The energy and utilities industry is in the middle of a hugely disruptive time. The global pandemic has caused ongoing supply chain issues which have seen high inflation grip the world, there are extreme weather events, the recent war in Ukraine, and customers and regulators demanding cleaner energy and a stronger focus on sustainability and governance.
This will only increase as the impact of climate change is increasingly felt1, and prices continue to climb – especially as everyone looks to minimize their energy use. This includes the European Union’s emergency gas plan, which aims to reduce consumption by 15% across member states2 amid fears that Russia could stop deliveries. Additionally, countries throughout Europe are turning off or dimming lights at public landmarks while businesses are being encouraged to do the same.3
All of this is putting the industry under immense pressure to do its part, which includes reducing its impact on global warming, maximizing efficiencies, being more sustainable, and providing a range of affordable and ever-greener alternatives. The energy industry, in particular, is under scrutiny because it is the source of three-quarters of greenhouse gas emissions.5
Challenges are coming from every direction. But ultimately, the one thing that will impact the industry the most in the coming years is digital transformation.
Driven by new technologies, from blockchain, artificial intelligence, and edge computing, it is set to enable the development of exponentially more efficient processes and solutions, the creation of new business models and customer offerings, and help organizations to be more resilient and competitive. They’ll also be better equipped to meet environmental, social, and governance (ESG) initiatives, and more able to quickly respond to ever-changing customer expectations.
As with all industries, digital adoption will be transformative for energy and utilities and will enable them to better tackle today’s (and tomorrow’s) disruptions. This is what our whitepaper discusses:
- Why digital transformation and optimizing the customer experience are essential for any business to meet clean energy and sustainability goals to develop an agile, change ready competitive advantage.
- The technologies to focus on.
- How to best prepare for the transformation, ensure your digital solutions are fully optimized, and most especially.
- Why the customer must be at the forefront of your digital strategy.
“Once you’ve read our whitepaper, you’ll see why getting your digital journey right is so essential, and how it can enable you to better engage with your customers and build digital solutions that can deliver a truly positive impact – for your customers, your business, and our planet.”
Georg Hansbauer, CEO & Co-Founder, Testbirds
The digital transformation – for growth and value
Digital transformation makes use of digital technologies to help create new (or modify) a wide range of business processes, experiences, and even the culture of an organization. As noted by IBM, it “uses AI, automation, hybrid cloud and other digital technologies to leverage data and drive intelligent workflows, faster and smarter decision-making, and real-time response to market disruptions. And ultimately, it changes customer expectations and creates new business opportunities.”
It‘s also being rapidly adopted by multiple industries. A recent report by IDC stated that global spending on digital transformation is forecast to reach US$2.8 trillion in 2025.6 It’s clear why. With a well-thought-out digital strategy, organizations can become more flexible, more resilient, and more competitive. This was reflected in a 2019 report by Tech-Clarity, which saw that top performers used digital innovation to achieve better ‘product innovation capabilities and business results’ with a 31% revenue improvement over 2 years (those without new digital strategies only saw 15%). Compared to their competitors, this enabled them to7:
- Get new / improved products to market quickly
- Design innovative products
- Meet market cost requirements
- Develop high performance products
- Deliver high quality / reliable products
For energy and utilities, digital transformation can enable this, and many other opportunities, across the entire value chain – from generation (supply) to transmission and distribution (network), and ultimately commercial and residential retail.
In their extensive look at ‘value realization from digital transformation in utilities’, Infosys listed multiple potential opportunities that ‘industry 4.0’ offered along this value chain, which included8:
- Supply – predictive maintenance, effective field operations, comprehensive engineering data management, cybersecurity, plant optimization, digital twins, and asset management
- Network – outage management, network performance monitoring, smart and digital grids, smart meters, crew productivity analytics, supply and demand management, and troubleshooting and maintenance
- Retail – dynamic pricing and product development, cloud computing, smart homes, customer behavior and pattern identification, seamless customer experience, intelligent apps based on user behavior
Each section of the chain is enabled by its own specific technologies. Supply makes use of mobile, eCommerce, and active defense (using deception technology to detect attackers). Network utilizes the cloud, big data analytics, and the Internet of Things. Retail turns to social media and other digital channels, with a mix of cloud and connected devices. When connected, they can make a strong, yet highly flexible, omnichannel solution.
With digital transformation, the benefits to the energy and utilities industry are immense.
The drivers of change
None of this would have been possible without several fundamental advances in technology and changing customer expectations over the past couple of decades.
