Utility Week

e Amazon threat Of course, keeping the customer in mind is something that most businesses strive to do anyway. e point is that it is easier said than done, and that is why real transformation is often necessary. " e number one thing that is changing in the external environment is customer expectation," says Nigel Watson, director of information services at Northumbrian Water. " ey are set by their last best interaction with a service provider, whoever they may be. So we compare ourselves with other service providers, not with other water companies." What that means is that utility companies need to start taking lessons from outside the sector if they aren't going to be swamped by new entrants. And those new entrants aren't only the nimble start-ups like Limejump and Bulb; they could also include some of the biggest organisations in the world. "In the retail space for energy you could easily see an Amazon Echo or a Google Home completely changing the market," predicts Graeme Wright, CTO manufacturing, utilities and services, Fujitsu UK & Ireland " e data Amazon and Google could collect through increased home automation is something that could help consumers in a very real way. "Is that a catalyst for change? Could it be genuinely disruptive? I think actually as that type of technology gets deployed then the Amazons of the world could start powering what's going on with microgrids or grids in the distribution transmission space." Wright says a supplier could source information from an Amazon-style data company "that could tell you exactly what's going on in a house". He continues: "You could get a message from a power company that says 'if you turn off these lights, they'll pay you x'. at could become a completely different business model from one that we see today. "You can see that there's a logical set of steps that could get there in the future. It's happening in pockets, but it would only take one organisation to join up the dots. And the person that does that will be a data company that may not exist today but will exist at some stage." e legacy problem Much of that might sound like crystal ball-gazing at the moment, but in a sector that is changing at a pace never before seen, it's the kind of thinking that needs to be happening already at C-Suite level across the industry. is is where the problem of legacy starts to be felt, and more so the bigger the organisation. Furthermore, when it comes to transformation, the legacy issue applies as much to people as it does to technology or business models. "Legacy, which includes people, is probably what holds most organisations back when it comes to transformation," states Wright. "It's the killer of transformation." Matthew Evans, managing director and leader on the Internet of ings at techUK, agrees that overcoming the legacy issue should be the most urgent item in the inbox of any CEO at a major utility. He cites the proposed merger of SSE and Npower, which got the go-ahead from regulators in August as further evidence that the big six will struggle to retain market share. But simple consolidation won't help when a cultural shift is what is required. " ey are hindered by legacy systems, which the new disruptors aren't," he explains. "It's a real open question as to who will be supplying our energy over the next five to ten years. It's quite likely it won't be traditional suppliers, and that introduces an incredible amount of risk for those companies. "You've got to have your leadership completely on board and have responsibility at board level. You need that to get over that organisational inertia that companies can have. "It's also making sure people have the right skills and understand why they need them, in a digital context, not an IT context. If digital transformation is seen as an IT thing then it's probably going to fail. You need the wider buy-in." Culture clash Getting that buy-in can be a tricky prospect. Former Npower chief executive Paul Massara, who recently took on the same role at blockchain start-up Electron (whose co-founder Jo-Jo Hubbard is interviewed on p9), says the success or otherwise of digital transformation comes down to the people involved. " ere's been a mixture of success and often it comes down to culture," he continues. "Often companies say the old market is dead and we have to move away; we get the guys in jeans and black T-shirts to fly around the world scouting out new ideas. " ey come back and the first thing the CEO does is ask his engineers to test it. Meanwhile you've been telling the engineers that they are historic and don't know what they're doing, so the first thing the engineer does is he looks at it and gives 101 reasons why it won't work. " at cultural problem is definitely one we run across. How much does the venture arm integrate with the old, traditional business? ere can be a massive culture clash." Although it is operating in a different market, Northumbrian Water understands that buy-in has to be across the board if innovation is to take hold. "We don't have an innovation department," explains Watson. "Part of our culture is that it is everybody's job." e company has used some of the techniques found more often in Silicon Valley than Teesside, such as data hacks and innovation festivals (see box p15), to develop new ideas to tackle the challenges of a digital age. But being able to demonstrate real-world instances of how changing the way you do things can transform the business is the most valuable tool. 14 www.utilityweek.co.uk/fLeX // We thought about how we could rebuild a utility model with the customer in mind // Erik Nygard, Limejump // If digital transformation is seen as an IT thing then its probably going to fail. You need the wider buy in // Matthew Evans, techUK C O V E R S T O R Y

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