Digital transformation: Towards the Energy Company 2020
Nowadays energy companies have the potential to collect more and more data on the energy consumption and grid feed of their customers, but the potential is not fully used yet. Big Data is one of the domains that allows utilities to achieve a digital transformation. They need to make a transition towards being service providers to benefit from this potential, but how?
Digital transformation: a hot topic for energy companies
Energy companies are going through some major changes when it comes to changing and improving their services. One of these major changes is the use of Big Data and the advent of digital meter reading at households and small-scale energy consumers. The rise of service offerings is generating extensive amounts of yet untapped data, with a tremendous potential for creating new business opportunities for utilities. As a result, the expenses on data analytics by utility companies worldwide, to process all this information, are expected to rise significantly by 2020, as shown in figure 1. Several energy suppliers have started deploying initiatives in the consumer market for collecting energy consumption and grid feed data, such as Toon by Eneco and OXXIO InControl. However, the collected data is not being used to its full potential yet. Utilities need to make a transition towards being service providers to reap the most benefits from Big Data.
Figure 1: The global spending on data analytics will increase fivefold by 2020 (source: Energy & Technology magazine, 2014).
A transformation with tremendous potential…
Digital transformation is enabled by innovations in Mobile, Cloud, Big Data and Social domains, as shown in figure 2. The potential of Big Data for energy companies is considerable, enabling them to maximise their operational effectiveness and fact-based decision-making. By disruptively innovating business processes through analytics-driven operational excellence, utilities can considerably increase their agility and responsiveness, reduce their operational costs and improve the reliability of their assets. By assuming the role of energy integrator (i.e. assuming the business and technical responsibility of providing all sources of energy supply safely and reliably to a customer), they are better prepared to optimally balance supply and demand points, which can also help to identify fraud. Improved analytics also positively impact maintenance, by increasing the planning efficiency.
Figure 2: The four digital transformation domains that together allow a company to transform (source: Sia Partners).
Furthermore, in addition to improving business processes, digital transformation can act as a catalyser to increase customer satisfaction and retention, by delivering a ‘360-degree customer-of-one’ experience (i.e. treating all customers as individuals with a much more instantaneous and fulfilling method of interaction), reduce costs and improve the management of energy demand. However customer expectations are not being met yet when it comes to offering the possibility of managing everything via a smartphone app, as is the case in other industries today like the banking and telecommunications sectors. Finally, digital transformation in utilities can lead to modified and new business models, which could include service offerings related to internet, security and even health services.
…but which needs to be carefully implemented
The benefits of digital transformation have been recognised, but several issues remain when it comes to their realisation. Nowadays fifty percent of big data activities are executed only on a basic level, due to for example the high costs of data storage and data analysis. Storing and structuring data is not only complex from a technical point of view, but people also need to have the necessary skills to be able to analyse the data. Data analysts and data scientists are scarce in utilities, and the ‘Nationale Denktank’ predicts that there will be a serious shortage of data specialists in the near future. On top of these issues, the current regulation further deters energy companies from taking Big Data to the next level, as privacy and data security issues are still seen as too much of a risk. However, other industries (such as the airline industry) have proven that Big Data can be technically and successfully used to recognise and enhance customer value.
Three key conditions for a successful transformation
Big Data and data analytics are a critical factor for utilities’ future success, but their adoption remains slow and painful. To accelerate this process and pave the way towards a successful transformation of their business model, energy companies need to:
First focus the benefits of data analytics around the whole energy chain. Energy companies need to optimise the added value of Big Data within the whole organisation, and not only focus on one single business unit. Experience in the banking sector has shown that the number one issue with Big Data is that there are too many ‘silos’ and that data is not shared within the entire organisation. A focus on the whole energy chain is therefore key to success.
Secondly, use best-practices from other industries. The banking sector and airline industry are far more advanced when it comes to the use of customer data. The latter for instance has shown that bringing together different types of passenger information to create a single consolidated view of the customer is more easily said than done. Their experience should be used to gain in-depth knowledge and proven track records, so that pilots and proof-of-concepts can be rolled out.
And last but not least, measure the results of these pilot projects, to provide a proof of success.
Setting the wheel in motion
The first steps towards digital transformation have been made, but there is still a long way to go. Utilities should increase their focus on the Energy Company 2020 and their future role as a service provider, while making use of the data provided by their customers. Setting up pilot projects can provide energy companies with the proof they need to change their focus. Sia Partners recommends that energy companies develop a roadmap with foreseen strategic investments, by mapping the As-Is situation with a strategic vision. From there utilities should develop a roadmap of projects critical to the mission, and finally prioritise projects to ensure the right projects are being conducted, leading them towards the Energy Company 2020.