Utilities Fight Disruption with Data and get Closer to Consumers Along the Way
By Mark Konya and Mike Smith, SAS
The 100-year-old “you pay the bill and we keep the power on” relationship dynamic between utility companies and consumers doesn’t work well today. Always connected consumers and a portfolio of energy choices that cut into traditional revenue streams (we’re looking at you, renewable energy sources) mean utilities must evolve like the banking and telecomm industries did a few years ago.
Change is painful no matter what. But progressive utilities have started strategically using their data to stay connected to customers and prospects and thrive as businesses.
Why Utilities Look from the Outside In
There are many disruptions to the traditional utility company-consumer relationship. In addition to renewables and connected consumers, other disrupters include: carbon footprints, global warming, new government regulations, distributed energy resources (DER), advanced metering infrastructures, plug-in electric vehicles, blockchain and time-of-use pricing. The list grows annually.
Lynn Good, Duke Energy CEO, may have summarized it best when she said, “That [utility] culture is not a customer-centric culture. It’s one that has been built on great engineering expertise. It’s one that cares about assets. It’s one that cares about miles, kilowatt-hours, capacity factors, [and is] very system oriented.”
This traditional mindset is fine for an organizations’ operational integrity-looking inside out. It’s not so good for an organization that needs to focus on customers first-looking outside in.
What’s the response to this shift? Consumers might be saying: “Confusing changes have been forced on me, and I’m paying more for my energy.”
Utilities are probably saying: “Revenue is eroding because of disruptive technology and regulations, and it’s forcing me to accommodate the new competitive energy marketplace.”
For both sides of the equation, maintaining the relationship requires lots more effort. Is there common ground for consumers who want energy faster, cheaper and on their preferred terms and the utility companies that must become customer centric to survive?
What can Utilities Do?
Customers are beginning to embrace the change in the relationship. The 2016 J.D. Power utility survey reports an increase in overall consumer satisfaction over the previous year. In addition, survey results make clear that an on-going commitment to high customer satisfaction is financially rewarding for utilities. A 2015 J.D. Power/SNL Energy white paper reports that utilities in the top quartile of overall customer satisfaction earned 0.6 percent higher return on equity than utilities in the bottom quartile.
The impact of ongoing disruptions will largely reside in the hands of utilities as customers seek affordability and reliability from their trusted energy provider. There are a few things utilities can do to manage future disruptions:
1. Create a vision and a plan to get there.
A utility cannot successfully manage customer relationships in a disruptive environment without first creating a vision of that relationship’s future. The vision doesn’t have to be complicated. A concise statement defining how the utility will relate to its customers and help guide them through unfamiliar territory is sufficient. Something like, “For better or worse, for richer or poorer, our company will meet our customers’ valid expectations until death do us part” might work.
2. Place customers at the heart of operations.
This means understanding the “voice of the customer” in more detail than ever before and delivering what’s important to the customer, not what’s important to the utility. Applying advanced analytics to segment and understand customers will provide an efficient means for accomplishing this goal. To be successful, utilities must pay attention to the differences between groups.
3. Communicate, communicate, communicate.
The era of the traditional utility/customer relationship is ending. It’s no longer acceptable for customers to have contact with their energy providers only through a monthly bill. Instead, utilities must anticipate communicating with customers personally about value-added programs, products and services based on individual needs and wishes. Again, this capability is enabled by advanced analytics that offer market optimization, multi-channel communications and real-time decision support.
4. Become process-oriented to enable continuous improvement.
Business processes are neither understood nor governed to efficiently deliver on valid customer expectations. Utilities must embrace process-orientation as a business strategy to meet customer needs efficiently and to become more agile. Doing so builds a platform that eases timely, targeted responses in times of service disruption.
The challenges of achieving good customer relationships in a disruptive energy marketplace are daunting but manageable with the right mindset. Charles Darwin foreshadowed the essence of today’s utility-consumer dynamic when he said, “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.”
Mark Konya is a principal industry consultant at SAS. With over 35 years of experience in applying analytics to derive business value, Konya shares his expertise with customers on integrating SAS into utility operations. Konya is a professional engineer, a Six Sigma Black Belt and a member of IEEE.
Mike Smith is a principal industry consultant with SAS. He has over 27 years of experience in the utility IT, automation, smart grid and analytics markets. He has led numerous industry research initiatives, and has founded and co-founded numerous industry-leading research, media and event initiatives and organizations, providing insights and forums for thought leaders and market participants.