Part 2 of the “Uncovering the Potential of Digital Investments” series
Stability and reliability are two attributes that utility companies highly value. From electricity and natural gas to water, more and more people worldwide depend on this industry to live – and any disruption in supply is always unwelcome news.
Although industry services to consumers have remained mostly unchanged for over a century, according to Bloomberg, publicly traded utilities are adding a new buzz phrase in their company filings, presentations, and news releases – “utility of the future.” Part technology, part economics, and part demographics, this strategy responds to the aging workforce – and provides opportunities to initiate enduring change that could turn into a significant competitive advantage.
Mateu Munar, head of the Utilities Services Delivery Practice for Europe, Middle East, and Africa at SAP, believes this new mindset reveals a critical moment for the industry. But to succeed, most providers should get a better handle on their data. “Data is the one asset that could help utility companies overcome increasing competition and consumer choice,” he says. “However, providers must first address a series of mechanisms that are blocking any effort to adapt to change with that data.”
During a recent conversation, Mateu and I explored ways utility companies can improve how data is used to build transformation growth for years to come.
Klaus Berghoffer: The utilities industry is on the cusp of unprecedented innovation, thanks to flexible demand, distributed generation, supply storage, advanced electronics and control devices, and data-driven technologies. What should providers do to seize this opportunity for long-term growth?
Mateu Munar: The utilities industry may have been quiet for decades, but increased competition and consumer choice are evolving the sector at an escalating pace. To address these challenges, especially on the retail side, providers require the right tools to deliver better services, find consumers in untapped pockets in the market, and innovate new business models on top of traditional offerings.
Thanks to industry-wide acceptance of smart metering and smart grids, providers have captured a high volume of data on their consumers – from home usage and power contribution to the performance of network transformers and assets. This massive volume of data flows in constant waves and needs to be processed intelligently and expeditiously.
There’s a lot to do. To devise and deploy dynamic strategies, providers need to understand their digital readiness to address these challenges and opportunities. Providers must standardize and secure their core business processes to maintain undisrupted operations – while implementing and adopting emerging digital technology and innovating new business models and processes that add value to consumers and the company.
KB: Why are technology and process standardization so crucial for utility providers?
MM: Conventionally, providers have used mainframe-type systems to support their business in ways beyond their intended design. These systems have evolved, and new solutions developed to address particular business problems. At the time, this method may have worked well. However, the latest technologies are now so data-hungry that heavily customized systems handicap any chance to integrate and upgrade solutions. The resulting risks and costs have become too excessive to support.
Providers can avoid this drag on the ability to transform by testing and working with technology linked to a standard solution with further customization and development. The workforce needs to prepare – in terms of skill and mindset – to work in this direction by embracing tremendously helpful preconfigured solutions and services.
KB: If standardization is a critical element of creating the utility of the future, how can providers differentiate themselves from a growing slate of competitors in an increasingly open marketplace?
MM: Technology alone does not allow utility providers to receive the insights they need to see shifts in their operations, consumer behaviors, and industry. Differentiation emerges when providers manage and use their data intelligently to drive innovation, real-time action, and simplified processes. Providers should facilitate digital tools that enable this intertwined relationship and are equipped to deliver unique value to their consumers.
The application of preconfigured solutions and services provides only part of a complete methodology for implementing digital technologies. This fundamental approach to a provider’s transformation opens a range of scenarios and processes they can modify in their systems quickly, while further simplifying operations and giving employees and customers the experience they expect. Adoption of the resulting innovation is supported with a robust digital core that enables the business to continue running at the same time.
With this mindset to digital adoption, providers can innovate ways to better manage a proper grid without burdening resources and resolve issues in real time with minimal effort. For example, automation, machine learning, and predictive analytics can help providers go a step further in their services by anticipating potential equipment failures and major storm damage. And for consumers, such an experience can become a valuable factor in their decision to remain loyal.
Get to know the preconfigured business processes, capabilities, and delivery approach that can help your business become the utility of the future. Explore SAP Model Company for Utilities.