3 minute read 28 Mar 2018
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How organizations can plot their own route through digital disruption

By

Benoit Laclau

EY Global Energy Leader

Experienced energy leader and advisor.

3 minute read 28 Mar 2018
Related topics Digital Innovation Disruption

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When dealing with disruption, there are many routes to success. What can utilities teach us about navigating this difficult journey?

Digital disruption is a challenge common to all industries, and the utilities sector is no different. Businesses, governments and individuals in utilities are responding in ways that would have seemed unimaginable even a few years ago. While today’s strategic challenges demand immediate responses, utilities need to recognize that the shift underway is structural and long term. Doing nothing is not an option.

Some of the largest utilities have chosen a path toward operational effectiveness, divesting non-essential assets or restructuring divisions. Others are embracing change, choosing to modernize and expand through acquisition, partnership and investment. Then there are those that are choosing to fight, developing defensive strategies and lobbying regulators. It is inevitable that utilities will, at some stage, consider all these options. The challenge is finding the right combination to succeed.

The utility of the future will operate in a new value chain where information about the workforce, assets and customers is integrated. This will require utilities to build a unified and secure ecosystem, one that is resilient to cyber risks, that leverages digital intelligence and enables “always on" functionality.

Digital technologies

A key focus for the board must be the functionality and integration of new digital technologies — answering the question, “Is our business fit for a digital world?” While cloud computing, social media and customer mobility have been around a while, the big game changer is now the ability to bring these together with technologies like the Internet of Things (IoT), big data, machine learning and virtual reality. This explosion in technology is enabling new competitors to pursue opportunities in the power and utilities sector, and I see more and more utilities entering new partnerships to retain their market position.

A number of big utilities have passed the point of ideation and structuring their innovation processes. But I see many that are struggling to take those innovations into the mainstream. There is no shortage of ideas, but the hard part is knowing how to take an idea and turn it into business as usual.

A digital journey

Invention is just the first step in a long commercialization process. Utilities appear to be in a number of different phases:

  • There are those in what I call the developing phase, a period of self-examination to assess existing strategies for relevance in a future competitive landscape and to start thinking about how to find the right balance between internal and external capabilities needed to deliver growth.
  • Some are in a building phase where creating a culture of collaborative innovation within and beyond company boundaries is vital.
  • The release phase is perhaps the most important area for utilities to get digital right and arguably the hardest. This is when management adopts an idea and aims to scale it into the business. In this phase, it is important to understand the organizational transformation needed to make this a success.
  • Then there are those in the establish phase, the period when the new service or product is rolled out and promoted, and its success is measured and evaluated.

Is your business strategy fit for a digital world?

As utilities move through the phases of their digital journey, there a number of key questions to think about:

  • How are you reorienting and differentiating your business?
  • What can you learn from competitors and early adopters?
  • How can you innovate and create a unique experience within the existing regulatory framework?
  • What culture and capabilities do you need to enable this unique experience?
  • How can you manage the trade-offs between customer experience, cost to service and business risk?
  • What drives shareholder value in this brave new world?

There are no right or wrong answers. The key is to recognize the structural shift in the sector and the pace of disruption. Embracing change means being aware of new risks but also of the opportunities arising from new technology. Those companies that can get ahead will have a real first-mover advantage, having created the right environment, leadership and culture to innovate and succeed.

Summary

There’s no right way to manage disruption, but companies that embrace change are likely to move ahead of their more sluggish peers.

About this article

By

Benoit Laclau

EY Global Energy Leader

Experienced energy leader and advisor.

Related topics Digital Innovation Disruption