Forming critical partnerships through strategic outsourcing is a key lever for businesses wanting to leapfrog the competition, as Richard Branson confirms “to be successful in business, and in life, you need to connect and collaborate.”
Many of the world’s largest and most successful businesses agree. Speaking at the World Economic Forum annual meeting in 2018, Jonathan Auerbach Executive Vice-President; Chief Strategy, Growth and Data Officer, PayPal states that partnering is a global trend to watch. “To prepare our businesses for the next wave of transformation and opportunity and to produce innovations that can be scaled, we need to work in partnership.”
One such example of a successful partnership is a recent collaboration between CenterPoint Energy and HomeServe in North America. CenterPoint engaged HomeServe in a strategic partnership for management of their home emergency repair programme in 2018. Within 12 months it had achieved a 13% penetration of the customer base, acquiring over 240,000 customers and delivering handsome commission revenues. Over $1m of repairs have been provided resulting in satisfaction levels of 4.8 out of 5. The programme works because CenterPoint recognises HomeServe’s market leading expertise and ability to offer great peace of mind to their customers, which in turn helps strengthen their customer relationships. “We believe CenterPoint Energy will lead the way by distinguishing ourselves among our peers through offerings and services that reinforce our reputation as a trusted energy delivery company and advisor to our customers,” said Scott Prochazka, president and CEO.
Managing a large-scale home repair programme requires tremendous resources – risk management, public relations, marketing, contact centre, billing, contractor management and more. And these resources need to be managed alongside the core business, where the number of daily transactions to answer customer calls, read meters, generate bills, manage service and
maintain infrastructure requires significant resources themselves – and laser focus.
In PWC’s 2018 Global Power Strategy study, the firm highlights a ‘fundamental shift in the global Utility sector’s dynamics” amongst its ‘GT40’ group of the largest global Utilities. One of key sector shifts it identifies is the extension of products and services, or the “Partner of partners” model offering home-related products as a strategy for competitive advantage, suggesting “the Utility could be the sole provider of these services, but they are more likely to gain customer acceptance when bundled in conjunction with branded providers”. 65% of those interviewed in the survey believe that ‘Partnering Prowess’ is one of the most important capabilities for competing in today’s marketplace.
Why then are some Utility companies nervous of establishing strong partnerships to compete in a fast moving and challenging landscape, preferring to keep ‘beyond the meter’ customer programmes in house? We believe there are three key myths to explode :
Myth 1 – ‘I need to control the customer experience myself in order to guarantee quality.’
It is a fallacy that controlling the entire journey, owning and managing it in-house guarantees quality. To truly put the customer at the heart of an organisation, businesses need to take a rational rather than emotional perspective to deliver the best possible experience, and identify how the customer experience could be enhanced holistically. A HomeServe study of customers signed up to outsourced programmes in the USA found that those enrolled in the partner programme were 77% more satisfied, 45% more likely to rate their Utility favourably and 45% more likely to feel that their Utility is looking out for their wellbeing than those not engaged in the partner programme.
Myth 2 – ‘Marketing needs to be exclusively managed by the marketing team.’
Whilst all customer communications need to be driven by a core strategy and support the brand promise, there is an opportunity to enrich marketing communications programmes through extending touch points outside the core transactional relationship with specialist help. Rather than overleveraging a core business with heavy investments for peripherals, there is an opportunity to draw in partnership funding and focus to improve valuable touch points. It takes heavy investment to set up and maintain a B2C marketing operation in-house. Not only for campaign management, but also continual testing, sales compliance oversight, and much more require a high degree of specialisation and investment.
Myth 3 – ‘Product extension must be grown from within.’
Not only can external partners bring freshness when it comes to innovation of products and services, but they also take away distractions that prevent businesses from focusing on what they are good at. Distractions from the core business can be dangerous. In his book, Onward, Howard Schultz, CEO of Starbucks, reflects on how the coffee chain lost it way because it didn’t get the basics right. As a consequence, in February 2008, Starbucks closed 7,100 U.S. stores for over 3 hours to retrain its baristas on how to make the perfect espresso.
Coca-Cola has over 250 partners around the globe; its bottlers. The business has become a global leader and yet it leaves the actual product quality and distribution in the hands of partners. As far back as the late 1800s Coca-Cola realised that the key to exceptional growth was through partnerships. By outsourcing the bottling process, they were able to reach rural markets with the product, and with the expansion costs taken care of by independent businessmen in small towns. Bottlers covered the capital to buy the machinery, packaging, water and transport.
In the USA, Dominion Energy Products & Services, a subsidiary of the energy Utility Dominion Energy served 500,000 customers in 16 states. They searched for a partner to run their home assistance business so they could give more focus to their core strengths. In a deal worth $143 million, the membership business was acquired by HomeServe and a close partnership formed to service Dominion customers. “We decided it was time for us to turn our entire focus to our core business, but we wanted to make sure our customers who had home repair programs weren’t left on their own. They had
come to trust us to provide this service, so we looked for a way to accomplish both goals,” said James ‘Jim’ Neal, General Manager, Retail & Gas Supply Services, Dominion Energy. The sentiment was echoed by Scot Hathaway, Dominion’s senior vice president of commercial services. “This is HomeServe’s core business and they have a long and successful track record of building strong partner relationships and providing high quality services to millions of homeowners across the U.S.” he said.
With over 600 P&L enhancing, agile partnerships across the globe, it is clear that HomeServe passionately believes in partnerships as the most effective way to redefine and optimise customer relationships and create competitive advantage.
The Millennial generation, as more reluctant DIY-ers, present an opportunity as an audience for home services.
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With a complex, heavily regulated environment and aggressive green agenda, the outlook for Utilities in Australia presents challenges but also great opportunities for those wishing to extend their relevance in customers’ homes.