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Utilities…Slowest Adopters of Digitalization?

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Nevelyn Black's picture
Writer, Independent

Nevelyn Black is an independent writer with a background in broadcast and a keen interest in renewable energy.  In the last few years, she transitioned from celebrity interviews and film shoots...

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  • Feb 25, 2022

Today, customers are digital experts.  Daily they navigate, operate and are very accustomed to, mobile devices, apps, machine learning and automation.  Accepting that reality, 38 percent of executives plan to invest more in technology that will give them a competitive advantage. In fact, net global spending on digital transformation is expected to increase from $1 trillion in 2018 to $2 trillion in 2022.  PYMNTS’ research shows that nearly half of the billing and collections executives at utilities and consumer finance companies believe digitizing payments will drive growth for the foreseeable future. While COVID has accelerated the need for digital transformations and executives say they agree, research shows 47 percent of companies haven’t even started on their digital journeys.  

Utilities are among the slowest to adopt digital technology for billing and customer engagement.  “About one-third of large utilities still do not have an app,”  said Jon Sundberg, senior digital manager at J.D. Power. “This is inexcusable in the current environment in which consumers are controlling virtually every other aspect of their lives via smartphones.”

The City of Toronto teamed up with SaaS provider of government services and payments, PayIt, to create digital and convenient payment options for customers.  The PayIt platform consolidates services and payments into on connected experience for customers.  ”We are thrilled that the City of Toronto has put its confidence in PayIt to deliver a truly modern experience. MyToronto Pay provides citizens with a safe, secure and easy way to pay their bills from anywhere, using their desktop or mobile device."  said John Thomson, Founder and CEO PayIt.

Billing is one area utilities are looking to improve.  However, customers continue to have problems with other tasks like researching energy-saving information, updating service and locating information on leaks. J.D. Power found customer satisfaction scores decline where there is a lack of digitalization.  How is your utility providing digital options, and improving customer satisfaction to the “always-connected consumer?”

Paul Gwaltney's picture
Paul Gwaltney on Feb 25, 2022

I think there are several factors at play with utilities and their slow adoption:  the inertia of technical debt--heavy legacy systems that consume a ever-greater percentage of technical budgets each year, leaving less for innovation; the slowness of regulating bodies and the adoption of allowing rate recovery on SaaS/Opex spends as they do on Capital spend; and the shear red-tape many utilities create internally around budgets and technology approvals.  This cycle itself, in my experience, can be 18-24 months for a major initiative.  It is difficult to be nimble and agile in this environment.

Mark Wilkinson's picture
Mark Wilkinson on Mar 7, 2022

Great points, Paul.  Another issue with digital adoption among utilities comes from a big difference in the approach to technology.  For instance, in big industrial operations, the cost for catching and fixing defects increases the farther away from the point of origin.  Finding a mistake in the design phase of a piece of equipment delivered to the home has a relatively low cost and doesn't delay the delivery of the program, but a late discovery of a defect after devices have gone into production can have catastrophic consequences on a project.  As a result, comprehensive planning at the start reduces risk and defects and reinforces the more "waterfall" oriented process of the majority of utility projects. 

Digital applications, especially the current generation of websites, ecommerce, and SaaS solutions don't follow the same model.  Because changing code early or late in the process doesn't' have the same massive impacts to delivery or costs, the model for digital delivery leverages iteration and rapid prototyping to get experiences into contact with customers to collect real user feedback, and make quick changes.   Iterative approaches like Agile Methodology typically means the comprehensive planning up front early in the process doesn't add as much protection from risk.  Many digital designers would likely argue that too much planning actually increases risk in the digital world because of the distance between planning and customer or user feedback and the need to change direction due to feedback that changes radically from planned outcomes.

Both cultures use the same language about design, development, QA, UAT, customer or user feedback, etc, but those terms can mean radically different things, which adds to the clash of cultures in a utility digital project.  We always go through an exercise of redefining terms when we work with utilities on a digital project just to be sure everyone works from the same playbook and we decide on what agile methods still work for teams that have a legacy or waterfall model to account to, as well. 

Mark Wilkinson's picture
Mark Wilkinson on Mar 7, 2022

Great post, Nevelyn.  I don't quite know how I feel about utilities building apps for their customers.  I know that apps support an "always connected" customer, and digital brands  And, it's true that customers have flocked to apps, but not all with the same success, and I'm not sure utilities and their customers necessarily get the full value from an app versus a better website presence.    Success with an app means delivering an app that customers use fairly regularly and gradually for new capabilities.  Considering all of the apps on my own phone, only a few get regular use or I feel I can't live without.  I have apps for retailers that I frequent and use at least weekly.  I have banking apps that facilitate regular banking or get risk alerts a few times a month.  And, I have insurance apps just for emergencies, so I hope I never have to use them. 

I think the threshold for a utility app depends on the capabilities the utility empowers for its customers.  If the app helps with home automation or energy management directly and would be used regularly, an app makes sense.  On the other hand, if systems limit the utility to show account information, pay bills, and manage outage communication, a mobile app may not any more useful than a mobile-friendly website experience, but the app would require substantial overlapping investment and maintenance.

The only other reason to lean into apps relates to data.  Amazon tops rankings of the most popular apps, and it covers most if not all of the same functions as their website, but the company benefits from a great deal more customer data when those customers order through the app.  If utilities can leverage that better data and demonstrate either upgraded capabilities or more immediate customer value within the app, then the investment makes sense. 

I know utilities get a bad rap for the lack of a modern digital experience and the slow pace of digital transformation.  Apps from the utility may be a great tool for increasing customer engagement and to facilitate customer operations.  Success seems to depend on making sure that the app serves a purpose above and beyond what a decent website CX delivers, else the utility may be disappointed with the return on that technology investment.  

Thanks for the thoughtful post.  Got a lot of conversations started today with my solutions team.  Keep them coming.

Nevelyn Black's picture
Thank Nevelyn for the Post!
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