In order for today’s utility to survive, transformation is inevitable.
Utilities have to grapple with a number of challenges such as meeting customers’ growing level of expectations, as well as competing in a highly competitive energy market thanks to market liberalisation and the growth in prosumers which are all altering the energy value chain.
In response to these changes, utilities have to put the customer at the centre of its business if it is going to thrive, not just survive.
Customer-centric model will create real value
In order to create real value and unlock additional opportunities, utilities should focus on the future needs of the energy industry. Utilities can no longer be just energy providers. There is now a growing need for them to become more focused on what the customer needs today and in the future.
This is according to Madhavi Dahanukar, Senior Vice President and Global Business Head, Utilities, EXL Service, who co-presented last week’s Engerati webinar, Disruptive innovation – The three steps to the customer centric utility and what this means for your business.
She points to the UK energy industry as having one of the lowest customer satisfaction levels perhaps due to the fact that customers are not being placed at the heart of the utility’s operations. However, she says that there is definitely hope for improvement.
She explains: “The first step is to understand customer behaviour, their needs and expectations. Then, the utility should work backwards and understand how to make this all happen. For instance, while digitisation is necessary in the utility space, it won’t work unless it caters to what customers actually need. Utilities need to get the basics right first, such as sending out bills that are accurate and work to gain trust.”
Embedding customer centricity into business operations
According to Ms Dahanukar, customer centricity can’t be attained unless it is embedded into business operations and is not just driven by behavioural attributes, which is how conventional approaches were structured. Conventional customer service approaches are based on awareness, coaching and training to develop a better understanding on customer needs. But, these methods are no longer working effectively since changing processes, procedures and measurement techniques have been overlooked.
Customer centricity can only be embedded if the utility understands and prioritises customers’ needs. Customer centricity also needs to be inherent to the work utilities carry out, and they are measured and incentivised to provide great customer service.
Also, operating models should not only be customer centric but also smarter in order to manage the pace of change and be relevant in five or 10 years. For instance, new generations expect digital innovation from their utilities. But, it must be remembered that new technologies are useless without any attention given to customers’ needs.
3 steps to embed customer-centricity
Ms Dahanukar explains, in 3 steps, how to embed a customer-centric approach which is driven by customer outcomes and enabled by analytics into business operations to assure consistent outcomes.
Step 1: Customer outcomes
The success of the customer-centric model depends on understanding and measuring customer outcomes. “Customer outcomes” is not the same as process outcomes (for instance, setting up of a customer on the supplier’s system within a certain timeframe). Process outcomes were typically established due to the ‘silo’ or functional- driven operating models. In the customer on- boarding process, the customer outcome is timely supply and timely first bill.
Timeliness and accuracy cannot be driven by industry, process or system constraints. These must be derived from Big Data and customer behavioural analytics. While analytics is increasingly being leveraged by other industries, utility companies have yet to use and embed them effectively in their operating models.
Ms Dahanukar describes analytics as the low hanging fruit as it can do so much to improve the utility business if used effectively. For instance, analytics can improve existing services and reduce costs.
Step 2: Customer journey-based smart operations
Most utilities have front and back office teams. These teams’ systems and operations need to be integrated based on customer touch points so that a seamless service can be delivered. This avoids the need for customers to be shuttled between front- and back-office or third parties unnecessarily.
The organisational design change presents the biggest challenge because it can lead to a large restructure of organisation and systems.
In addition to having the right organisational structure, process inputs and outputs are best driven by analytics to highlight trends and areas for improvement. Analytics should be challenging the drivers of the process and predicting likely downstream impacts on the customer.
The aim here is to create a more proactive utility when it comes to managing customers instead of reacting to unsatisfied customers.
Step 3: Smarter quality models
In any service industry, companies measure quality based on existing processes and system constraints, which is typically ineffective from a customer point of view.
Customers care about the “right” outcomes (from their perspective) and not the energy providers’ process guidelines.
Outcome-based quality assurance has existed in other industries like manufacturing for many decades but has yet to be embraced by the service industry.
Another challenge with traditional quality models is the use of small sample data versus leveraging information about the whole population. The best way to solve this is through the use of analytics that identify patterns of non-conformance and their first-degree causes.
Improvement opportunities can then be towards the process, system or associate handling the customer account.
Business operations will need to be enabled by analytics and advanced technology like smart metering but the technology alone will not be enough for the utility to enjoy the multiple opportunities the new customer centric utility can leverage to ensure it builds a platform to innovate, adopt and outperform its competitors and lead the market.
In order to keep pace with the evolution of customer centricity in the energy industry, utilities will need to update and evolve towards a smarter customer-centric model than they have today.