Navigant Research Blog

Make Sure You Have a Strategy before Asking Whether You Need a CDO

— March 1, 2018

Before recruiting high level staff to drive digital transformation, it is worth remembering that staff alone—regardless of their skills—are not a guarantee of success. Digitization is an enabler for business transformation. Business transformation requires a solid strategy roadmap backed by C-suite executives.

Late last year, Strategy+Business published an article that asked whether utilities need a chief digital officer (CDO). It discussed how the industry is undergoing a rapid transition that is underpinned by the digitization of previously analogue processes. The value of a utility’s enterprise data is soaring. Data is central to the energy transition. All the new business models currently being discussed—such as smart EV charging, automated demand response, advanced distribution management, and many more—rely on connected devices spitting out ever-increasing volumes of data. Data is also central to the efforts to improve the efficiency of business processes across the entire value chain. The old maxim “you can’t manage what you can’t monitor” still rings true.

Are CIOs Poorly Suited for Digital Innovation?

Strategy+Business correctly discussed how the traditional CIO role is unsuited to adopt the mantle of a CDO. CIOs have historically been in charge of large-scale IT deployments and an organization’s digital transformation can often be, somewhat naively, regarded as a simple extension to a CIO’s current job description. However, digitization is far from a standard IT project.

Digitization is the fundamental enabler of strategic change. It dramatically changes a utility’s go-to-market and relies on the convergence of business units with IT. Unfortunately, CIOs can be too heavily invested in the old ways of doing things. In my experience, a CIO’s intransigence is one of the most often cited barriers to analytics and digitization projects. The article states, “The reality is that leading digitization will require an executive—regardless of the title he or she holds—with skills and roles that depart from those of the CIO.” It goes on to list a bunch of skills that set a CDO apart from CIOs.

Job Descriptions Are All Well and Good; Just Don’t Forget the Underlying Strategy

While there is no arguing with the piece’s sentiment, I believe that the article missed the most fundamental requirement: the need for an enterprisewide analytics strategy. I am not alone in writing extensively on the gaping chasm between the executive board’s proclamations regarding a digitization strategy, and what is being done on the shop floor to effect the digital transformation. Teradata’s David Socha’s blog from 2017 is another great resource.

A CDO is a pivotal role within a company’s digitization, bringing skills—Strategy+Business lists skills including strategic thought, experience of transformation, execution, and experience with data—that many CIOs will lack. However, these will come to naught if there is no CEO-backed, companywide strategy that drives the digitization project. Who leads the digital transformation is a side issue. No one will lead it if they lack the ammunition to effect change.

Enterprisewide Strategy Must Define a Utility’s Digitization

Utilities first and foremost need a plan to guide themselves through the digital transformation. Digitization is just an enabler for wider strategic objectives. Therefore, utility executives must identify the products and services they could (not should or will) deliver in the future. They must then identify what technologies will be required to support these services, how these services will evolve over time, and the changing requirements in underlying technology.

These strategic goals will help define the roadmap that a CDO—or anyone else, for that matter—will implement. Simply recruiting someone with an impressive CV backed up with vague pronouncements from on high will take a company exactly nowhere.


Market Heats Up for IoT Energy Management Solutions

— February 1, 2018

Managing energy grids has grown ever more complex as the number of connecting devices has risen sharply. Millions of two-way communicating smart meters, pieces of advanced substation automation equipment, and distributed generation assets have come online in recent years, creating an intricate Internet of Things (IoT) network that can challenge even the best of grid managers. Connecting all these devices is a challenge, and is by no means trivial.

How Best to Organize and Interpret Data from Connected Energy?

The real test comes when trying to organize, make sense of, and glean valuable insights from the huge data volumes generated by these IoT devices and sensors. From there, the objective becomes turning those insights into useful and lasting applications for today and tomorrow. Solutions vendors have worked hard to meet their grid customers’ need for advanced technological tools to manage the data and applications. Lately, the vendors have developed some new offerings.

Platforms for Smart Cities and Utilities

Landis+Gyr launched its Gridstream Connect IoT platform, which is aimed at utility, smart city, and consumer applications. The platform is designed to integrate a variety of smart devices and utilize various communication protocols, including radio frequency mesh, LoRa, and cellular. The platform’s IPv6-based architecture can work independently with third-party devices and software to control street lights, solar inverters, EV charging stations, environmental sensors, and an array of distribution assets. The overarching idea is to provide utilities a way to leverage sensor technology at the grid edge for smart community and smart home applications, while also laying a foundation for future distribution strategies.