Technology has ushered in a world of 24/7 always-on and connected convenience. The internet, email, the cloud, mobile devices, social media, the Internet of Things, and artificial intelligence. All provide new ways to streamline and personalize offerings, conduct business, and send and receive information.
Importantly, it has enabled businesses to disrupt the status quo (Netflix, Amazon, Uber, and Airbnb are often the most talked about9 in this regard, with each revolutionizing their specific industry).
For energy and utilities, several trends will dominate in the coming years:
The Internet of Things (IoT), smart grids, smart meters, smart cities, smart cars, and smart homes. Everything is becoming connected, and this trend shows no signs of slowing down. The global ‘IoT in energy’ market alone is expected to grow to US$35.2 billion by 202510. By collecting and transmitting data via the internet, smart devices blend the digital and physical worlds and enable the generation of vast amounts of data to enable continuous monitoring in real-time, optimize efficiencies and asset maintenance, automate processes, identify malfunctions, and much more.
An immutable, distributed, decentralized, and permanent ledger, blockchain is all about providing complete transaction transparency. This is seeing the development of peer-to-peer energy trading platforms11, secure records of electricity generation and consumption12, improving data management, and dozens of other potential uses – as outlined in a joint report from the World Economic Forum, PwC, and the Stanford Woods Institute for the Environment, which noted over 65 existing and emerging blockchain use-cases for the environment13. This included optimized distributed grid management to tackle climate change, cryptocurrency-enabled smart meters for water efficiency, decentralized mini-grids for weather and disaster resilience, and many more.
Big data analytics
Smart digital technology (from IoT to social media) collects vast amounts of data and often from multiple sources. As noted in an HLCTech article, “a utility company, using smart meters and power, can collect around three petabytes of data every 15 minutes for a year for about one million households.”14
That would be the real-world equivalent of downloading 33,000 4K movies, every 15 minutes, for a year.15
By analyzing this data it is possible to accurately anticipate and manage energy needs, detect and prevent power outages, conduct preventative asset management, boost operational efficiencies, simulate aquifer behavior, identify water contamination, and more.16
Big data analytics is all about quickly and efficiently turning data into insights. Its potential is limitless.
AI and intelligent automation
Big data is also being integrated into artificial intelligence to help make fast, accurate decisions in areas such as customer service and support, regulatory compliance, and to increase operational efficiencies while reducing expenses. As mentioned by IBM, “When combined with automation, AI can infuse intelligence and real-time decision-making into any workflow. It can drive everything from innovative smart products, from increasingly personalized customer and user experiences to optimized workflows for supply chain management, change management and more.”17
The coronavirus pandemic
If there was any one momentous change that has impacted digital adoption, it has been the ongoing impact of COVID. Lockdowns, remote working, and social distancing have seen all manner of organizations embrace digital solutions and have seen enterprise digital transformation, and e-commerce, accelerate by three to five years.18,19
But it isn’t just technology that is driving change. It’s the customer.
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Power to the consumer
The customer-driven transformation
What people expect, whether customers, partners, or employees, has become arguably one of the biggest catalysts for digital transformation. As Salesforce said, “Digital transformation begins and ends with the customer.”20
Being customer-centric is essential if you want to satisfy customers, reduce churn, and build loyalty and advocacy. That means every business decision must place the customer front and center. A recent Harvard Business School Survey21 asked respondents to identify their organizations’ top two areas of focus in digital transformation. Customer experience came first with 23% and technology infrastructure second at 17% (the remainder were process efficiency, data management, company culture, and employee experience).
Getting it right means not only deeply understanding the customer’s needs and expectations but providing fast, personalized solutions (or services) that give them more choices. People want to feel their needs are heard and understood.
They also want higher engagement and more control, as was discussed in Deloitte’s US Power Utilities Outlook 201922 report: “Utilities are listening, and many are beginning to respond to what customers are saying by developing apps to give customers more control over energy usage; to manage energy use from their smartphones (heating/cooling, lighting, window blinds); to shop online for rooftop solar installations; to view monthly bills and monitor energy use in real-time; to receive alerts if bills are higher than normal; or to receive outage alerts with estimates of restoration time, crew arrival time, and more.”
This is all about creating digital satisfaction. Between 2018 and 2020, utilities that maintained or improved that alone saw overall customer satisfaction rise by an average of 2 percent, while those who saw digital satisfaction fall, saw an overall decline of 1 percent.23
As smart grids and sustainable initiatives grow and consumers become increasingly focused on managing their energy and water use, the need for more open and transparent communication is as essential as providing the necessary tools that empower them. However, as seen in a J.D. Power 2022 US Utility Digital Experience Study, many utilities continue to offer outdated websites and low adoption of mobile apps – and that one-third of large utilities still do not offer an app.24
As industries, businesses, cities, and consumers strive to become net-zero, there will be an ever-growing need for energy and utilities to partner with everyone to meet renewable energy goals, improve overall resilience and reliability, and meet their own ESG goals.
