required.
Developing maturity in Digital Experience, means designing and building digital customer experiences around the needs of customers. It requires you to develop an intimate and informed understanding of your customer base and their requirements, or needs, of you.
Over time however, the expectations placed upon these digital experiences will change and grow and in order to live up to the demands of the customer, water companies must continuously evolve and refine their digital customer journeys to maximise value.
Unlike a single large-scale capital project, it is important to see this digital experience transformation as an ongoing evolution. Whereas in the banking sector, digital experiences may have started with online banking, then moved to mobile banking and now open banking, water companies should also adopt a long-term view and an acceptance of the need for continual change and investment if they wish to remain relevant in the eyes of their customers.
Mature Digital Business
Building a digital business is about more than delivering technology, it is fundamentally a question of how digital can reach into the fabric of the organisation and inform not only the business strategy, but the fundamental operating model.
The water sector is in many ways well positioned for this challenge. In recent years investments have been made in sensor technologies, planning capabilities and the digitisation of field workers and engineers. Some, like Anglian Water have started to realise the value of their data assets by developing SAAS solutions that not only help to increase operating efficiencies within the business and drive increased customer experience, but also lead to new, never-before tapped revenue streams.
Likewise, there are signs that the pace of innovation is increasing. Companies like United Utilities are developing dedicated internal capabilities, such as their Innovation Lab initiative, to grow and expand their use of digital.
Further work is however, required across the sector, to truly democratise the vast data and network information collected by the water companies over hundreds of years. This data has massive value for a range of applications and water companies have only stated to scratch the surface of the opportunity.
Needless to say, a digital transformation will only be successful with investment in the right technology and functionality to underpin and power our digital strategy. This means that not only do Water companies need to consider investments in their internal systems to improve productivity and collaboration, they also need to explore how customers may have greater access to, and transparency of their own processes.
Also, traditional funding models, where on-premise IT systems remain the mainstay of a water company operations are becoming restrictive. With the advent of cloud based technologies, which are essential to developing more integrated and connected data relationships and leverage greater business and customer value, companies need to reconsider their financial models to permit greater revenue purchases in IT.
People & Culture
Finally, water companies must continue to invest in their people and work with them to build an organisational culture where digital is not feared, but embraced and understood.
Many water companies today lack the required digital expertise in-house in order to develop and build strong digital propositions. Addressing this knowledge gap should be a priority, as too should the formation of a digital centre of excellence (CoE) to help coordinate and direct digital investment within an organisation, ensuring all solutions are aligned to a single roadmap and that the maximum value is extracted.
Coupled with this, greater agility and collaboration between teams should be encouraged, partly to aid with the attraction of digital talent to the water sector, but also, so that the reach and understanding of digital can be extended into more traditional areas of the organisation.