There’s never been a more critical time for the Utility sector to transform and re-invent the wheel. The industry’s landscape is currently defined by emerging challenges and seismic shifts, but it’s also the perfect time to embrace new opportunities opened up by technology.
In order to face these challenges and opportunities head-on, the sector needs to carefully assess the road ahead and immerse itself into a customer-centric era. One of the best ways to do this is by leveraging data in innovative new ways that can build a more powerful customer experience.
The recent history of the Utility sector
By far the biggest challenge currently facing the Utility sector is the global push for sustainability in the face of growing concerns over climate change. Utility companies are under increasing pressure to adapt their business practices and energy generation to new green targets.
This comes at the same time as increased demand, as the world’s digital revolution encourages an ever-greater focus on technology in everything we do. Coupled with an ever-growing population, the strain is mounting on energy and water providers to keep up with this surging demand.
Meanwhile, customers are also becoming more switched-on to the workings of the Utility sector, particularly in terms of sustainability. The green credentials of Utility companies are becoming a more prominent factor in consumer decisions concerning which provider they choose. This new green focus, coupled with increased consumer awareness, means that Utility companies are facing a larger pool of customers willing to switch providers.
This effect is set to be especially pronounced in Australia. While as of 2018 about 50% of consumers had never switched Utility providers, the Energy Council of Australia’s move to introduce “reference bills” is likely to add more pressure on the sector in the coming years. But perhaps the biggest source of pressure is the unknown. The federal and NSW government have recently made several headlines for their initiatives and strong commitments to a greener and more energy-efficient in NSW and Australia.
Why it’s critical to evolve, emerge, and leverage technology
These challenges represent significant upheaval in the Utility sector, with increased pressure to modernise and invest in sustainability coming at the same time as revenue streams are squeezed and becoming less reliable. As such, it’s vital that Utility companies react appropriately and rise to the occasion.
Failing to adapt sufficiently means Utility companies will face bigger risks of resource shortages and negative customer sentiment. The key to overcoming these challenges lies in adopting new technology, as seen in one survey in which 95% of energy sector leaders agreed that digital technology transformation is a top strategic priority.
However, the same survey found that only 30% of respondents were actively exploring disruptive technologies like AI, analytics, and machine learning. According to Felipe Requejo, Deloitte Global’s Consulting Leader for the power and utility sector, this suggests that “while digital transformation is a priority, it may need more traction in the sector to deliver on its true potential.”
Much of the focus in terms of modernisation currently lies in the adoption of more environmentally friendly technologies and business practices. But Big Data, machine learning, and AI all represent powerful opportunities to collect deeper insights across the Utility sector’s operations, from demand forecasting to customer service.
With the Big Data analytics market in the energy sector expected to grow at a compound annual growth rate of 11.28% through to 2026, it’s clear that data has a vital role to play in modernising and revolutionising the Utility sector. Despite this, data leveraging has yet to be realised to its full potential.
This is especially the case with water companies. Kumar Parakala, Global Digital Leader at GHD, says that: “Water utilities have a lot of data but have limited understanding of its use. Although more companies are recognising the value of data as a strategic asset, they might not necessarily have sufficient internal capabilities to generate real value from it.”
Data is essential to the path forward for the Utility sector – it represents an opportunity to more deeply understand the challenges on the horizon and how the sector can best prepare for them.
Despite the challenges ahead, it’s not all bad news for the Utility sector. In fact, a time of upheaval is also an opportunity to excel. Companies that can adapt successfully by adopting new technology and leveraging data in innovative new ways stand to reap numerous rewards.
Leveraging data represents an opportunity to increase operational efficiency across the board, cutting costs, improving business reputation and maximising revenue at every level.
At a time when customers are becoming more and more attuned to the credentials of their Utility providers, this equates to an opportunity to greatly increase acquisition potential and grow a loyal, expanding customer base.
How have other industries evolved?
To find inspiration for how the Utility sector can evolve when it comes to leveraging data, it’s helpful to look to other sectors to see how they’ve evolved in the face of challenges of similar significance. One prime example is the retail sector.