That means utilizing the right digital solutions to better engage, empower, and provide highly personalized experiences for their customers at every step of their journey with you.
Digital transformation is the answer. The question is how to do it right.
Developing the digital strategy
Eine A successful digital transformation requires a clear customer focus alongside a data-driven mindset that places high importance on agility and being able to adapt to changing conditions – whether from the customer, competitors, or any other external factor.
In a 2020 Deloitte Insights survey, the benefits arising from digital transformation, “…go well beyond, the bottom line. Many of these benefits, such as improved product quality and customer satisfaction, contribute to better financial performance.
Others, such as reducing environmental impact and increasing workforce diversity, are increasingly seen as part of companies’ broader social responsibility.”25
Before starting on such a transformation, however, it is essential to establish realistic business expectations. A BCG report26 highlighted that 70% of digital transformation efforts fall short of their business expectations, ‘often with profound consequences’.
But with a well-thought-out strategy, you can maximize your efforts and place yourself ahead of the competition.
Top steps to energize your digital transformation
One essential element throughout the following steps is the need for consistency. Everything must be calculated, measured, tested, and revisited.
Know where you want to go
As with any major, long-term business decision, it’s imperative to have a clear vision of what you want your digital transformation to achieve while ensuring it is supported by specific and measurable business outcomes. Ideally, it will also intricately link to your overall business strategy.
What is the experience you want to create? What are the steps you need to take to realize that vision? What customer needs do you want to meet? What digital solutions do you intend to develop to address their needs? To do this, what needs to be improved? Is your budget realistic?
Importantly, it is also essential to take a detailed look at the level of digital transformation you want to achieve and what changes are required. If you only want to digitize some data, your strategy will be vastly different to whether you want to digitize processes and platforms, enter new markets, develop new products, or create new business models.
Your vision’s roadmap must then include all elements, from use cases, technology, people, and your organization’s capabilities. It must also clearly define the actions required to progress your digital adoption and revisit or create new key performance indicators (KPIs).
In many ways, this is the ideal of what you want your business to be, its purpose, and what it provides to its customers.
Be agile and change-ready from the top down
This means leading with an agile mindset and readily communicating the importance of the transformation. Ultimately, the why, how, who, and overall alignment of what needs to be done, are developed from the top.
All factors are then aligned with key executives and middle management. Everyone should be on the same page and believe that such a transformation (no matter how big) is required. Everything can then be condensed into a ‘change story’, which is used to communicate with all employees why the change is necessary, where the company is moving, and why it is important.
Only then can this be driven throughout the entire organization.
By being agile, all involved can better adjust priorities and adapt how the business is run as the business transforms. An important consideration can be the appointment of specific roles to drive and implement the digital transformation strategy.
Invest in the right team, technology, and training
It can be easy to underestimate the difficulties involved in a digital transformation, especially when it comes to the team, the solutions you use, and how much training (for all) is required.
Putting together the right team, with the right technology, and ensuring ongoing training is essential when it comes to a successful transformation. From tech experts, data specialists, and process leaders, all must be able to communicate and work well together – while being led by someone passionate about bringing change.
This is usually a CIO or CTO role, though it can be more specific, such as a Chief Digital Officer. The role is essential, as pointed out by a McKinsey survey, which showed that less than one-third of respondents had a chief digital officer to support their transformations, however, those that did were 1.6 times more likely to report a successful transformation.27
But, it should be noted that only just over 40 percent28 of companies report they have a dedicated digital transformation team in place.
Some key roles can include:
The visionary (change leader), the planner, the financial guru, the analyst, the architect, the UX/UI expert, and even the ‘Critic’ – someone who consistently asks the important whys and what ifs.
All of whom must, to varying degrees, work with the scalable and fit-for-purpose technologies that best support their transformation use case. This requires taking a close look at the technologies, platforms, and software that are currently being used to not only see what may need updating, but to identify any gaps that can be filled with newer, more flexible, and scalable solutions.
Can they adapt to changing business needs? Are they agile, yet robust, enough for frequent updates? Do they deliver true value? How well do they work, and how easy are they to test, within your DevOps29 environment?
