Utility customers are changing their behavior rapidly, increasingly viewing the utility much in the same manner they would their bank, cellular provider, or – even worse – preferred online retailer. J.D. Power affirmed this in July with the publication of its 2014 Electric Utility Residential Customer Satisfaction Study. Consumer engagement technologies are also detailed in Navigant Research’s white paper, Smart Grid: 10 Trends to Watch in 2015 and Beyond. These other types of providers, the banks and the cellular providers, have at least one thing in common: they’ve completely rearranged their strategy and operating model around a growing digital environment. But utilities by and large are behind in developing effective and user-friendly digital presences, and I would argue that this is largely due to not having approached digitization as a firmwide strategy.
What is digitization? It’s a broad topic, including everything from advanced gathering and analysis of data to social media. The slowest movers have been government and public service organizations, such as utilities, simply because they’ve had more or less inelastic demand and monopoly status. But now deregulation and growing expectations are forcing utilities to improve their public image and provide services in a more competitive manner by enhancing historically low/declining customer satisfaction. These changes include the ability to easily monitor all activity and make services changes online, incorporate services such as prepay and prosumer options, and develop specific and targeted web/mobile-based marketing campaigns.
Resistance in the C-Suite
A couple of barriers are keeping utilities from becoming better digital organizations. Probably the greatest barrier has been the resistance of utility executives. It’s no longer possible to assign an intern to maintain a Facebook page and call that a digital strategy – digitization needs to involve all parts of the firm, and will probably change the business model altogether. Utilities are not only characteristically slow adopters of change, but also traditionally siloed both functionally and informationally.
At the heart of a digital strategy is the information that is gathered to guide it. The utility must consolidate comprehensive internal and external information from distributed sources like smart meters, customer information systems, intelligent electronic devices located on the grid, social media, and weather reports, just to name a few. If this information is located within different parts of the utility and structured differently than other types of data, it can be nearly impossible to analyze in one place, and utilities will only see a half-formed image of demand patterns and customer preferences.
Beyond the Web Site
Once this information is in place, however, the utility still faces a second and even greater challenge of determining if and how to restructure its offerings in order to provide services in a different manner. This can trigger investments in reorganization efforts, such as human capital investment, cross-functional collaboration, IT purchases, and outsourcing.
It comes as no surprise that many utilities are reluctant to consider these sorts of reorganizations, as they already operate with relatively low margins and typically have restricted investment budgets. In those cases, managed services can ease the cost of digitization through highly focused products and outsourcing.
Managed services companies can assist utilities in developing firmwide digital strategies and provide resources that allow them to do so at a lower cost (with less risk of faulty investing) than integrating internally. Until recently, the majority of these companies’ services have been adopted for very specific programs and needs, but more competitors are ramping up to offer enterprise service models where customer-facing digitization only scratches the surface. In our report, Smart Grid as a Service, Navigant Research provides an in-depth assessment of the utility IT services market globally. It will be worth watching how this market forms as more utilities ease, or are shoved, into the full transition to digital.