In the face of the COVID-19 pandemic, retailers were left in a data deficit crisis: entire databases which had previously formed the basis of decision-making were rendered unreliable as consumer behaviour experienced a sudden, massive shift. While many retailers floundered without data on which they’d previously depended, others immediately sought to adapt to the new retail landscape by shifting their data focus to new sources.
Previously neglected consumer behaviour indicators became an important new focus for those who adapted successfully. Email interactions, customer call logs, social media, and website browsing behaviour all provided valuable insights into how consumer thinking had shifted, allowing retailers to shift their own strategies accordingly.
The change also spurred a re-assessment of data collection and analysis infrastructure, with a focus on agility and re-focused KPIs. The Utility sector can learn from this experience by re-examining its own approaches to data collection and analysis in order to glean new insights into a changing consumer mindset.
How has the Utility sector evolved in other nations?
Australian Utility companies aren’t alone in their need for evolution, so it makes sense to look towards the state of the industry in other nations to find inspiration and guidance.
One lesson to be learned is the potential for data to be leveraged for impressive cost savings and enhanced operational efficiency. For example, one European windfarm has built automation and data analysis into its maintenance operations through the use of autonomous drones that capture images of wind turbines and power lines before uploading the images to the cloud for analysis.
This cognitive analysis allows faults and anomalies to be identified and reported much faster than through manual inspection, with an automatic inspection time of just 30 minutes compared to 5 hours for a manual inspection.
Similarly, data analysis has proven effective in streamlining maintenance operations in water treatment plants. One US-based water utility has leveraged big data analysis to map out a relationship between trihalomethane production and effluent dissolved organic carbon; in doing so, it was able to more accurately identify when GAC filters needed to be replaced.
This resulted in estimated annual savings of $100,000, showing the potential for data to hugely streamline operational costs. Utility companies that utilise data in this way can then pass on these savings to their customers to build a more positive customer experience and improve customer loyalty.
Another success story lies in the UK, with breakthrough energy company First Utility (Acquired by Shell and rebranded to Shell Energy as of 2019). The adoption and potential of smart meters in the UK has been well-documented, but according to their ex-CIO Bill Wilkins, “Smart meters deliver a number of benefits, but we don’t believe they’ll be a differentiator for companies like ours over the long term.”
As such, First Utility’s strategy has revolved around going beyond smart meters to deliver a more customer-centric approach. In particular, their “consumer engagement platform”, MyEnergy, enables customers to view their energy consumption in more intelligent, understandable ways than standard usage data reports.
MyEnergy goes beyond the customer’s own usage, creating usage profiles from aggregated data to allow customers to compare their own usage patterns against similar profiles and thereby identify new strategies to reduce their own usage.
First Utility extends their data-driven approach throughout all of its operations. For example, MyEnergy integrates with First Utility’s CRM systems to provide deeper analysis and insights into consumer behaviour and drive more personalised communications for a better overall customer experience.
How Sigma Connected can help you leverage data
At Sigma Connected, we’ve got years of experience in the UK Utility industry as leaders and a strong focus on helping the Australian market through a range of challenges facing the sector.
Our capabilities include customer acquisition and retention; customer services and complaints management; vulnerable customer identification and management; staff training and upskilling; and quality assurance.
In instances where Utility companies need support in one specific area, we provide a more tailored service geared specifically towards the business needs.
We believe in the power of data to drive more effective decision-making. And so, we help businesses create and leverage systems and digital technologies to effectively track, measure and extract actionable insights to serve as a foundation for better decision-making across the board.
Equally important, we help Utility companies rethink their approach to data, using targeted data analysis to identify specific problems and opportunities, and provide clients with the insight they need to deliver appropriate customer-centric solutions .
By improving data leverage, your company can gain a deeper understanding of consumer behaviours, needs, and expectations, and provide a more customer-centric service as a result. In doing so, we can help your business to equip itself to face the challenges that lie ahead for the Utility sector and help create a market differentiator in the competitive marketplace.
For further information or a wider discussion on how we can help your business, contact us below.
About the author
Jason Cowan is Sigma Connected’s Regional Managing Director, Australia.
You can contact Jason via email or connect with him on LinkedIn.