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26 | 9th - 15th January 2015 | utILIty WEEK Research Customers U tilities will become significantly more customer-centric this year, according to research by Utility Week in asso- ciation with Wipro conducted in 2014. The research, which formed the basis of discus- sions at a recent roundtable event (see p24), asked respondents about their intentions for customer centricity in the year ahead. Respondents scored on a scale of 1 to 5 (where 5 was high) how customer centric they expected their companies to be in 12 months. Enormous optimism was displayed. Nobody felt their firm would be rated 1 to 3 out of a 5 rating within a year; 38 per cent scored 4 out of 5, and a whopping 62 per cent – about two-thirds – said they expected a 5 out of 5 rating. Electricity sector respondents were most positive, giving an average 4.9 out of 5 rating, followed by gas (4.6) and water (4.4). Compared with the ratings respondents gave for customer centricity today, expecta- tions of improvement are hugely ambitious. For instance, 14 per cent expect to achieve a top rank within 12 months. It would be wonderful if 2015 proved to be a period of improvement, with all utilities succeeding in eradicating mediocrity from their offerings. But although the ambition is laudable, such a substantial improvement in such a short time will surely prove too much, too soon for some. Even if the entire sector improves, the comparative methods used by regulators will mean there will always be winners and losers. What is driving such high expectations of customer centricity improvement? We asked respondents to rank key drivers. Overwhelm- ingly, utilities said they were driven by doing the right thing for the business and the cus- tomer, far more than by external stakehold- ers, including government, regulators and – less surprisingly – investors. In fact, government policy was consid- ered the least important driver, which sug- gests that for all ministers' sound and fury over energy policy and utility bills, utilities think other factors more important when it comes to motivating the industry to be cus- tomer centric. Regulatory incentives and penalty mechanisms – which have been influential in encouraging customer centric- ity to develop to its current stage – achieve only mediocre rankings here. This is surpris- ing given Ofwat has made much of putting the customer at the heart of regulation for the 2015-20 period, and has introduced a number of new or improved incentive mechanisms as part of its PR14 methodology. Ofgem too, through its RIIO price control regime, has given energy networks an incentive to focus on consumers. In fact, the energy regula- tor's move turns up pressure on networks to engage with end users under the preceding five-year price controls. So the industry seems less convinced by regulatory incentives and penalties than by doing the right thing for customers. Perhaps we should be a little cautious, though, on accepting that at face value. The sentiment is laudable, but it is hard to see how the likes of rejected business plans, financial and repu- tational penalties and jeopardised funding can easily be brushed aside. There is an interesting story if we look beyond the overall figures to the sector- specific numbers. The top driver for both energy sectors was that customer centric- ity was considered necessary for business success. In water, the top driver was that improving customer centricity was "con- sidered the right thing to do". Regulatory incentives and penalties cut more mustard in water, where they are the joint third most important driver. It is fourth in gas and sixth in electricity. Cost control was considered less important in gas than in either of the other sectors – perhaps because its costs are dominated by the 20-year programme to replace 90,000km of cast iron gas mains. In terms of upcoming or ongoing market or regulatory events that provide opportuni- ties to change customer centricity, mobile technology was considered the most impor- tant, followed by SIM (water only) and smart It's all about the customer Exclusive research by Wipro and Utility Week quizzed energy and water utility executives on the degree to which their organisations actively pursue customer centricity. Which of the folloWing business areas compete most With customer centricity for priority? please rank the folloWing, With the areas that compete the most toWards the top. Financial constraints eg business plan Business operations Regulatory demands Government demands Investor demands EU policy/directives 1st 2nd 3rd 4th 5th 6th average rank 2.2 47% 32% 11% 11% 11% 11% 26% 26% 16% 5% 21% 21% 21% 21% 26% 21% 5% 5% 11% 5% 16% 16% 16% 16% 26% 16% 16% 11% 16% 5% 32% 37% 26% 2.6 3.4 3.9 4.2 4.7