Stephen Fitzpatrick, chief executive of independent Ovo Energy, is making waves by taking on the Big Six, while finding himself at the centre of the UK’s energy debate. We went to meet the maverick who’s out to pull the plug on his rivals
Four-and-a-half years ago few people had heard of Stephen Fitzpatrick. Fast-forward to 2014 and the man behind independent energy business Ovo Energy has made quite a name for himself. He may have courted controversy recently, after lambasting the UK’s so-called Big Six energy firms in parliament for hiking their prices up, but it’s certainly done nothing to harm his brand’s awareness.
When we sit down to chat at our Director cover shoot, it’s easy to see why people are starting to pay attention to the former banker from Belfast. Fitzpatrick’s on a mission to shake up an industry dominated for years by the same six firms and, it appears, is determined to stay the course to ensure it happens.
“The government should be focusing more on competition – and not just competition among the same six companies,” insists Fitzpatrick, whose customer base has grown to 150,000 in four years. “I think [industry regulator] Ofgem should have a mandate to reduce the Big Six’s market share – if you want transparency, it’s about letting new entrants into the market.”
Fitzpatrick, a greengrocer’s son, wasn’t concerned that he didn’t have any prior industry experience; and besides, he’d already proved he had plenty of acumen.
While studying business and finance at Edinburgh University, he created The Rental Guide, a property newspaper – winning him a place in the national finals of the Livewire Young Entrepreneur of the Year Awards. He went on to become a trader at Société Générale and JP Morgan for five years, before he and his wife launched Ovo Energy in September 2009.
“Having missed out on the dotcom boom of the Nineties, I wanted to figure out what was going to be next and I thought it would be energy,” he says. “I thought it was a fascinating industry – and one we take totally for granted; you turn on a switch and your lights come on. The energy industry is the second biggest in the world after food, and I found that really appealing. There’s always going to be straightforward demand, so that was something I didn’t have to worry about.”
Despite Ovo’s success, the past four-and-a-half years have not been without their challenges, he admits. “Two years after we launched, in the space of one month, the Arab Spring hit Libya and there was huge turmoil – natural gas and oil plants came offline and there was a big spike in energy prices,” he recalls.
“A few weeks after that there was the Fukushima nuclear disaster, which piled even more pressure on the energy market. It meant that in the two years since launching, wholesale prices had doubled. Had that happened in the lead-up to our launch, we’d have been out of business before we’d started.”
When Fitzpatrick founded Ovo, he says his vision was to have one million customers, be a top-10 UK employer, and have the highest customer retention in the industry by 2020. “Our goal remains the same but we’ve brought it forward by three years because we’re ahead of schedule.”
Battling the Big Six
“I’ve always been aware of the fact we’re a small company operating in a very big, grown-up industry,” admits Fitzpatrick.
“When we launched I was pretty sure it would not be worth their while [the Big Six] reacting to anything we did in the market in terms of price; with approximately six million customers each, a big gain for us was insignificant to them. They didn’t pay much attention to us initially, but I knew they wouldn’t like what we were doing as time went on – keeping costs down, delivering good value for money and making things simple. It’s difficult for them to emulate that because they’re much bigger organisations.”
Ovo recently announced the release of a one-year fixed rate tariff – the cheapest fixed rate available on the market. But how can the firm afford to undercut its giant competitors? “We’re exposed to the same cost pressures as the Big Six, but we’ve spent a lot of time focusing on technology and building robust billing and customer relationship management systems – which make us a more efficient retailer.”
Unlike competitors, he says, Ovo’s systems mean they can offer better customer service and keep costs down. “It’s better for the customer if they can use a smartphone to put in their meter reading and get the bill. Most energy firms bill customers every three months because their systems take a long time to perform the calculations. We can do it really quickly – customers can manage their own account, allowing us to keep costs low.”
The key to successfully disrupting the market, says Fitzpatrick, is offering a different type of competition. “If all those other businesses look the same and are saying the same things then you’re likely to assume they’re true. A lot of energy companies make the same claims. The only way to tell them apart is by the experience. There’s no shortcut to winning customers’ trust, you have to consistently deliver.”
