Blogs, Eye on the Smart Grid

From commodity supplier to digital energy service provider: A how to guide

Ancient Chinese philosopher, Sun Tzu, said that strategy without tactics is the slowest route to victory, while tactics without strategy is the noise before defeat. His idiom perfectly sums up the digital dilemma facing utilities companies today.

While industry executives are used to planning for the longer term, the pace of both digital threats and opportunities mean they must now move at a much faster pace, knowing that the future they’re planning for might change before they get there.

New digital entrants are disrupting the industrial landscape, while regulation demands smarter measuring systems, more environmentally friendly standards, as well as greater transparency. Short term projects can often distract from long term objectives. IDC found that more than half of European organizations that embark on a digital transformation journey get stuck – usually because they create a ‘special projects’ team for digital initiatives that’s separate from the rest of the business, ending in deadlock.

So as digital innovation takes root across the sector, how exactly are you supposed to take meaningful action now that will adapt for the longer term? Thankfully, you’re not the first to tackle the problem. McKinsey’s The Alchemy of Growth, created the three horizons framework. The framework shows a way to manage both current and future opportunities for growth in parallel. It gives a structure for companies to assess their potential growth opportunities without neglecting current performance.

IDC has now taken this approach one step further, providing their own three horizons methodology and applying it specifically to help utilities companies create their digital future in a more schematic way.  IDC’s Digital Use Case Map for Utilities, sponsored by SAP (July 2018), spells out how to reverse engineer a roadmap to get your organization to reach its own unique corporate vision with short-term, mid-term and long-term objectives, that incorporate the types of use cases you’ll need along the way.

For example, with users taking an increasingly more active and prominent role, many utilities need to completely reorganize existing processes to cater for digital customers. Pivoting from commodity supplier to digital energy service provider requires a shift in focus from operational efficiencies to customer experience and demands a ‘digital first’ approach. But the bar for customer expectations has already been set considerably high by consumer digital engagement in other industries, making customer experience management – and the ability to transform customer data into actionable insights – fundamental to the business strategy.

This type of omni-experience demands relevant individualized content, products, and services, delivered with 360-degree connected customer management services.  And the more it’s applied, the more you learn about your customers, increasing customer satisfaction and deepening the relationship. A successful omni-channel strategy is one of the key enablers for a deep sector transformation that positions utilities as a hub for all ecosystem interactions around energy.

But having an integrated digital engagement system to achieve 360-degree connected customer management in the longer-term (Horizon 3), requires building up an ecosystem of connected things, customers, partners, and suppliers in the mid-term (Horizon 2). This would be impossible unless utilities reconfigure their go to market strategy to master digital customer engagement in the short-term (Horizon 1).

Use cases like these should be an essential part of your digital roadmap. IDC identified more than 450 of them and found that successfully executing digital at scale requires use cases with capabilities that can be easily transferred across the enterprise, whether they help create device-based energy programs, an orchestrated demand response, or peer-to-peer marketplaces. Such use cases are a foundation to enable more advanced uses cases to build on by layering them into your mid-term and long-term horizons.

These use cases can be used to focus on business value, prioritize technology investments, facilitate innovation strategies, and identify when and where different executives need to get involved.

This approach lets you create a roadmap that’s modular (as use cases can be swapped in and out), as well as scalable (by factoring in the next horizon of development). And of course, any robust roadmap needs to be extensible so as new technologies in your long-term horizon mature and go mainstream, they can easily be folded into the mix as required.

This hands on, ‘how to’ type of guidance provides utilities companies with a template for digital transformation. Successful transformation begins with clarity – for the short term here and now to the more abstract longer-term scenario of how the business will operate in the future, based on changing customer expectations. It’s not easy and it cannot wait, but you can start your own journey here.