Interview - Mark Powles: Stopping the trickle before it's a flood

Scottish Water's commercial arm is upping its game so it doesn't leak customers, its chief tells Terry Murden.

THERE are not too many businessmen who start their job with a 100% share of the market and a product that everybody wants.

It sounds like the perfect sector to be in, except that the water industry in Scotland is now open to competition, and for Mark Powles the battle is how to retain those customers he began with in March last year.

Powles is the first chief executive of Business Stream, the commercial wing of Scottish Water, that has yet to register much of a profile with the general public, probably because its customer base is restricted to businesses.

Three months on since the market was opened up Powles is planning a publicity drive, though his ready-made group of 100,000 customers and 130,000 billing sites includes every business in Scotland so getting the message over through word of mouth should not be difficult.

Even though we are only weeks into the new era of competition there has been criticism that not much switching has taken place. Powles says it's a bit early yet, and that the electricity and gas industries experienced the same level of apathy.

But he acknowledges that he lost only four businesses in 12 weeks. Out of 100,000 it is hardly a source of great concern, and at that rate we would be looking at only 16 in the first year. A thousand would have to switch supplier to knock 1% off market share and there seems little prospect of that happening. So, would the loss of 1,000 clients be regarded as success or failure?

"I won't be drawn on the level we would be happy with," says Powles, "and, yes, I am avoiding the question. Let's just say that losing a customer does not mean you have lost him forever."

Those who left fled to Berkshire-based firms Satec and Aquavitae. As Scotland on Sunday revealed last month, Aquavitae is no longer competing for business and its customers have now either returned to Business Stream or gone to Satec. Two other firms, Osprey, a division of Anglian Water, and Ondeo, are expected to enter the market shortly and could offer more serious competition.

"My model is to retain as many customers as I can and on merit, and look at where we can add value," says Powles. "We do not think of it as a monopoly, we have to think only about providing the right services at the right price, or the customer will go elsewhere."

While there is obvious comfort in having a clear advantage over his rivals, Powles admits he wants competition and gives the impression that he would feel let down if it didn't give him a few sleepless nights. "The threat of competition has forced us to raise our game. We didn't wait until April 1 (when the market was opened] to decide what to do. We were working with customer focus groups and finding out what they wanted."

It is likely to take some time for the changes to sink in, not least because the model that was introduced is a world first. Business customers of any size can choose their water and sewerage provider, overcoming the "one size fits all" approach of the previous regime. Its progress is being watched by Ofwat, the regulator for England and Wales, where a competitive framework has proved too restrictive to have any impact. In the 12-month run-up to the changeover Scottish Water achieved £10m in annualised savings.

Alan Sutherland, the chief executive of the Water Industry Commission for Scotland, the regulator, recognises that Business Stream is in pole position but the framework demands that it publishes its tariffs and gets no special privileges. It is not allowed to supply water at a loss. Sutherland believes it faces three options: managing its own decline; expanding into England and Wales to replace customers it loses in Scotland; or partnering with other firms for special projects.

Powles says the English option is being looked at. But at such an early phase of the competitive era he wants to focus on serving the core Scottish customer base and taking on the opposition – when it arrives.

"We set ourselves up for the rush of competition and it has been slow, but you cannot judge the success of the market on the number of competitors or on how many customers have switched," he says.

Powles was headhunted for the job after a career spent at a number of regulated businesses including Sealink, under the ownership of British Rail, and National Express, where he set up the hugely successful online retail division, Qjump. He spent 18 months as operations director at life company Aegon's independent financial advice business Origen and found the challenge of Business Stream fit with his fondness for being in at the start of something.

Since his arrival, he's set about trying to change the culture, aware that he inherited 130 staff with a public sector approach to the industry and many of them engaging with the competitive world for the first time. "There was a fear about what it was going to be like and whether their jobs were safe. But we seem to have got over that." He has brought in private sector hands from Scottish & Southern Energy, Standard Life, British Energy, Cap Gemini and Bupa, to add new skills that he hopes will rub off on the core staff.

Powles takes some satisfaction from the high ratings achieved in a staff engagement survey undertaken by Harris Interactive that shows how the staff are adapting to the new environment. "It tells me that people have made the transition and that we have made a good start," he says.

Powles still commutes weekly to his family home in Bishops Stortford, Hertfordshire and retains a link to his Birmingham roots through his support of Aston Villa football club. Otherwise, he's thrown himself fully into the day job and selling the message. His first act on opening the door to his office in Edinburgh's Fairmilehead is to offer a glass of water. Scottish tap water, of course, and he's quickly spouting the list of services that Business Stream will offer: network modelling, contingency planning, emergency cover, leak detection.

With firms facing cost pressures and requirements to meet environmental targets, he says the new regime's big advantage is being able to tailor a service to meet the individual customer, though for many, it's about providing a service that allows them to concentrate on their own business and run it more efficiently.

"For most business people water is just about taps and toilets," he says. "They just want us to make it simple for them."