Increasingly, utilities realise the importance of becoming a digital organization but they continue to find themselves in a phase of deploying discrete digital point solutions.
Digital not yet a business model
According to the CGI Global 1000 outlook which was carried out in 2016, 62% of the 110 utility participants said that digital transformation is being executed and that they have already adopted various initiatives of a digital nature from mobile workforce management, to customer portals and data analytics for improving asset management. However, only 27% have an actual digital transformation strategy in place, leaving the majority of utilities in the first stages of transformation, that is the “experiment to learn”. They are leveraging digital as an efficient technology solution but have yet to adopt digital as a business model.
The findings highlight that utilities are under unprecedented pressure from regulators to perform and reduce costs while improving customer satisfaction and comply with regulations.
According to Ana Domingues, VP, global industry lead for Utilities and Communications at CGI, utilities should be ramping up their digital transformation efforts. “They should be taking a holistic and enterprise-wide approach to the deployment of new technologies, as well as looking at multiple value drivers they can deliver when viewed in an interconnected end to end way. Utilities should move in an ‘evolutionary way’, constantly trialling and rolling out innovation that leads to a more customer centric, insight-led organisation which has more real-time integrated operating models, enabling a wider transformation approach.”
Domingues also suggests that utilities explore what interconnected digital technology can do when combined with new business and operating models. “This is particularly important due to the combination of decentralisation and decarbonisation impacting the energy system with high volumes of potentially disruptive distributed loads that are being linked to the grid such as distributed renewable generation and micro-generation, electric vehicles, micro-storage solutions and combined heat and power .”
The transformation to a digital enterprise requires utilities to consider all new technologies especially those that are driving and not just enabling the digitisation of an interconnected energy ecosystem. Often, many of these are outside of the control of traditional utility market players.
The key challenges to becoming digital
As the move to a digital organization becomes more critical, there are challenges that utilities struggle to grapple with. According to the CGI Global 1000 outlook, 71% of the respondents say that their biggest challenge is cultural as well as change management.
Utilities come up against resistance when it involves breaking up silos and changing old ways of working in exchange for new end-to-end business processes. It is far more difficult for established businesses, than those that are being created as digital-born businesses, to transform as they need to evolve legacy systems and change the way they view the market, the business and their clients.
Says Domingues : “We know utilities struggle to understand what digital means for their business. They need to know where the utilities industry is heading, which new business and operating models as well as skills will succeed in the future. They also have doubts around which technologies they need, balancing the returns with the investments that are needed now, the best roadmap for them, how they connect the legacy with the new in adopting digital as a business model and in leveraging the opportunities of moving to a low carbon economy as it turns digital.”
Balancing the need to define a strategy with the short term needs towards successful transformation
The findings also highlight the fact that many organisations are leveraging digital technologies by deploying discrete point solutions as a way to optimize the existing business and its processes. Optimizing the business is the biggest priority for utilities, according to the findings and this can be achieved both from modernizing and from leveraging digital technologies as they enable better insights and higher levels of automation for increased productivity and reliability.
As utilities pursue these business objectives, they are actually accessorizing digital technologies on top of their IT landscape in search of new efficiencies. Domingues says that this should form part of an enterprise-wide strategy approach where utilities look at new ways of creating and delivering value, as well as connecting the legacy with the new. If this isn’t done, utilities may not be extracting the full value of their investments, she says. Still, while automating old processes might give utilities some productivity gains, it is important to bear in mind that today’s digital technologies might not be fit to support an end-to-end approach to digital as a business model.
While many utilities already grasp the need for a holistic approach to technologies, people and processes, they also understand that the basics need to be right first. Says Domingues: “IT modernisation will provide the foundations on which to build their digital transformation initiatives while optimizing the business operations and increasing agility.”
Interestingly, the findings show that utilities who defined themselves as leaders in digital transformation are actively outsourcing more of their IT needs as a way to accelerate the transformation process. “They realise the pace of change is accelerating, that transforming established organisations is challenging and the learning curve can be too steep. Innovation and new ways of working will need to be adopted faster, driving the need to have more of an outside-in approach. This will accelerate the adoption of new practices that are agile and innovative.”
Another observation made by CGI is that utilities are looking more actively into a business process approach when it comes to achieving their business outcomes. There appears to be an increase in data sharing between the operations side and the IT side and this is in response to the fact that new projects in network utilities require a combination of IT and OT investments and planning.
The sharing of data, made possible by the increasing interconnection of the energy system, will drive the emergence of new digitally-based business models and introduce new ways of interacting with the customer and deliver value in new ways. For instance, some utilities market players are beginning to see the value in using the flexibility from customers’ energy production and consumption of energy to help balance the grid and avoid building expensive new generation capacity.
As a sharing energy economy emerges, there will be a growing need for increased collaboration across the value chain, that will need to be more real-time based, and utilities need to adopt it as part of the transformation process.
Domingues points to the REX solution CGI developed for Alliander, a large network operator in the Netherlands, that allows optimizing demand and supply within clusters of customers with surplus or shortage traded on day-ahead and intraday trading markets. Another example from Alliander is their Open Smart Grid Platform, an Internet of Things platform created by CGI, which enables an ecosystem of 3rd parties to innovate and develop new services and products over open source technology.
“Alliander is a regulated business and they see themselves as having a very important role in driving innovation across the ecosystem. Suppliers who play in a competitive market, can have a number of drivers that might prevent them from creating new energy based services that drive consumer participation in supporting better management of the new energy system. This is a role that network operators could capture,” Domingues says.
The power of harnessing data
There is a large consensus around the importance of data when it comes to supporting the optimization of processes including asset management, network operations, customer experience and the development of new services. “It is important that utilities look at what value existing and new data can bring into supporting this more agile and flexible approach”, says Domingues.
For network operators, data will be crucial to increase their visibility on what is happening on the grid. “They can use this knowledge to increase automation and reduce operating costs.”
In response to changes in the network, processes have to be carried out in real time especially when it comes to the monitoring of asset management. “This is a crucial shift in the way we view asset planning because today asset management plans are signed off by regulators for a period of five to eight years following a paradigm of a simple single-way supply-driven network.”
In response to this, CGI has come up with a framework called activeAM (Active Asset Management) that allows organisations to keep track of the impact of their asset management plan delivery in near real time, correcting their course along the way. This concept includes the Integrated Network Model that inferences data across all domains to ensure a fully aligned and inter-related single source of data is available to all processes and activities across the organization..
According to Domingues, the traditional planning and management of physical assets will not be enough. To achieve higher efficiency levels, data must be exploited. “To do this, utilities must align their asset management objectives and plans to their vision and business objectives with strong links between each of the cascading layers from top to bottom.”
Strategy is key
Domingues concludes that while digital transformation is gaining momentum amongst utilities, it appears that many are still unsure about which approach to take.
“Many do not have a digital transformation strategy and roadmap and if they do, they have yet to adopt an enterprise-wide approach which is crucial if they want to drive change and overcome the key challenge of changing culture.”
She adds: “Many utilities already have various digital elements necessary for re-orientating their organisations’ mindset but they have yet to understand how all these elements, and others that are still missing, need to come together to create a strategy and a roadmap for becoming digital organisations.”
Other industries, such as telecommunications, banking and retail, are ahead of the utility space when it comes to the customer experience and exploring digital customer channels.”Utilities are keen to learn from these other industries, following a think outside-in approach, as a way to accelerate their transformation even further.”