As the pace of change accelerates in the energy market, partnerships are becoming critical to success. So is embracing a fail-fast approach.
Every year, CGI meets face-to-face with its clients to learn about the key trends, priorities and innovation areas that are driving their executive decisions.
The resulting findings and insights from this year’s 1,300 client interviews are shared via CGI Client Global Insights industry reports.
In the utility sector, CGI spoke with 116 clients from 17 countries to take a temperature check on their efforts to adapt to the rapidly changing energy market. The utility players, which range across the value chain from generation to retail, shared their perspectives on the trends affecting their organisations, and the implications for their business and programmes.
Increasing demands of digital customers, an aggressive rise in the volume of renewables and the need for faster electrification are accelerating the move for utilities to transform into truly digital organisations. In fact, in the 2017 report, 42% of executives confirmed having a defined enterprise-wide digital strategy in place, versus just 27% in 2016.
Utilities and technology partners
Utilities are also extending their strategy to include a wider ecosystem of partners, with 55% looking to collaborate with external providers. These steps are part of the larger plan to leverage emerging technologies to create an internal environment that fosters innovation and new ways of thinking - two key elements to achieving a successful digital transformation.
CGI recommends adopting an “outside-in” approach to accelerate the trialling of emerging technologies and bring in the additional capabilities - and in some cases tangible assets - needed to create new revenue streams that leverage decarbonisation opportunities, says Ana Domingues, Vice President, Global Utilities and Communications at CGI.
There is, however, no plug and play solution to choose the right technologies or the right partners. “Each utility will need to find the answers that best fit the specificities of their local market—from regulations and market structures to consumer attitudes, technology maturity and the utilities’ own DNA,” says Domingues.
This year’s CGI Client Global Insights also reveal that utilities are focusing on innovation to drive changing models and differentiate themselves for growth in an increasingly competitive, rapidly evolving and demanding marketplace.
Consumer technology and platform players
Utilities are keen to expand their enterprise ecosystem. They are exploring different ways of engaging with start-ups and establishing innovation centres to drive cultural change at a faster pace, adopt innovation, and overcome gaps in capabilities and assets.
As digitalisation blurs the borders between industries, Domingues says we can expect to see more partnerships forged with non-traditional players in the utility market, such as consumer technology vendors and platform providers from other sectors.
Leading utilities are also acquiring equity stakes in start-ups, particularly around disruptive grid edge technologies and have created special units and specific new venture funding initiatives to further their objectives.
A prime example is E.ON Venture Partners and ENGIE New Ventures. The latter is a €100m investment fund. It has invested in Tendril to speed up the development of European energy services management solutions, as well as in Redbird, an expert in the analysis of technical data collected by drones; and in KiWi Power, a leading UK demand response aggregator.
Such investments allow utilities to accelerate change by bringing in external innovation whose creation they have influenced to better meet their needs, explains Domingues.
CGI has been co-creating several business and operational solutions with utilities by leveraging emerging technologies that not only drive the adoption of innovation, but also leverage the company’s own ecosystem of partners.
An example is the REX solution created in collaboration with Alliander, a major energy distributor in the Netherlands. REX uses PowerMatcher technology from the Flexible Alliance Network, empowering clusters of consumers to aggregate their energy surplus or shortage and trade in existing markets.
Another CGI-Alliander partnership is the Open Smart Grid Platform. Based on an open source IoT platform, it enables third parties to create new services.
Utility agility and culture change
Domingues says that in the learning curve of creating new value streams and delivering that value, energy companies need to embrace a fail-fast approach.
Utilities will need to develop a culture of experimentation and be willing to try new technologies, create new business and operating models, develop new products and services, and explore novel ways of working with and engaging consumers.
Furthermore, they will need to foster an organisation-wide mindset that failure is okay, as the focus should be on the lessons learnt and their application. Basically, the knowledge gained from a failed attempt improves the probability of success of the next attempt, explain Domingues.
She advises selecting a few initiatives, underpinned by an enterprise-wide digital strategy, and then using agile methodologies for quicker iterations and incremental development, such as Scrum, to make it possible to “re-evaluate the form and value of ideas more quickly and put the user/consumer in focus by involving them continuously in the process.”
“The aim is to begin gathering data from a pilot within 6-8 weeks and then use the results to shape the second phase to make a product a better fit for market, or to simply abandon the pilot and apply the lessons learned to the next idea,” says Domingues.
This allows an organisation to consistently experiment and adjust through learning, launching, re-learning and re-launching, and refining in manageable iterations.
This, she says, can only happen by catalysing internal change to build a culture of innovation, speed and agility and aligning priorities and the pace of change between the business and IT organisation. The move to agility represents a necessary mind-shift and culture-shift across the enterprise.
Domingues concedes that this is not easy in an industry with a risk-averse culture; where being unable to keep the lights on will make front-page news. And, certainly, while caution must be exercised when it comes to mission-critical systems, for those alarmed with the word failure, the key is to embrace it and learn from it as part of a larger blueprint to successfully transform faster.