By Philippe David, Capgemini Consulting
Late in 2012, a study by consultancy Capgemini and Massachusetts Institute of Technology’s Center for Digital Business examined the link between the digital maturity of an organization and its financial performance. The findings were stark. The most digitally mature companies—the “digirati”—generate on average 9 percent more revenue than their competitors and are 26 percent more profitable. The findings make a convincing case for every organization to ensure its own digital transformation is a top boardroom priority.
Dig deeper and the stats make murky reading for utilities. Only 20 percent are digitally mature—significantly lower than other sectors, including banking (35 percent), insurance (33 percent) travel and hospitality (31 percent) and telecommunications (30 percent). This comes as no surprise for business decision-makers in the utilities industry, of whom 87 percent say digital is a key driver of business performance, but 62 percent admit not investing in it heavily enough. Put another way, although senior utility executives accept the business case for digital transformation, they aren’t reaching far enough into their pockets. Why not?
Part of the answer lies in the misuse of the word “digital” in the market. Often it’s employed as a synonym to describe more specific topics such as social media, big data, mobility or the Internet of things (including smart meter, smart home and smart grid). Utilities might be investing in one or more of these areas, but these are all component parts of digital within a business. Digital reaches across an entire business and impacts it in a diverse way. It must be approached as an integrated, holistic, long-term undertaking. Investing in digital is not as simple as it sounds, and this is one of the big reasons utilities are dragging their feet.
Then where should utilities spend their money? The answer isn’t as simple as a Twitter handle or cloud. Rather, it lies in how companies bring together the range of technology investments—social, big data, the Internet of things, mobility—around three core business areas that are important to any business: the customer experience, the employee experience and asset management.
The Customer Experience
Some of the world’s most prominent utilities boast a customer base so big that it rivals the population of the average country. The explosive growth of smart phones, tablets and apps mean that a critical mass of those customers have high-speed Internet access on mobile devices and are always connected. As a result, they expect a quick, seamless online interaction with any service provider. Utilities are not exempt. Energy, compared with, say, a DVD, is one of life’s essentials and the absence of which most consumers won’t tolerate more than a few hours. Moreover, they won’t appreciate waiting on hold for half an hour to alert their utilities to power outages and trying to figure out when they’ll get it switched back on.
Digital is important in bringing the utility customer journey back into the 21st century. Done right, transformation projects such as migrating and re-engineering a utility’s online customer service setup allow seamless transactions, taking a maximum of 30 seconds to handle a customer request (a bill inquiry or switching the service to a new address, for examples) and three seconds to respond (such as providing the necessary information or processing a payment). This reassures customers, boosts satisfaction and reduces switching rates—a big problem for the energy industry in markets where it is allowed.
Similarly, digital can empower utilities to take a more proactive approach to customer service by packaging and leveraging the structured and unstructured—or big—data sitting across the utility, social media or customer’s own energy usage data. As an example, reams of data are flowing in and out of utilities every day designed to flag, identify and diagnose service problems and outages. Better access to that data—integrated with the data that holds customers’ cell phone numbers—would allow an electric utility to alert a professional on the way home from work and allow a grateful customer to pick up carry out instead of arriving home hungry to a powerless oven and microwave.
The Employee Experience
Despite lagging other industries, most utilities recognize their deficiency in enhancing the digital journey of customer experience. A less obvious part of a utility’s business that is a candidate for digital transformation is the day-to-day activities of its employees: the employee experience. Best practice for any utility should be applying the same rigor to the employee journey that is applied to the customer’s.
The importance of this cannot be overstated for all employees, particularly those engaged in field-based activity. Easier access to a more integrated, useful data set is an essential tool in boosting productivity and mitigating talent attrition the industry will encounter. The widespread availability of mobility tools has made that transition easier for utilities, but the capacity to access company data on a single tablet or device rather than across information technology silos on multiple devices is vital to improving the hyperconnectivity of workers and boosting their efficiency and output. That area needs urgent investment and resources.
How a utility manages its asset base is the third area of business operations that can be digitized to great effect. Asset maintenance is conducted based on relevant equipment manufacturers’ recommendations. In other words, essential maintenance and repair work is conducted reactively when something needs fixing and usually is expensive. By shifting to a proactive maintenance and management model using real-time, predictive analytics, utilities can achieve financial optimization on Capex and Opex spend.
Predictive analytics leverage the wide range of data that flows back into the utility from intelligent sensors—measuring different variables—and use it to identify potential problems before they arise. For example, by using digital technology in a more dynamic way, it is possible to monitor the 10 key data sources that are coming in from a transformer. This allows a utility to better monitor power load within the asset, predict undercharge or overcharge, initiate yield management and see off potential overload issues before they arise.
It would be naive to pretend there aren’t additional barriers to utilities’ taking the bold steps needed to initiate digital transformation within their businesses. First, the level of regulatory approval required on any investment made by a utility might have prevented innovation.
European regulators such as Ofgem are making progress, and some U.S. regulators are more open to innovation, provided the overall benefits will be shared among all stakeholders.
Another barrier to digital transformation in the utility is its culture. Moving toward a data-intensive, customer- and employee-centric industry demands a seismic cultural shift in attitudes and approach within a utility’s employees and leadership. From a leadership perspective, utilities will have to adopt a less risk-averse approach to their business. Radical change requires courage. For employees, nearly half of the energy utilities work force consists of baby boomers. As they near retirement in the next 10 years, a manpower shortage looms, according to the Department of Labor. Proactive change management programs will need to be implemented to ensure the right skills and incentives are in place to retain this outgoing industry knowledge
Although the case for digital transformation is compelling and the priority areas for utilities—customers, employees and assets—are becoming clearer, it would be unrealistic to expect this fundamental, deep-seated revolution to take place in a few years. Delivering an integrated, cross-utility, long-term solution will take at least a decade in lockstep with the proliferation of smart meters, smart grid equipment and home energy devices. The longer utilities wait to throw in their chips, the bigger the risk to the future strength of their business.