Asia’s utility needs are rising exponentially as economies boom and infrastructures modernise. The need to innovate, specifically when it comes to meeting today’s customers’ complex needs, is critical for the future utility business.
Asia’s urban expansion
Asia’s economy is set to expand by 5.7% in the next two years, according to the Asian Development Bank. The majority of this growth will occur in the cities as manufacturing and services are the primary drivers for most developing nations’ rising GDP. Inevitably, this leads to a mass migration of people as they move from rural areas to cities.
Between 2000 and 2010, around 200 million people in East Asia moved to urban areas - a figure that would be the world’s sixth-largest population for any one country. This has put strain on transport, power and utility networks. As the urban population in Asia cities continues to swell by 44 million every year, problems related to congestion, power outages and inadequate waste management are likely to occur.
Meeting Asia’s growing energy demand will not be easy especially since it is predicted to double in the next 15 years. We spoke to a number of energy experts at Asian Utility Week who all agreed that innovation and customer-centricity will help utilities in the region meet various challenges
‘Connecting to the heart of the customer’
Revenue losses due to theft is a big problem for utilities operating in an over-crowded urban environment. Ravindra Joshi, HOD Special Consumer Group TATA Power Delhi Distribution Limited, spoke about his company’s innovative take on revenue losses when it comes to customers who live in slums, ‘the poorest of the poor’.
After privatisation in 2002 in north/northwest Delhi area, TATA Power’s licensed area of operation, electricity losses in the slum areas reached nearly 100%. “We realised that the area had to be dealt with differently. We realised that we had to win consumers over to reduce losses.” While theft reduction was an important business decision for TATA Power, the company also wanted to provide a reliable 24-hour power supply to the slum areas so that their lives could be improved. “The reliable power would help kids study at night, improve safety and give these people the feeling that they are part of mainstream society.”
The company has also provided the slum area with much-needed literacy centres, employment and free medical assistance. “It’s all about winning the hearts of poor customers” says Joshi.
Customer satisfaction levels have improved from 30% to 90% and this has had a knock on effect in other parts of the business-Joshi says that the company’s innovative approach has seen billing efficiency rise from 40% in 2009 to 84% today. Billing demand has increased from $3 million to $20 million and collection has increased from $2 million to $18 million.
Says Joshi: “Many utilities in the Asian region are giving up when it comes to energy losses in the slum areas but they shouldn’t. Our figures show that it is possible with innovation to improve these people’s lives and reduce losses at the same time.”
Innovation needed to cater for Asia’s new middle class
Dr Bartosz Wojszczyk, President and CEO, Decision Point Global said there are a few major drivers for innovation in the energy sector and the customer is one of these. Sustainability and a green agenda is also a driver so it is important to rethink how electricity can be generated in a more sustainable manner. “We need to deliver a more reliable source of power to the customer given their higher expectation of service levels today.”
Utility network performance has become increasingly important and there is a lot of potential for innovation. He pointed out that over the next decade, Asia’s emerging countries will see an addition of 2.5 billion people to the middle class and that they will expect a higher level of innovation from service providers. He says: “We have to innovate around resources to cater for this new lifestyle.”
Preparing for disruption with innovation
Stefan Padberg, Global Innovation and Cooperation , RWE, says that there are so many innovation “hotspots” including Bangkok, Hong Kong, and Singapore to mention a few.
He says that in today’s competitive environment, it is important to undergo disruption. Utilities will need to change their ‘business as usual’ model and face disruption through innovation.
But, what is holding Asia’s utilities back when it comes to innovation?
Padberg says it is probably cultural. He explains: “Asia’s culture generally looks down upon failure but the reality is that innovations have to be tested thoroughly and there will be instances when technologies, products or services don’t work.”
“Market disruption can happen at any time and utilities should use the time right now with existing business models and current high revenues to prepare for the future. If they don’t, it can become challenging for them.”
Catering for today’s tech-savvy customer
Evo Stefanov, Managing Partner, Methodia, briefed us on the evolution of software and the need for innovation in the enterprise in line with changing consumer paradigms.
He said: “The software challenge for utilities is they need to quickly shift their focus of how they develop their software and how they drive new solutions. Utilities need to switch from pushing tech to being pulled by tech and consumer needs. Consumers today use software tech more than ever before and utilities need to cater for this.”
He says that consumers have become more knowledgeable and utilities need to quickly adapt to this trend. “Software tech can help utilities be ‘more in tune with today’s customer’.”
“Utilities need to be smart and realise what’s going on in the market place. They should acknowledge that everyone can participate in the energy market so they should start thinking about tools and technology that will enhance the customer-utility relationship.”
Clearly technology and the ability for people to participate is disrupting the utility business. “Already, very established models have been broken down and this is only going to continue. Those who are smart realise they must participate in this brand new way of doing business so that they can be relevant in the future.”
There is a saying: “Don’t cut the branch you are sitting on” but Stefanov suggests to utilities: “Start cutting the branch because otherwise you will fall.”