What does it mean to be a “Total Digital Utility” and why does it matter?

This article was first published in Zpryme.

Utilities are making significant investments in building and deploying digital capabilities that aim to modernize their ability to deliver safe, affordable and reliable energy. Over the past several decades, utilities have continuously moved toward more sophisticated and interconnected technologies to help drive efforts that deliver energy services more efficiently.

Today’s efforts are taking a multitude of forms, such as investments in:

• Customer-led digital channels: focusing on chatbots, digital IVR, mobile apps, web, Amazon Echo/Google Home devices
• Digital worker: redefining how employees in the office and the field do their jobs (e.g. cloud, big data, mobile, wearables, etc.)
• Modernizing the grid: using sensors, automation, communications infrastructure, IoT and IT/OT integration
• Digital twins: creating generation and transmission assets
• Integrated operations centers: unifying cyber security, physical security, operations and asset health
• Artificial Intelligence (AI): integrating machine learning, predictive analytics, robotic process automation and other automation technologies to drive more data-centric decision making

What’s different now, is that a true “total digital utility” isn’t simply a utility that has upgraded their systems and technology, but instead incorporated them as part of their DNA. Making technology and data part of the utility’s DNA is what will drive the utility’s evolution—not transformation—to a customer-led, innovative, agile organization that can monetize their digital investments while delivering more value to the customer.

So how does a utility not just deploy technology and upgrade its systems, but instead embed technology and data into its DNA?

Consider three areas:

• Understand and plan for the impact that “going digital” has on the operating model
• Apply agile to the entire enterprise
• Understand that “going digital” is an evolution

Define the Target Digital Operating Model

Overlaying highly interconnected digital technologies onto an existing utility’s operating model and structure quickly reveals, in stark detail, how siloed, fragmented and internally focused—rather than customer-led—many utilities are. Many “digital transformation” projects center around the technology implementation, functionality and data—but overlook the changes required to the operating structure within the business; or the competencies/capacity of the IT organization required to continue to evolve the digital investments.

Utility leadership must be prepared to make changes to long standing operational structures, if they are to deliver the optimal value from their digital investments. A simple way to think about it is twofold. First, realign the internal processes to deliver on the desired customer experience/journey and then to change from using non-integrated technologies to applying Digital to build seamless experiences across multiple business units, third parties and the customer.

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Organizational Agility

Over the past few years, we watched and participated in the adoption of agile within the financial services, pharmaceutical and healthcare sectors. These industries were driven by a need to change due to market disruption. They were successful because the aim wasn’t to simply improve effectiveness or reduce costs, but to ensure their very survival. While it is true that utilities have recognized the value of adopting agile principles, tools and ways of working—few have made the shift.

Almost more concerning, is that some utility executives will claim to “be agile,” having trained some of their teams, but an objective look at their actual maturity and value add falls far short of the mark.

Organizational agility across the whole organization, not just in pockets of IT, is a fundamental enabler to the realization of value from digital investments, and to the continuing evolution of the utility. This shift is not going to be driven by agile training and some projects piloting agile tools & approaches—it requires senior leadership and a sustained commitment to change the organizational mindset, culture and operating approach.

Evolving to a Total Digital Business

We make the distinction between evolution and transformation because it is critical for utilities to view their digital investments as an evolution of the whole organization, not just the transformation of some of their business functions. Unfortunately, we still observe that many utility technology projects are often defined, funded and run as individual projects, rather than a portfolio of projects that are collectively delivering the required change. Of course, if you ask senior leadership there is a view that the projects are indeed a portfolio of projects—because the budget is viewed as a portfolio—but in practice they are not run in that manner at the project level, with one project having very little to do with another.

A more rapid path to becoming a true “total digital utility,” which we define as a utility that is customer-led, employee-centric, agile, adaptive and innovative, requires the utility leadership to leapfrog existing digital trends by focusing more on what some might consider emerging technologies. Two examples illustrate this point:

• Amazon Echo/Google Home: utilities are playing catch-up if they are only redesigning their website, building a mobile app or implementing chatbots. If you really want to innovate, look at—and fund—how customers will interact with you via voice home automation “Alexa, what’s my energy consumption summary this month compared to last month?”
• Artificial Intelligence: ironically, experts believe that disruption to our lives from AI—at all levelswill be more significant than the widespread use of electricity. We know from our own work that machine learning (a form of AI) is already being applied to help with predictive maintenance and outage analysis. However, there does not seem to be, for instance, the formation of an AI Center of Excellence, staffed with data scientists and AI experts as part of the utility organization (and hence DNA).

Looking forward

It is clear in the utility industry, that there is significant investment in digital technologies, data quality improvements, integrations, and the pursuit of efficient, reliable and safe operations. With technology so abundant, digital assets now do more to drive revenues, margins and market capitalization than physical assets.

What appears to be missing for some, is the required shift in culture, leadership, structure and organizational agility that is necessary to fully realize the potential value of these digital investments. Without these, utilities will not be able to take advantage of the collision between strategies, technology and innovation to bring new value to customers.

Ross Smith is a utility digital expert at PA Consulting