IoT Analytics

SAS and Trilliant joined forces to create a harmonized system that targets analytics for IoT. Under the agreement, SAS will contribute its event stream processing capabilities for structured and unstructured data, and provide machine learning technology for event detection, distributed energy resources optimization, and revenue protection. The SAS pieces will be matched with data from Trilliant’s real-time, multi-technology, multi-application networking platform. The two firms are already working jointly with the town of Cary, North Carolina, where they are in the middle of deploying analytics-based applications for street lighting, with the goal of improving public safety and boosting energy efficiency throughout the town.

Predictive Maintenance Software Solutions

ABB unveiled its Ability Ellipse software solution, which is designed to help utilities take a more proactive approach to predictive maintenance. The Ability Ellipse software unifies the functionality of ABB’s enterprise asset management, workforce management, and asset performance management packages. The software suite enables customers to better optimize asset utilization, and reduce equipment failures and system outages. Ability Ellipse is the latest offering in the firm’s Ability family, which embeds business processes and leverages real-time equipment data and IoT to connect predictive analytics and asset management systems to mobile workers in the field.

And More

These three examples of the latest solutions are by no means the only ones in the market. Competitors like Itron and Siemens come to mind. Yet these latest moves by the above vendors signify that current tools are inadequate to harness the growing complexity of energy grids. As the digital transformation of energy markets continues, grid managers will need these types of advanced software solutions to seize the opportunities awaiting them as they forge the emerging grid of tomorrow. Without them, the opportunities will be lost, or upstarts will move in with advanced tools and disrupt the incumbents.


Where Are All the Meter Manufacturers in Transactive Energy Projects?

— December 7, 2017

That’s a question I’ve been asking myself recently. The answer seems to be “nowhere.” In the 110 or so trials of utility industry-related blockchain and transactive energy (TE) Navigant Research has identified, meter vendors are at best the silent, invisible partners of other companies. When asking leading blockchain and TE startups about the meter hardware in their trials, the stock response has been “nothing is available that supports our requirements, so we built our own.” So, why aren’t meter vendors making more noise about a potentially significant growth opportunity?

Blockchain is the hottest, most hyped technology in the energy industry, and TE is its hottest use case. If current TE trials prove successful, I expect rapid adoption, particularly in countries with high penetration of solar, supported by ratepayer-funded incentive mechanisms. TE’s market-based incentives could replace subsidies. Large-scale, fully automated TE platforms have a number of requirements, as discussed in Navigant Research’s Blockchain for Transactive Energy Platforms report:

  • TE pricing requires visibility into local network conditions, including network assets and distributed energy resources.
  • Smart contracts—which determine when transactions are opened and closed—must be hosted locally and fed with market data.
  • Meters measure and record all TE power supplied and consumed.
  • Communication networks will transport data to interested parties.
  • Transactions must be recorded to the blockchain.
  • Significant distributed compute power will support automation of the TE platform.

Meter Vendors Can Support Many TE Functional Requirements

TE markets will have to be settled in much the same way as wholesale power markets are today, in accordance with strict market regulations and technology standards. This is a complex system, where a lot of trust will be placed on the technology platform. Meter vendors have many capabilities that could put them in a commanding position to lead the TE space:

  • Smart meters already provide visibility at the point of consumption.
  • Advanced metering infrastructure communications could provide the data networks on which TE runs.
  • Smart meter data concentrators could be used as nodes for the blockchain, store smart contracts, provide compute power for localized pricing calculations, and so on.

There is another feature that meter vendors have so far overlooked: it is difficult to amend records already committed to the blockchain. Consequently, it is vital to ensure that transaction data is correct before it is recorded. This will be a difficult task in a largely automated TE platform. While smart meter accuracy is generally high—between 99.5% and 99.9%—a validation algorithm is run regularly to estimate missing or erroneous meter readings. In TE, a similar algorithm must run on transaction data. However, it is likely that validation will be distributed alongside the ledger, rather than a centralized batch process. Most meter vendors also offer a meter data management system with an associated validation algorithm.

