Utilities, Climate Change and Digitization: How to Help Them Accelerate the Digital Journey (Part 3 of 3)
Utilities’ digital transformation efforts are at a nascent stage. And if lessons from other industries are anything to go by, this is only the beginning of a long journey that will not only require doing away with old ways, but also overcoming the challenges that come with an effort of this magnitude.
Digitization is seen as the panacea for overcoming the myriad challenges that utilities have come up against in recent years. In confronting these challenges, utilities have undertaken measures to use digital to create efficiencies, improve customer service and revamp their business models. While this indicates the industry’s undeniable move towards digitization, at an organizational level, utilities will need to overcome multiple challenges to achieve their digitization goals.
Digitization is perhaps the biggest change an organization can undertake. It is a long, drawn-out journey that relies heavily on an organization’s ability to not only adopt technology, but also adapt to the business and technology changes required. For large organizations such as utilities, transformation typically boils down to a series of changes driven by an enterprise-wide mandate that must be executed carefully with key stakeholders’ buy-in. Moreover, organizations that have set themselves on the path to transformation will also face challenges that may not have anything to do with digital technology at all.
The collection and conversion of data into useful information that informs decisions is the fuel that drives a modern digital organization. Big data analytics is at the heart of this effort. Across industries, successful companies are using big data to not only create efficiencies in internal processes, but also to drive innovation in the form of new products and services. With the growing use of smart meters and sensors, utilities find themselves sitting on mountains of data that, if used properly, could help them replicate the success of other industries. To that end, utilities need to invest in data management as well as the talent and skills to leverage this data.
Here again, they can take a cue from other industries, where almost 56% have appointed a chief data officer (CDO) for ensuring regulatory compliance and driving innovation. Comparatively, a survey by the SAS Institute found that 85% of utilities have not yet created the position of a CDO to drive their data strategy. Furthermore, only 46% have a formal data governance program. This is most likely the case because utilities have only just boarded the big data bandwagon.
Early adopters of data analytics have experienced its benefits. As the industry’s use of analytics continues to grow, individual utilities need to put in place a comprehensive data strategy from a CDO — whose role needs to evolve into a leadership function that drives innovation. Digitally mature organizations that embrace this model are most likely to create a competitive advantage and embolden their business transformation efforts.
As competition for customer retention in the energy supply space (at least in the U.S.) heats up, the focus on customer retention is stronger than ever. Deregulation of markets means customers have become more and more demanding, thereby putting pressure on utilities to focus on boosting customer loyalty. This makes perfect sense, after all customer retention is known to be more cost-effective than customer acquisition, and loyal customers tend to be more profitable. As noted in part one of this series, improved customer engagement also results in lower cost-to-serve. A customer-centric approach, therefore, is crucial for utilities to thrive in the new normal. This means that utilities need to get certain things right in creating their digital customer experience. The following are among the important requirements for creating such an experience:
Understand the customer lifecycle and the associated touchpoints (mobile, for example).
Create an omnichannel experience that derives from a deep understanding of the key stakeholders in the customer service ecosystem, i.e., the customer, service delivery, operations and leadership.
Integrate a comprehensive social media strategy to smoothen the customer experience. The key elements of such a strategy would include outage notifications, awareness building, demand response and customer service.
Digitize operations that use analytics to provide customers with day-to-day inputs based on their usage.
People & Culture
The transformation of an organization into a digital enterprise has little to do with technology itself, which is only the means to an end. The two factors central to successful digital transformation are organizational culture and the people who will drive this transformation. Companies in other industries that set out on their digital journeys quickly discovered that how well they exploit the potential of new technologies depends on how involved the disparate teams are across the company.
Typically, IT teams tends to be involved in support of such projects, such as developing and executing the strategy. A Forbes survey of C-level executives found that the involvement of cross-functional teams in developing and implementing the digital transformation strategy is far below that of IT. Only one-third of the respondents believe that the other teams are prepared for digital transformation.
Utilities find themselves in a position where they can learn from this experience and implement their transformation efforts in a manner that leaves no team behind. They need to put in place a CDO whose mandate would include the creation of a data-driven culture. This means cross-functional teams come out of their silos to collaborate. Apart from this, the leadership can identify individuals to champion its cause. Without the right mindset and the right people driving the effort, utilities’ transformation efforts will fall well short of the expectations — and that’s a risk that utilities cannot afford.
A sound governance model is critical for monitoring the progress of digital transformation efforts. To make this work, the organization’s digital strategy needs to be codified into policies and standards that are implemented to maintain accountability. The figure below lays out the key elements of such a governance model.
A digital governance model must consist of the right mix of people with varied skill sets so that all perspectives are incorporated into the team’s decisions. It also needs to consider the following:
Centralized /decentralized governance: This choice depends on whether the organization wants a separate steering team for ensuring smooth implementation of transformation efforts (centralized governance), or if it wants to ensure that the principles of digital are integrated deep into the organization’s structures and processes (decentralized).
Governance committees: The governance committee identifies the key transformation initiatives and people who will execute them, and ensures accountability at every stage.
Transparency: The adopted governance model needs to be clear about the intents of and outcomes behind the policies and initiatives adopted. These need to be clearly communicated to all the teams involved.
Larry Rubenacker, a Senior Director in Cognizant Consulting’s Energy & Utilities Practice, contributed to this article.