And importantly, is everyone up to speed with the new technologies and processes? To achieve the desired outcomes, everyone must be trained, reskilled, and upskilled on the digital tools they will increasingly encounter in their day-to-day work (alongside new policies and workflows). Comprehensive training can help develop engaged, confident, and empowered employees who are more able (and willing) to support your digital transformation and work in new ways.
No transformation, or product development, is done in isolation. Especially when it will ultimately impact and affect everyone. Without a strong focus on finding the right talent, using the right tools, and ensuring everyone are skilled up, enthusiastic, and ready to go, any digital transformation will struggle to succeed. As it also will if you don’t track your transformation and test at every step of the way.
Monitor your progress and test, test, and test again
Organizations that monitor their transformation with extensive metrics, see more success. Many, without proper monitoring, may see temporary improvements but cannot sustain them in the long term.30
Importantly, the KPIs that are used must be flexible enough to shift with changing company needs, market conditions, and other disruptions. Selecting the right KPIs, and the optimal number of them, isn’t always straightforward because the right ones depend on a variety of factors, from your digital maturity, budget, and objectives.
They must be data-driven, highly relevant to your goals, specific to your digital transformation team, and be able to clearly determine whether your new digital solution or process is providing the results you want – from customer experience and satisfaction to operational efficiency, and much more.
The best metrics, according to Gartner31:
- Have a clearly defined and defensible causal relationship to a business outcome
- Work as a leading, not lagging, indicator
- Address a specific, defined audience
- Can be understood by a non-IT audience
- Drive action when they change from green to yellow to red.
Additionally, if you’re using financial KPIs, can you quantify the return on investment of your digital transformation investments? Are they, overall, actually achievable? And importantly, can outcomes be regularly tracked at all levels?
Ensuring this last point is why ongoing and regular testing is essential. If you are using, for example, customer-focused metrics, such as Net Promoter Score (how likely they are to recommend your solutions to others), Customer Satisfaction Score (how satisfied are they with a product or service), and Customer Churn Rate (those who stop using your solution), every change to improve digital performance, retention, and the experience, must be re-tested.
Are bugs negatively impacting performance? Exploratory Bug Testing can catch bugs in hard-to-find places.
Are customers struggling with your smart meter’s app? Usability and UX Testing can help you meet their expectations.
This is no different when focusing on employee metrics. From Employee Engagement to Workforce Productivity, each KPI must look at how the transformation is impacting their productivity and morale. With Customer Journey Testing, you can comprehensibly look at every aspect of your solution at every touchpoint to see what works and what doesn’t.
Getting it 100% right, however, means taking your solutions out of the lab and using real people to test in real-world situations. Only then can you be certain it’s user-friendly, reliable, and works on any device or operating system.
Your KPIs help you to see if your digital transformation is delivering value, but it is testing that helps ensure it does.
It’s a digital world after all
The energy and utilities industry is quickly joining other industries in fully embracing the digital world. Having reliable and flexible digital tools and solutions, the right digitally-savvy people, a change-ready attitude, and a customer-first approach, all provide an increasingly competitive advantage.
People now want solutions that give them convenient and user-friendly control over their energy and water usage, and that are delivered by organizations striving to meet environmental and sustainability goals. Those who can deliver such solutions will quickly outpace those who cannot. This is why digital transformation is essential.
Getting it right, however, is no easy task. But there are some areas to focus on that can help boost your chances. In their report on Unlocking Success in Digital Transformation32, McKinsey listed 21 keys to success. The top 10 included:
- Implement digital tools to make information more accessible across the organization.
- Engage initiative leaders (leaders of either digital or non-digital initiatives that are part of the transformation) to support the transformation.
- Modify standard operating procedures to include new digital technologies.
- Establish a clear change story (description of and case for the changes being made) for the digital transformation.
- Add one or more people who are familiar or very familiar with digital technologies to the top team.
- Leaders engaged in transformation-specific roles encourage employees to challenge old ways of working (processes and procedures).
- Senior managers encourage employees to challenge old ways of working (processes and procedures).
- Redefine individuals’ roles and responsibilities so they align with the transformation’s goals.
- Provide employees with opportunities to generate ideas of where digitization might support the business.
- Establish one or more practices related to new ways of working (such as continuous learning, open physical and virtual work environments, and role mobility).
Embracing new horizons. Building the right team who welcomes change. Using the right technologies and KPIs. All must combine seamlessly and proactively to push transformation throughout the business and into every digital solution developed for your customers.
But you simply cannot ignore comprehensive and ongoing testing to optimize your offerings.
Transformation isn’t a one-step process. It’s continual. When every change can improve or set back everything, you must be ready for every contingency. Testing is the answer to a successful and continual transformation.