Despite meter vendors’ requisite hardware and software, they are nowhere to be seen in the TE world. There are many reasons: ongoing major smart meter rollouts command a lot of attention, and there is little money to be made in TE right now. However, I would have expected at least one vendor to have taken the leap into the world of TE. The biggest risk is that meter vendors are trapped in the old utility world, where metering innovation was driven by utilities—with whom meter vendors have decades-old relationships—and adoption of new metering technologies was slow and incremental.

TE adoption will be different. It is driven by startups that have no previous relationship with meter vendors. These startups could develop their own validation algorithms; they could choose to use public 5G networks for data communications; or they may decide to deploy their own distributed compute. If this happens, meter vendors will miss out on potentially billions of dollars of value created by TE. Meter vendors must wake up to the reality of TE and the opportunities and threats the market presents.


Utility Cloud Use Soars in 2017

— December 5, 2017

I’ve been analyzing technology markets long enough to have observed the entire cloud computing hype cycle; it’s now a well-understood, mature technology. Which also means that there’s little to write about for an analyst more used to covering emerging technologies. However, from 2008 to 2011, I never got the chance to write a detailed report about cloud computing in the utility industry. While the cloud hype volume was cranked up to maximum, the utilities industry was doggedly refusing to move any IT infrastructure into the cloud. Which was a personal disappointment: for a fan of puns, it was difficult to resist the temptation to write a report titled Utility Computing in the Utility Industry.

I even advised a couple of cloud vendors that wanted me to tell them how to break through the conservatism of the utilities industry. My only advice? “Lobby the regulators, because utilities just aren’t going to budge on this one.” And why? Three primary reasons:

  • Conservatism: No utility ever liked going first with something new. In any monopoly market, moving first was only ever a disadvantage. Rather, utilities would wait for someone else to stump up investment capital and let vendors learn from the mistakes of others before bringing a more reliable product to market.
  • Security: I have been told more than once of security officers halting vendors’ cloud pitches midway because of security concerns.
  • Regulatory: Some regulators would not let data be transported outside of certain geographic areas, killing off any idea for clouds based in other jurisdictions.
  • Finance: The key selling point of cloud is its OPEX-based pricing scheme. While music to the ears of CFOs in other industries, it killed cloud’s chances in utilities rewarded for making capital investments.

Until a year ago, cloud’s adoption by utilities was slow and steady. However, 2017 has marked a dramatic change in the industry’s attitude toward the technology. There is no better way than using cold facts to describe the rapid acceleration of its adoption. In a recent call with SAP, I was astounded at the company’s growth in cloud-based revenue in the first three quarters of 2017: a 90% year-over-year increase on 2016. SAP’s utilities business unit recorded the second-highest growth in cloud revenue across the business, just behind retail.

Market Requirements Have Eroded Resistance to Cloud Adoption

This growth isn’t completely unexpected. European utilities are under significant pressure to reduce costs and are no longer concerned about the OPEX versus CAPEX argument. The cloud is helping them achieve this. Cloud vendors have also made great strides to improve security issues. So much so that investment in security is typically higher than a utility can manage for its onsite data centers. And with the growth in demand for cloud, vendors can build infrastructure in more locations, negating the need to move data across international borders.

What’s next? The industry is becoming more comfortable with cloud, and more IT infrastructure will be moved to it. However, this will be done in a controlled manner. Despite some (frankly laughable) claims to the contrary, private clouds will account for the vast majority of utilities’ use. Core IT infrastructure likely will never be moved to public clouds, due to the inherent increased risk.

Finally, a word of caution. I predict that some utility’s adoption of cloud services will be piecemeal, unstructured, lack a coherent strategy, and uncoordinated. Different departments will procure cloud services for their own departmental means. In effect, reversing the recent trend to consolidate data in a data lake or data warehouse. Instead, new cloud-based operational data siloes will be created, where access to data is restricted. To counter this threat, individual departments must be reined in just enough to ensure enterprisewide data management without choking innovation.


Blog Articles

Most Recent

By Date


Clean Transportation, Digital Utility Strategies, Electric Vehicles, Energy Technologies, Policy & Regulation, Renewable Energy, Smart Energy Practice, Smart Energy Program, Transportation Efficiencies, Utility Transformations

By Author

{"userID":"","pageName":"Digital Utility Strategies","path":"\/tag\/digital-utility-strategies","date":"3\/18\/2018"}