Digital transformation for energy companies starts with the customer journey
A survey by the International Energy Agency, the IEA, amongst European energy companies’ last year, revealed that investment in digital transformation to date had been largely hardware-based, focusing on smart meters and electric vehicle charging. Investment in software for wider transformation however, seemed to be lagging behind hardware with no planned increase in budgets. Similarly, with respect to new software solutions like artificial intelligence (or AI), the energy sector came in last compared to most other industrial sectors. Nevertheless, there are many solutions based on AI, machine learning or other digital approaches now available to the energy sector.
A recent KPMG report showed that to address the rapidly emerging trend of digital disruption, 28 percent of CIOs in the UK energy sector are starting to respond by contracting out assistance and 27 percent are partnering, whilst 23 percent are retraining their people and 15 percent are hiring. At Digiterre too, we’ve noticed a massive change in the adoption of transformative software solutions at energy companies over the last 12 months or so. Things are definitely changing.
To be really successful, digital transformation should be designed around an energy company’s existing strengths, including their product portfolios, their people and technical competencies and especially, their customers’ journeys. Projects and partnerships must also be designed with the connected goals of digitising core processes as well as upgrading IT platforms.
Digital transformations also bring about a shift in culture and attitudes. The business horizons for utilities have typically been relatively long in duration. The energy industry is traditionally based on the use of very expensive assets requiring extensive investment and incorporating regulatory requirements. With the rise of distributed generation, alternative energy sources such as green energy and the data-driven customer interface, energy companies are now entering an information-based digital economy. Success for them depends on having new capabilities, especially the rapid scaling of innovation.
So key success factors for these companies immersing themselves in digitisation include the following:
- Having a digital vision
Digitisation is massively changing not just energy, but all industry boundaries. In articulating their digital vision, energy companies must identify the position they want to occupy in the digital landscape with respect to data, services and devices. This means finding the points in the value chain where digitisation would make the largest revenue contribution in the short- and mid- term. By systematic analysis, companies can learn the value opportunity of each area and the feasibility of Prioritisation by value is vital, rather than assuming digitisation should be applied equally across the entire organisation, regardless. Companies can then develop a digital blueprint and work out how to successfully implement it.
- Growing the importance of design
Simplicity of design and especially user-friendly end products count for a lot in the digital economy. Successful digital transformations are clearly dependent on adoption and usage. To strategy and technology—the two main work streams of traditional business transformations—design must therefore be added as a third requirement of the digitisation effort. End users, whether customers, suppliers or employees, must help shape the design from the onset and provide continuous input into the usability and usefulness of any proposed digital effort. To quote McKinsey: ‘The post-mortem review of user experience is not the best path to adoption success!’
- Adopting an agile approach
The agile approach to change is based upon a culture of sharing, open communication, and visible support from top management. It improves design by using cross-functional teams to understand end users more deeply and meet their needs more clearly. Unlike in a conventional engineering approach, teams work by an iterative test-and-learn principle. Top management would do well to provide these teams with the greatest possible freedom when it comes to taking action, since experience shows that agile teams foster digital success.
- Starting with the customer journey
An end-user orientation supports both the greater role of design and an agile approach. When digitising business processes, companies that have been most successful have begun with the end user and worked backwards. This helps to ensure that initiatives are undertaken according to their value and the corresponding need for change. The orientation demands a clear understanding of the end-user journey and the potential value lying there. Once they understand how customers interact with them from touchpoint to touchpoint, many utilities alter their management approach. By moving from a focus on functions or products to an orientation toward the customer journey, utilities can unlock massive value!
As tough as digital transformation programmes might appear to individual companies, the potential opportunity from it is worth many times the associated cost and risk. Digitally advanced sectors such as retail and financial services have already demonstrated that the value in digitisation is greater than anyone ever predicted!
For energy companies, digital transformations can yield huge productivity improvements, revenue gains, better network reliability and safety, enhanced customer acquisition and retention and entry into completely new business areas.
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