The concept of disruption changing the utility landscape is not new. Businesses, governments and individuals are responding in ways that would have seemed unimaginable even a few years ago. While today’s strategic challenges demand immediate responses, utilities need to recognize that the shift underway is structural and long term. Doing nothing is not an option.
Some of the largest utilities have chosen a path towards operational effectiveness, divesting non-essential assets or restructuring divisions. Others are embracing change, choosing to modernize and expand through acquisition, partnership and investment. Then there are those that are choosing to fight, developing defensive strategies and lobbying regulators. It is inevitable that utilities will, at some stage, consider all these options. The challenge is finding the right combination to succeed.
The utility of the future will operate in a new value chain where information about the workforce, assets and customers are integrated. This will require utilities to build a unified and secure ecosystem, one that is resilient to cyber risks, that leverages digital intelligence and enables “always on" functionality.
A key focus for the board must be the functionality and integration of new digital technologies - answering the question, “Is our business fit for a digital world?” While cloud computing, social media and customer mobility have been around a while, the big game changer is now the ability to bring these together with technologies like IoT, big data, machine learning and virtual reality. This explosion in technology is enabling new competitors to pursue opportunities in the power and utilities sector, and I see more and more utilities entering new partnerships to retain their market position.
A number of big utilities have passed the point of ideation and structuring their innovation processes. But I see many that are struggling to take those innovations into the mainstream. There is no shortage of ideas but the hard part is knowing how to take an idea and turn it into business as usual.
Invention is just the first step in a long commercialization process. Utilities appear to be in a number of phases:
There are those in what I call the developing phase, a period of self-examination to assess existing strategies for relevance in a future competitive landscape and start thinking about how to find the right balance between internal and external capabilities needed to deliver growth.
Some are in a building phase where creating a culture of collaborative innovation within and beyond company boundaries is vital.
The release phase is perhaps the most important area for utilities to get digital right and arguably the hardest. This is when management adopt an idea and aim to scale it into the business. In this phase it is important to understand the organizational transformation needed to make this a success.
Then there are those in the establish phase, the period when the new service or product is rolled out and promoted, measured and success evaluated.
As utilities move through the phases of their digital journey, there a number of key questions to think about:
How are you re-orientating and differentiating your business?
What can you learn from competitors and early adopters?
How can you innovate and create a unique experience within the existing regulatory framework?
What culture and capabilities do you need to enable this unique experience?
How can you manage the trade-offs between 1) customer experience; 2) cost to service; and 3) business risk?
What drives shareholder value in this brave new world?
There is no right or wrong answer. The key is to recognize the structural shift in the sector and the pace of disruption. Embracing change means being aware of new risks but also the opportunities from new technology. Those companies that can get ahead will have a real first-mover advantage, having created the right environment, leadership and culture to innovate and succeed.
To read more about disruption see the latest Megatrends report. Follow me on Twitter at @BenoitLaclau or EY at @EY_PowerUtility.
Don’t forget our elders can suffer in silence too: suicide prevention
Many people think that mental health and suicide are not topics that impact our elders but they could not be more wrong. The data tells us there continues to be an emerging trend when it comes to peop...
Wherever you look these days, not matter the developed country, whole population groups and peoples struggle with the daily grind of life. From children in state care to mental health, from affordable housing to the primary health system and from education to employmen...
For the last few years I have been fortunate to have been involved in the aged care sector and have seen both the lows and highs. Today we live in a world where most of us are living longer thank to more awareness around healthy living, the advancement of better medica...
You can’t go past a news paper, radio show or television news story these days without being flooded by all things Bitcoin or Crypto Currency. Some say it’s the new world of money while others suggest its all just a passing fad. Whatever your position or preference of...