Only 22% of utilities providers are innovative – will the other 78% be swallowed up?

Posted by David Costello on 13-Sep-2016 11:22:51

The utilities sector is undergoing seismic change, responding to change demanded by customers, the industry, and regulators. In an effort to understand this evolution, IDC commissioned a report – Designing the new utility business models.

Taking feedback directly from utilities providers, the report looked at the current state of the industry, the attitudes of senior executives, and how they planned to cope with the change being forced upon them. Although all of those questioned realised that they would have to change the way they do business, just 22% of considered themselves innovative. The vast majority believed their organisations to be “conservative”, while a further 13% were “sleeping”.

Shockingly, none of those questioned classified their business as “visionary”.

The largest threats are from outside the industry

Decision makers at the utilities firms questioned were not only aware of the changes being forced on their industry, but also where the strongest competition was coming from. As with so many digitally driven transformations, pressure is coming from technology-led organisations, rather than other utilities providers.

Over the next five years, the utilities sector is expecting to face its most difficult tests from telecoms firms and, bizarrely, Google. But with a track record of disrupting industries outside search engines, these decision makers may actually be more visionary than they give themselves credit for.

A shift in focus

A good proportion of those businesses questioned also have begun building the required mindset for a digital transformation programme – whether they realise it or not. Nearly half, 47.8%, have already prioritised developing the customer experience for their business strategy. Less than one-fifth (17.4%) believe the future of their business can be secured solely by increasing company performance.

As we have discussed previously on the PSI blog, prioritising improvements to the customer experience will provide knock-on benefits for the rest of the organisation. Streamlining communications between clients and your business improves their experience for instance – but it also offers the chance to make new efficiencies that help to recoup technology investment.

Aware but inactive

IDC’s report reveals a problem however. Utilities firms know they need to act to remain competitive. Nearly 80% of businesses are prepared for true digital transformation programmes however. A conservative business strategy (which is probably more attractive to the compliance officer) is unlikely to keep pace with the rate of development within the market – particularly as disruptors continue to shake up the marketplace.

With this in mind, 78% of businesses are setting themselves up to fail because they are unable (or unwilling) to encourage the innovation and experimentation required to develop new processes and operational models. Worse still, these organisations will be unable to keep up with the demands of their customers who are clamouring for greater efficiency, systems that make their lives easier, and value added services that deliver more than “just” electricity (or similar) to their door.

The one advantage you have

The thought of Google entering any new marketplace is terrifying. Their hugely popular brand coupled with seemingly limitless cash reserves allow them to compete at the highest levels. But your organisation has one significant advantage – experience.

Knowledge of the industry, coupled with your experience of navigating the compliancy regime means that your innovations will always meet those requirements. Newcomers like Google face a choice – innovate slowly as they learn the frameworks, or take big risks that could breach the rules and land them in trouble with regulators.

This advantage is heavily reliant on the compliance manager, and it won’t last forever. Whether your business decides to go “all out” for innovation, or to try and blend speed with conservatism, the simple truth is that you need to act now or risk losing market share. Over time, a failure to match the pace of innovation could see your business pushed out completely.


Topics: Digital Transformation

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