A study by MIT Sloan and Capgemini found that 90% of CEOs believed the digital economy would have a major impact on their industry. However, the study also found that only 25% had a plan in place to address it and less than 15% were funding and executing that digital transformation plan. That's a significant disparity between awareness and execution across all industries.
The utility industry, to its credit, has the awareness piece down. Often seen as a laggard compared to other faster-changing industries like TV and telco, most large energy companies across the world have embraced transformation in their business models and technologies. But the utility industry still has a long way to go if it wants to future proof itself.
What Are Utilities Worried About?
The utility industry is in the middle of disruption and is aware of the challenges that face them.
According to UtilityDive, Security continues to be the top concern by a wide margin. Cybersecurity will be the top worry for energy companies for years to come. Evolving security threats continue to be a challenge, both on the front-end (operational infrastructure) and back-end (protecting customer information).
With Distributed Energy and Renewables disrupting the market, utilities are concerned both about DER policy (net metering, ownership, etc.) and how they can effectively integrate renewables.
Aging infrastructure is also a concern, particularly for water utilities. AWWA's State of the Water Industry survey found that "renewal and replacement of aging infrastructure" has consistently been the top issue facing the industry for several years in a row.
These then lead on to capital investment, the second biggest issue concerning utilities. The cost of upgrading infrastructure and technology is a significant barrier. It’s hard to replace aging infrastructure without financing. For utilities, many of those needed infrastructure projects should be thought of and positioned partially as security projects, since updating to new technology can significantly improve security.
Big external changes in the energy market are causing utilities to face more challenges than ever as well. In Europe, deregulation and new competition have created a fierce environment for retailers. Customers are expecting lower pricing levels, more transparency, and improved responsiveness. The relationship between utility and customer is no longer transactional. Customer acquisition and retention were ranked #1 and #2 in CXP's Digital Utilities Survey of European utilities.
Ingredients for a Competitive Strategy
Customer retention is still the top concern for utilities. But what makes utility customers switch in the first place?
While lower pricing is the most obvious reason, a recent DNV-GL survey found that 50% of Commercial & Industrial (C&I) customers switch suppliers for reasons OTHER than pricing including behind-the-meter products (21%), access to renewable energy products (14%), electric vehicle charging products (7%), and other reasons (8%).
For retail energy providers, the top strategy for retaining customers is sending email alerts and newsletters. This has an impact but won't cut it as the only strategy. More innovative and competitive retailers are using things like online usage portals, e-commerce portals (to buy smart home devices), energy and service bundles, and rewards programs to keep customers loyal. Tools like multiple payment options, multiple touch points, and real-time usage are no longer seen as innovative. These are now expected.
Chat-bots are helpful in reducing costs and 67% of water retailers plan on investing in non-human voice interfaces in the next 12 months . Some utilities have emphasized their partnerships with or started selling non-utility products like smart home controllers, energy efficient light bulbs, home security products and even insurance!
But ultimately, what is consistently found to be the best differentiation strategy is improving the quality of customer service. Customer experience management will be the key and this goes beyond the CRM system and includes promotions, apps, social media, and portals. Customers who use mobile platforms have been shown to be the most engaged and, more importantly, have a higher level of retention . In an industry evolving this quickly, investing in happy customers is the best place to start.
 CXP 2017 - Digital Utilities: From Behind the Curve to Innovation
 UtilityWeek - The Future of Utilities Report 2018