Ebb and flow of deregulated market plays to Business Stream’s experience
ANY chief executive would be thrilled by the prospect of a hugely lucrative new market emerging on their doorstep, and Jo Dow is no exception. But the road to this happy hunting ground has also proven a two-way street as rivals have been roused into protecting their territory.
The incumbent in Scotland, Business Stream – the commercial arm of Scottish Water – has vied for custom on its home turf since 2008, when the market for supplying water to businesses was opened up to competition. This didn’t amount to much in the early years, with few rivals mounting any serious contention.
That has now changed, says Dow, who has been with Business Stream since its inception in 2007 and took over as chief executive last year.
“In the last 12 to 18 months we have seen a huge spike in activity,” she says. “It started as it became clear that the non-domestic market in England will be fully opened up – it seems companies down there are looking to cut their teeth in the competitive environment in Scotland.”
“We have gone from defending our patch to winning new customers in England”
Thames Water Commercial Services is just one example, having announced in April intentions to double its Scottish customer base from 130 businesses operating across 600 sites.
The shift has chipped away at Business Stream’s home market share, which in early 2013 – five full years after competition was introduced – still stood at more than 90 per cent. Dow says it now hovers at a bit more than 75 per cent, which is certainly still a dominant position, but illustrates the growing rivalry within the sector.
It also highlights the tricky conundrum faced by Dow and her team at Business Stream’s HQ in Edinburgh.
While keen to defend key markets in Scotland, new opportunities loom south of the Border, where non-domestic water supply will become fully competitive in April 2017. The market is about eight times the size of that in Scotland, which is compelling motivation to go on the attack.
“We have gone from a situation where we have been defending our patch to now going out and winning new customers in England, and that is a big shift for our business,” Dow says.
“It is difficult because you could fall one of two ways. We could go into the camp of saying we have got to do everything we can to defend our core customer base, or at the other extreme we could be totally lured by this great big new market out there. The trick is to get the balance right.”
Fortunately, some tactics apply on both sides. Like the major energy providers who have come under fire for soaring charges, one of Business Stream’s key platforms rests on helping customers reduce consumption, and therefore cut down on their bills.
Though businesses spend ten times more on electricity than water, this has proven a successful approach. Dow says there is “a clear link” between using less water and using less energy, as the cost of moving water around a system comes down to the price of the electricity running the pumps. In this way, Business Stream says it has saved “millions” for Scottish customers such as Glasgow City Council.
“It helped them tick their environmental box as well, because they were able to say they have reduced their carbon footprint,” she adds.
Similarly, Business Stream signed a deal earlier this year with House of Fraser which includes the installation of