Energy: power of politics
When asked about Ed Miliband’s intention to freeze gas and electricity prices for every home and business in the UK for 20 months if Labour wins the 2015 general election, Fitzpatrick remains guarded. “It’s easy to say you’re going to freeze prices but nobody knows what that means. It’s hard to know what any impact will be because there are no details associated with the policy – it’s just a one-line slogan.”
It is hard, he adds, to take the announcement seriously at present. “I don’t think they have worked out what they’ll do if they actually win the election and then have to keep their commitment.”
He does, however, believe green levies should be rolled into general taxation. “A lot of these policies are social policies rather than energy policies. The idea that we give people money off their energy bills if they’re in fuel poverty is a social policy – it’s right it should be paid for out of general taxation rather than on energy bills.”
What about the potential of other forms of power such as nuclear energy? “I don’t have any ideological opposition to nuclear energy; the question is the cost. In the past, not enough money has been set aside to cover the clean-up and decommissioning of power plants, and taxpayers end up paying a lot of money. You don’t really know how much it’s going to cost until the plant comes to the end of its life. I think there are cheaper ways to deliver low- carbon energy.”
Fitzpatrick believes the government should be investing in making renewable energy more efficient and affordable. “If you keep subsidising technology, there is no natural drive towards greater efficiency. We shouldn’t be spending huge amounts of money subsidising technologies that are never going to become efficient,” he says.
“We need to spend the money that would go on the subsidy on research and development. If we have a target [the government’s carbon reduction commitment] that is absolutely impossible to hit then we should accept that. In business you often have to shut down projects when they become unfeasible. You can’t keep subsidising something forever – that makes it very unsustainable.”
Ovo cultural values
To ensure consumers trust the Ovo brand, says Fitzpatrick, it’s important to deliver an honest service. “If you’re a consumer and you hear a message or slogan you think sounds great but your experience isn’t reflective of that, you will lose trust in that company.
When we’re making decisions about pricing or marketing or how we run things, we imagine a customer is sitting in the room: if we think the customer wouldn’t like to hear us talking about something we won’t talk about it.”
The business has now grown to 320 employees since its inception and, says Fitzpatrick, motivating staff starts with the hiring process.
“We want people to be themselves – we don’t want to hire really good people and then try and get them to act in a different way at work. Take the Big Six: when I meet people from British Gas or E.ON, for instance, they’re almost always nice people and if you met them in the pub you wouldn’t hate them. [But] when all of those individuals get together and go to work it’s so easy to dislike the company they work for. At Ovo, we hire people who share our values and whose ambitions fit with where the company is going.”
For Fitzpatrick, leadership is about fairness. “I want to be able to walk down the street and say hello to anybody who ever worked at, or with, Ovo – as an employee, supplier or partner.”
Operating like a start-up is also integral to the way Ovo is run. “We’ve always tried to keep the culture of doing more with less,” he says. “We started with a very small budget and had to creatively solve problems. As you get bigger you start to throw money at things to make them happen faster – which invariably results in a loss of quality. Thinking like a start-up helps keep our costs down.”
It’s also important to communicate with staff. “You need to let people know where they are and say thank you as often as you can. You have to lead by example and be prepared to do things you’re asking others to do. A great quote about leadership is: ‘You can’t teach what you don’t know and you can’t lead where you won’t go.'”
“This year we’ll be continuing on our journey and will start thinking about expanding and potentially working overseas,” he says. “We’ll certainly be hiring more people. It feels like 2014 is going to be a pretty straightforward year – we’ve been reinvesting in the business and have a new senior team, and we want to grow this year without losing customer satisfaction.”
In five years’ time, he adds, the company will be well past one million customers in the UK. “We’ll probably have launched in two or three other European countries and potentially North America, too.”
What makes him most proud is creating a business where, he believes, people can have a great career. “It’s the realisation that we are building the kind of company that I would really like to work for,” he says.
“Our focus has always been on developing a business that provides an excellent customer experience and the way we’ve set about doing that is to concentrate on being a great employer – it’s a good feeling.”
So, does he ever manage to switch off? “I need to be doing something completely absorbing in order to switch off,” he says. “I don’t have time for any hobbies at the moment – spending time with friends and family is what I enjoy most of all.”