The Utilities sector is facing unprecedented headwinds across Europe. Governments are pushing new regulations to meet aggressive emissions targets, and the rocketing demand for and plummeting prices of renewables are changing the economics of the wider industry. On top of this, consumer habits are changing rapidly, driven by environmental concerns and higher expectations around customer service set by technology firms and challenger brands. How can European Utilities companies cope with all these competing pressures?
Technological innovation is an important part of the answer. The Utilities sector is waking up to the huge potential of digital technology but there’s no hiding it: digital transformation is hard in any business, especially in a large, complex and well-established Utilities company. The key to success lies in the ‘C-word’: collaboration.
What does digital transformation mean for Utilities?
The Utilities sector has a lot to gain from digital transformation. Some are ‘quick wins’, such as productivity tools for employees, or using data-driven decision-making to provide products and services that more closely match consumer demand.
But these are only the first steps on a longer journey. Utilities could combine ‘smart grids’ with big data analysis to match supply and demand more efficiently. Automation, powered by machine learning, could be used to distribute resources more effectively, and respond quicker to spikes in demand. Enhanced communications technology could be given to field workers to make repairs go more smoothly. These are big projects, and it will be difficult for a single IT team to complete them alone. Collaboration – within and across business units, and between Utilities companies and third parties – is the key to making this ambitious vision a reality.
Fostering a spirit of innovation
A number of Utilities startups in are looking to challenge incumbents. Bulb, a renewable energy startup founded in London, is a prime example, having signed up over 300,000 households in just three years. Incumbents need to foster an internal spirit of experimentation and innovation to come up with creative new ideas to stay ahead of the competition.
ENGIE, the French energy provider, is a great example of innovation in action. The business set up its own incubator, Incubation by ENGIE, enabling its staff to build their own startups in collaboration with external partners. Since launch, the incubator has received over 400 project applications, and 50 employees have developed 18 projects so far. Several of them have now been brought to market, including a tool for flexible energy management and an online customer concierge service.
Initiatives like this are invaluable in breathing new life into workforces. By removing silos and encouraging different teams to talk to each other and work together in an agile way, businesses can unlock hidden talents and innovative ideas which will benefit the wider business.
Structuring business for innovation
ENGIE is not alone: according to the TCS-commissioned IDC Energy Insights report, more than half of European Utilities businesses have set up innovation labs. This is a fantastic achievement, but these labs are not an end in themselves. Innovation labs count for little unless their insights are incorporated into the wider business. The same IDC report found that fewer than half of European Utilities companies run new business units within their core company, while only a quarter have created dedicated units for strategic business innovation.
There are many advantages to integrating innovation labs into the core business. They help overcome big business inertia by continuously presenting fresh, technology-driven ideas and those ideas are hugely improved by the additional context that comes from being more plugged in to the company.
Of course, integrating forward-looking business units into the wider company is easier said than done. At the outset it’s important to define what the business wants to gain from an innovation lab, the products, technologies and use-cases to focus on, and how employees will be selected to join the programme. Evangelists should be recruited to promote new ideas, and embed themselves into existing teams to educate them on new technologies such as predictive analytics, big data analysis or agile ways of working. These evangelists also play a key role in promoting collaboration and highlighting the importance of innovation and intrapreneurship. It is also important have processes in place to make sure that what is learned within the innovation lab is integrated into the business and actually implemented.
Keeping the customer in mind
When you’re in the midst of a large-scale tech project, it’s easy to lose sight of the end goal: to better serve customers. This is a mistake. In today’s Utilities industry, customers hold all the cards. With new products like smart meters and price comparison sites, consumers have never been more empowered to manage their energy usage. Businesses that understand the need for a more customer-centric approach will be the real winners in this new era.
The solution here is to actively collaborate with your customers: listen to what they want, research how they buy and where they look for information, and create new products and services that are ‘co-created’ with them. AGL, the Australian energy company, is a great example of this. Its customers wanted to buy energy in a simpler way, with greater price transparency. In collaboration with TCS, AGL pulled expertise from a variety of innovative organisations such as the Indian Institute of Technology, to create the Business Energy Marketplace, a market-leading service which gives customers a much simpler price comparison experience.
Technology has huge potential to improve the service that Utilities companies offer their customers, and improve businesses’ bottom lines. However, innovation requires careful management and direction. In any large organisation there is a huge amount of talent waiting to be unlocked, whether in the form of a hackathon, an incubator or a strategic partnership. At the core of any digital transformation project is a successful collaboration between different units of the business or trusted partners, and with the application of best-practice knowledge and experience.
Sandeep Simon, Head of European Utilities industry unit, Tata Consultancy Services
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