Pandemic Unleashes Utilities’ Potential

“Out of adversity comes opportunity,” said Ben Franklin. The pandemic created the most significant challenges that energy companies ever faced. Today’s utility management teams need to heed Franklin’s advice in order to position their companies for success in the future, according to EY.

The COVID-19 pandemic dramatically reshaped CEO agendas. Before it, many energy companies slowly and cautiously responded to new imperatives. That is no longer an option. The pandemic shrunk life cycles, reshaped business processes, and increased competition. Consequently, the trajectories of thriving and surviving companies are diverging rapidly.

The Road to Success

The path to strength may seem counter intuitive: utilities need to invest more during these turbulent times. The health care crisis shifted transformation from an important consideration to an urgent one. Sometimes because they had no other choice, utilities invested in new technology, like cloud, mobile, and social networking, and quickly updated inefficient legacy business processes to modern, digital, frictionless interactions. The differences between the two are becoming more pronounced and more important to corporate vitality.

Over half (58%) of thrivers accelerated their existing transformation in response to the pandemic. As a result, they are already pursuing a growth agenda, which will help their organizations in the future. They are betting that technology will provide them with a strong foundation: 61% plan to undertake a major new transformation initiative and 68% plan a major investment in data and technology. These CEOs also plan to spend more on transformation over the next three years.

A Change in Thinking

In addition, their rationale for investing in such projects has changed. These investments are not going to be offset by cost reductions for the most part, with nearly half citing investor support in these initiatives even it diminishes their near-term financial performance.

In addition, CEOs are shaking up the human dimensions of their enterprises, such as talent, leadership, organizational structure, and culture and purpose. The majority of thrivers (68%) have at least one people-related transformation priority, and 15% have two or more people priorities. These programs emphasize improving employees’ skill sets, improving collaboration, and creating more decisive mindsets.

In contrast, most survivors (54%) slowed their existing transformation priorities and focused on cost reduction. Where thrivers are moving quickly ahead, survivors are still retooling, a process that will put them in danger of falling behind market trends and possibly reaching obsolescence.

The result is a significant difference in future outlooks among utilities. The paths of thrivers and survivors should diverge even further in the future: 79% of thrivers are projecting growth in three years; only 7% of survivors are. As a result, the survivors’ future is murky.

The pandemic forced a quick and dramatic transformation for energy companies, one that divided them into camps. Those utilities that embraced digital transformation are set up for success in the future; those that did not will realize less growth and perhaps imperil the business. Consequently, the onus is now on management to ensure that their organization moves to the former category and not the latter.