Niche Info Online Business

The state monopoly over water supply will at last be broken next week, as Scotland's business market is opened up to the UK's most radical private sector competition.

But as two rival companies prepare to take the plunge, with others likely to put a toe in the water before long, the chief executive of Scottish Water-owned Business Stream has other ideas.

Mark Powles insists: "I guarantee we will hurt every time we lose a customer - that is the culture we have created in here."

Whereas business competition in England and Wales is limited to just 2000 companies, the entrants in Scotland are angling for a bite of a complete market with 130,000 properties and 94,000 businesses. They are all customers of Business Stream, which has for 16 months been separated from its parent as an arms-length company with its own funding structure.

Powles says: "We had to satisfy a number of tests, to be independently-managed with our own board of directors, our own management team and staff, and in control of our own destiny."

He adds: "We consider Scottish Water as supplier, not parent. The subsidiary thing is not on our agenda."

Powles arrived last year to lead the change from public sector administration department to riproaring retailer. He commutes weekly from his home in Hertfordshire to Edinburgh, where a floor of Scottish Water's HQ at Fairmilehead has been given a culture change makeover.

The walls and pillars are adorned with mission statements, core values and KPIs (key performance indicators), and the windows sprout the organisation's coloured bubbles (purple for Scotland, green for the environment, blue for water).

"The bubbles are a key part of the personality of the business and everyone is bonused on delivery of certain KPIs," Powles explains as he walks the floor. "Nobody has an office here, we are all in the open-plan."

The 130 staff who transferred to the new company a year ago already have some 10% of pay linked to performance, with more to follow. "These are people who have worked in an inte-grated water industry, not a competitive market, and it is about getting them to think in a different way. There is a big difference between doing customer service because you are regulated to do it, and doing it because your future and your livelihood depends on it."

Powles admits Business Stream, now with 160 staff, is holding a lot of cards. "We know this market and are based in this market with local knowledge."

But when you have 100%, arguably the only way is down. "The regulator says there may be a mix of niche players, private companies who deal in one particular area, and some bigger companies who decide to come in as well in future.

"We don't have a God-given right now to keep the customer, and I am setting our stall out to ensure we have the product, service and service culture to be good at what we do - to do it on merit rather than because we are the only show in town."

Powles kicked off his career in retailing, but won his spurs in some of the big competitive battles in the UK's transport industry, working for Stenaline ferries as it fought Hoverspeed, then moving to National Express.

"Just after privatisation, it was about how you turn these institutions into customer-facing businesses, and bring commercial success into highly complex regulated companies."

He led the revamping of London's rail commuter "misery line", the launch of the Stansted Express, and a queue-jump project to drive efficient telesales and online rail ticketing.

On arrival in Edinburgh, he had to juggle the culture change with the need to keep the business running smoothly.

"A lot of staff have come over from Scottish Water, good young energetic people who just need direction and leadership. We have also brought in a range of skills you would not find in an integrated water business - marketing, relationship management, IT - from companies like Cap Gemini, Logica, British Energy and Standard Life."

Business Stream last month opened an office in Hillington, Glasgow, for up to 20 staff, giving the business a service base in the west of Scotland for the first time. It has also made an acquisition, a specialist water and waste consultant Business Solutions. This helps Powles to sell the new company as proactively helping its customers to cut their water bills, through advice on supply and conservation of water, waste reduction and treatment, and data management including real-time consumption.

"We have saved companies anything from £100,000 to £500,000," said Powles.

He is promising to roll out new services over the next 12 months, including direct debit discounts, electronic billing for multi-site customers, and online meter reading and bill management. There will also be "closer working with commercial property developers to ease the process of new water connections for business customers".

Powles says part of the new commercial focus is to get the basics right, such as accurate meter-reading, and much of it is about understanding a diverse market.

"I have broken our customer base down into 12 segments, from agricultural and manufacturing through to bed-and-breakfasts and newsagents, and we are looking to design a service offering around these different types of customer."

He says the challenge is in some ways unusual. "We are a start-up, but we start with 100% of the market, which I have never had before. You have got to give your staff something to believe in but a lot of companies make a big mistake, they bring in all the consultants and specialists and change goes down to the staff. I decided early on that it needed to be owned and driven by the business with specialists in support, rather than the other way round."

He will not be drawn into how much of the customer base he expects to retain once the switching starts, but says: "We will work very hard to understand why they have switched, and we will work hard to win them back."