Are utilities responding rightly to the digital boom?

Tim BestBy Tim Best, Executive Director, Advisory, Ernst & Young LLP.

In spite of the digital explosion, it is often the case that the utility CIO’s budget has remained more or less the same. The CIO is often busy maintaining legacy systems, running transformation projects on billing and metering solutions and possibly doesn’t have the time nor the funds to take up digital initiatives. As a result, digital is often taken care of elsewhere in the business, e.g., the marketing team — sometimes all by themselves and sometimes with help of third parties.

What is interesting is that oftentimes these digital initiatives happen without the knowledge of the CIO. In fact, more than one-third of the spend on technology is made outside the CIO’s oversight and control.

This disconnect can expose utilities to multiple risks:

  • Financial risks: Lack of coordination with IT can lead to duplicated efforts and wasted money. When IT is not part of the team running digital initiatives, vendors may be likely to charge the less-knowledgeable team a higher rate.
  • Data breaches: Hackers can often target the weakest connection in your systems, and if initiatives are implemented without the CIOs knowledge they might not have the same security standard than the rest of the companies IT. This can lead to unauthorized access and use of critical customer data. In addition to reputational damage, this can also result in financial damage via fines and penalties.
  • Intellectual property loss: Hacking can lead to loss of IP information that could be copied or used for all the wrong purposes.
  • Share price manipulation: Hacking is also done to manipulate share prices. Hackers use the dip in share prices as a result of the news about an attack to realize gains.
  • Reputational and brand inconsistency: Implementing a digital initiative that has a totally different image from the rest of the utility can lead to reputational and brand-related inconsistencies.

The best way to avoid these risks out is to get CIOs and marketing heads to work together on digital initiatives. Digital impacts every single aspect of the business, it is too big to be under a single person’s domain. Digital is everybody’s job.

Define the purpose of your digital initiatives

There are a number of steps utility companies can take to help better integrate their digital projects, especially as smart technologies gain further importance.

  1. Define clear accountability: Some companies have digital officers to take ownership of digital initiatives; however, their role varies depending on the organization. A digital officer could be someone running websites and applications or they could be transformational IT leaders with the scope of becoming the next CEO. It all depends on where they are positioned and what the company wants them to do. CIOs are extending their remits from back-office IT to digital to act as a collaborative partner of this potential new leader.
  2. Create new business units: Some companies have created new business units to run digital. For example, one large international utility has recently launched its Digital Transformation Unit, which will drive the digitalization of the company’s retail business across all markets and report directly to the board of management. CIOs are establishing relationships with newly created business units to ensure IT is linked to the digital evolution of the company.
  3. Adopt and integrate: Albeit that there might be certain stakeholders who are more affected than others by digital disruption, the impact of digital is still felt in every single part of the business: it has implications for the business model, the customer experience, the workforce, technology, operations, risk management, cybersecurity, data privacy and so on. Cross-functional input is therefore needed. To increase the chances of success we believe that utilities must align their digital strategy and capabilities with the overall company purpose and ensure every digital project delivers a clear value, avoiding “pet projects” or technology-driven projects.
  4. Innovate: A few companies are already innovating around digital to help improve customer engagement. But there is still a huge opportunity for others. For example, companies have co-created products with customers and opened up patents to spur development and to collaborate with entrepreneurs. Some have also got help from digital-savvy employees to help upskill those who are yet to catch up digitally. CIOs are becoming business enablers supporting digital innovation to help innovations yield results in terms of increased revenues whilst managing costs.

Digital presents utilities with plenty of opportunities to engage better with customers and to increase margins. But to realize that, utilities will have to get all their functions, including IT, legal, risk and cybersecurity leaders to unite around a shared vision — one that is built from the bottom up, embraced by everyone and protected by everyone. There’s no room for silo mentalities anymore.

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