by Perry Stoneman, Capgemini
Digital transformation is causing a shift in the utilities industry. In the coming years, digitally driven changes will drive increased investment for improved power quality, reliability and distribution, plus more engaging customer service.
A shift to a more digital enterprise also is helping utilities reduce operating expenses. As for how overall investment spending will be approached, the internal and external forces that drive these changes will shape the plans and policies around broader utility initiatives. The widespread embrace of digital technologies, however, already is driving capital spending, budget shifts and the reprioritization of business strategies within many forward-thinking utilities.
The need for utilities to plan around transformational pressures as diverse and widespread as regulatory reform, fossil fuel conservation, energy price volatility, environmental concerns, aging grid infrastructure and outdated information technology (IT) systems and business processes is urging traditional utilities to re-invent themselves and use the tools needed to operate successfully in this customer-focused, digital era.
Many utilities understand that digital transformation is a key component to addressing these issues and remaining competitive in today’s market. Investments in areas such as smart meters alone will not garner holistic business benefits unless a proactive investment strategy for increasing customer satisfaction, improving data analytics and driving asset optimization is implemented alongside these critical infrastructure initiatives.
We have reached a tipping point, and the success of utility providers will be contingent upon the broader investment horizon as they seek to become a more digital enterprise.
To become high-performing players, utility leaders must completely rethink their business and operating models to seize future growth and innovation opportunities by transforming how they interact with their customers and manage their infrastructure.
For utilities that want to accelerate their digital transformation and become smart utilities, there are three major focus areas for spending and investments: next-gen customer engagement, advanced data analytics and grid optimization. The utilities that can align these elements with broader innovation strategies and investments will be well-positioned for the future.
Improving the Customer-Utility Dynamic
When undertaking major initiatives such as distributed energy or smart grid technology implementations, utilities must align customer relations strategies with the operations involved, and soon.
Customer satisfaction ranks as one of the top business priorities for utility providers, followed by reliable service delivery and operational cost reductions. New digital technologies such as smart analytics and smart homes, coupled with the rise of mobile connectivity and social media, are playing a role in how utilities and their customers interact daily. Although these emerging channels can increase engagement and present utilities with greater, more impactful gains in company perception and satisfaction, executives will have to re-evaluate and implement investments correlated to customer engagement to meet demands and provide relevant, accurate offerings.
How soon must this change be implemented? In an ideal situation, yesterday. With this new wave of Internet-savvy, smart device-using customers who demand increased customer care, access to detailed energy usage insights and 24/7 customer support across channels, utility providers are feeling these pressures and those from regulators to adapt while trying to optimize operational efficiencies and minimize costs.
Most utilities still cater to the significant, albeit shrinking, percentage of customers who mail paper bills and require customer service through live agents and walk-in centers, which, in today’s digital era, wastes time and resources. These costs only will escalate if utilities operate as they did 15 years ago.
From a business perspective, the need to embrace new, digital technologies is a twofold initiative when justifying future investments. Not only does it boost customer satisfaction by catering to the influx of individuals who prefer to be engaged digitally but it will improve front- and back-end efficiencies and better manage growing sources of customer data.
From an operational perspective, utilities must meet customers’ information needs in a manner that reduces customer service calls. In the smartphone and iPad world, mobile applications, Web chatting, texting, messaging and engaging via social media are becoming important channels to educate, motivate and inform customers, particularly when real-time interaction is crucial, such as during a power outage.
By better understanding what customers need and what they will want, utilities can consolidate and centralize their customer-facing operations to provide better services that garner more accurate usage data and customer feedback. This will reduce operational costs and increase customer retention. IT and functional business leaders, as well as C-suite executives, will need to work together to find a portfolio of solutions and implement a holistic investment strategy that maximizes these efficiencies with minimum additional investment. This can be done by leveraging existing IT platforms–supplementing them with cost-effective digital applications and tools.
Smarter Data Analytics
To manage these growing sources of customer data, utilities already are building the infrastructure needed for smarter technology platforms that can handle complex data flowing into their organizations at unparalleled speeds. Modernizing systems and equipping teams to handle this data flow, however, will be a challenge. In the utilities industry, providers are seeing the long-term value in investing budget in big data initiatives to gain insights into the data from new meters.
To handle this data influx, utilities must develop new business processes and integrate disparate back-office systems into a single, enterprisewide system that provides detailed visibility into customer information, performance metrics, equipment performance and a holistic view of the entire supply chain. Data storage and data management will be integral to an overall smart metering strategy to extract important business insights in a timely, efficient manner and to better meet customers’ needs.
Most utilities’ data analytics initiatives are project-based and function in silos merely for organizational efficiency, which makes cross-functional analysis difficult and slow. But many utilities are discovering the value of deploying accelerated platforms to analyze data from disparate sources to gain important insight while reducing the time required to synthesize this information.
Soon there will be more opportunities for utilities to capture and analyze large quantities of structured and unstructured data to drive increased revenue and decrease expense. For example, advanced data analytics can interpret consumer usage patterns and help utilities develop competencies to forecast demand and plan for infrastructure requirements.
Data analytics platforms also can be scaled to fit specific business requirements. Some utilities might not need to implement major big data strategies right away. They can adopt smaller-scale advanced analytics tools that can be integrated into their current data systems. Rather than wait, utilities should seek to incorporate these systems now so they can be prepared and begin to see a return on their investments earlier.
Strategic Modernization Through Distribution Grid Optimization
Utilities also must contend with the increasing complexity of grid management and anticipate the impact of intermittent and distributed energy resources, as well as emerging trends that affect the energy grid such as electric vehicles, from a supply, storage and demand perspective.
When mapping out larger infrastructure plans and investments, utilities must evaluate their current distribution management systems (DMS) to assess how they function and integrate with other operational systems. Only by developing a framework to evaluate and assess future DMS extensions can utilities reap the benefits of advanced analytics capabilities such as forecasting, predictive load, simulations and optimization.
When deciding which digital applications and tools they need to optimize the distribution grid, utility leaders should assess broader questions about the overall business before making major investments that might not have strong positive impacts.
For example, how far along are you in the transition to making critical infrastructure changes, and what barriers stand between your current state of operations and achieving the promise of smart utility innovation? If investments in this area are made properly (factoring in components such as the right organizational structure, effective data management, controlled access and enhanced security) then effective distribution optimization will enable proactive grid management and ensure reliability and efficiency of service.
Whether utility providers are in the midst of deploying smart meters or deployment is complete, areas such as contact centers, billing operations, business processes, IT system applications and employee training efforts often lag. The infrastructure might be in place, but in many cases the technology and resources to drive profitability, customer satisfaction and results are not.
Many utilities have not begun planning and analyzing the impacts of emerging technologies and changing customer expectations. But the general consensus remains: Prioritizing digital transformation initiatives will result in new relationships with existing and future customers and drive the industry to deliver on its promised developments for tomorrow.
Perry Stoneman is global head of sectors at Capgemini