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From Disruption to Transformation

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By John Gustafson, Cognizant Technology Solutions

Electric utilities have always operated in an environment of fluctuating fuel prices, uncertain regulations and extremely commoditized business models. This environment coupled with asset-intensive operations needing continuous infrastructure investment to generate and distribute power has left utilities with little room to invest in customer-facing technologies. Results of a new Cognizant/Ovum Smarter Utilities survey of 100 U.S. utilities indicate, however, that times are changing. The imperative to reduce emissions, the need to reduce reliance of fossil fuels and the rapid evolution of technology are providing utilities with compelling reasons to look for new ways to operate. The survey revealed that utilities also are recognizing the need to become more customer-centric lest more consumers pursue direct energy sources.

The "digital shift" presents both a reason and opportunity for utilities to do things differently. Utilities' move to smarter grids and cities, along with their move to digital technologies provide an opportunity for transformation. They can leverage new technologies to innovate and deliver 21st century customer experiences, while optimizing their operations and maintaining compliance.

It's a tall order, but many utilities are already well into this transformative journey that will enable them to thrive in a period of great change. In fact, more than one-third (38 percent) of U.S. utilities surveyed plan to invest in customer service tools that will drive better customer experience.

Most energy executives understand that it is crucial to engage consumers and address their concerns, though not all survey respondents agreed on the level or type of investment needed to achieve that goal.

Still, more than 60 percent of service providers plan significant investments in tools to provide customers with more information on their energy use. By contrast, less than half of respondents plan significant investment in value-added services, including smart-energy technologies and energy-efficiency programs. This indicates a disconnect between "talking the talk" and "walking the walk."

At the same time, a significant 36 percent of utilities surveyed indicated they plan to invest in smart grid technologies to enable distributed generation, greater network efficiency and integration of renewables and storage. These initiatives will lead to improved cost effectiveness and better security of supply in a time of increasing complexity. In addition, these utilities will rely less on field service, replacing it with targeted asset maintenance and proactive lifecycle management.

In addition, the survey revealed, in what perhaps can be interpreted as a definite shift in the traditional approach of developing capabilities organically, that most respondents view collaboration within the larger ecosystem of players as critical. More than 50 percent of all respondents and 75 percent of independently owned utilities agree that collaboration with third-party service providers will be vital to executing their business strategies.

Not all U.S. utilities are in the same state of readiness-whether intellectual, operational or financial-to embrace digital disruption. Many are waiting for regulatory guidance that might come too late, if at all. There is a major risk of not going far enough toward customer centricity. History has shown that established asset-based companies such as telecommunications providers, could see their assets exploited by over-the-top players who understand the end customer and are not burdened with the constraints of operating as a legacy player.

This new era of digital disruption presents the opportunity to empower customers, enable optimized transmission and distribution networks, help balance generation against demand, and integrate energy supply with every other aspect of connected homes and smart cities. Utilities that can seize the moment and capitalize on these advances position themselves well for the future.

Those that fail to embrace these new technologies, however, are in danger of being bested by over-the-top competitors, fickle shareholders and fierce regulators. Recognizing that transformation is essential is a key starting point, but utilities need to act now (if they have not already) to bolster the experiences they deliver to their customers.

Digital Transformation: Where to Begin?

Regulation will never catch up, and utilities waiting for clarification will lose the initiative. Rather than wait, there are several practical steps to take now:

• Invest in the smart grid: With the growth of solar home systems and electric vehicles, utilities should make investments-if they are not already doing so-in smart grid to enable distributed generation, integration of renewables and storage and greater network efficiency, for cost-effectiveness and better security of supply.

• Focus on customer experience: Utilities are notorious for earning the lowest customer-service ratings in the country. Customer experience needs to be a priority, providing greater transparency, energy-efficiency tools and real-time information.

• Get involved with connected homes/smart cities: These will be the beginning, middle and end of the next-gen utility landscape. How involved utilities become in these areas will define whether they become leaders or laggards.

• Step up collaboration: In a world increasingly defined by connected people and devices, going at this alone will be difficult. Companies must leverage everything available to them to help them through this journey-partnering with vendors, associations, commercial entities and the like. Utilities must let go of their tradition of working by themselves in favor of working with vendors and partners to deliver the next level of service as an ecosystem.

Utilities are done sitting on the sidelines of the digital revolution. A new survey shows that customer experience and service are the top consumer-facing technologies U.S. utilities will buy as they move to customer centricity.


John Gustafson is vice president and business unit head, energy and utilities for Cognizant Technology Solutions.

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