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The Importance of Innovation in the Utility Industry

Byron Lee's picture
Partner Bain & Company

Byron has more than 20 years of consulting experience in the energy & natural resources industry. He holds deep expertise in corporate transformations, strategy, operational performance...

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  • Jul 21, 2019 9:01 pm GMT
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As irreversible change takes place in the utility industry, companies are turning to digital technologies and a more innovative mindset. From new technologies, regulatory changes, rising costs, and a growing call to decarbonize, disruption is forcing the utility industry to change.

Emerging technologies have a critical role to play, and utilities need to embrace them and the opportunities they present.

Technological advancements

Technological advancements are transforming business and operating models in the areas of connectivity, automation, and artificial intelligence. These changes are blurring the lines between sectors and creating exciting new possibilities.

Connectivity: The Internet of Things (IoT) is enabling usage-based revenue models. A fusion of technological platforms, data, and physical devices is unlocking new approaches. Blockchain is bringing about the development of decentralized business models.

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Automation: Customer and business operations are being transformed by automation of processes. This is having an impact on costs and the delivery of services.

Artificial intelligence: Breakthroughs are occurring in cognitive computing, from streamlining customer experiences with chatbots to optimizing value chains, using machine learning for mass personalization and applying advanced analytics.

The future utility customer

In the future, customers will have personal relationships with their utility companies through a dedicated “smart home platform.” They will be able to access it through a laptop, tablet, or phone. Customers will have data-driven, personalized experiences in real-time.

The future utility employee

Employees will be tech-savvy professionals who rely on independent yet connected systems and often collaborate with bots that use AI to do tasks. Most processes will be automated so employees will do less routine, sometimes dangerous tasks and will be able to focus on more complex, customized work.

Bold steps are needed to embrace change

The utility industry is experiencing new opportunities to interact with markets and customers and determine how and what services to offer. Convergence is altering the rules, and the whole marketplace is becoming more dynamic and demanding.

A technology-led approach to innovation means having the capability and environment to test new business models, experiences, and ideas in a situation that’s not constrained by everyday business.

It means applying design thinking, prototyping, and in-market experimentation quickly. It means creating new materials, new products and services, and testing, validating and iterating them.

Deployment involves raising capital and executing and scaling innovation through a variety of mechanisms. Implementing this most appropriately involves understanding the potential for customers and the implications to the organization.

A customized approach

Innovation is never a “one size fits all” approach.

Create internal awareness: Creating internal awareness about disruptive technology and fostering a climate of change is important.

Execute new ideas: Executing new ideas and business models centered on innovation can make a meaningful impact.

Collaborate across industry lines: Collaboration is also necessary for successful implementation. Players across industry lines need to work together to make room for innovation.

What should utility companies aim for?

Utility companies should be focused on improving operational efficiency, productivity, and reliability. How can they achieve this? The first step is to recognize that transformation will be significant, substantial, and long term. It will be an ongoing process that won’t end soon.

The process begins with defining what the organization wants to achieve and then developing a roadmap to do so. It’s vital for an organization to develop innovation capabilities that enable it to design, test, and iterate each concept speedily through to launch. It needs to develop or acquire new technology through various means.

Fostering an innovative company culture is another step towards setting an organization on a sound path for the future.

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Thank Byron for the Post!
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