Utility Week

UTILITY Week 28th October 2016

Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government

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Page 26 of 31

UTILITY WEEK | 28TH OCTOBER - 3RD NOVEMBER 2016 | 27 Customers Market view A ccording to research by Which?, just six energy companies serve nine in every ten homes in Britain, dominat- ing the UK market. However, several smaller providers are now challenging the status quo and beginning to disrupt the industry. The sector faces many big challenges including regulatory changes, the pressure to create a greener environment, efficiency, cost-effectiveness and higher customer expectations. When trying to hold on to their customers, price, choice of tariff and great customer service are obvious key fac- tors. New market entrants are matching or beating them on price and creating shiny new brands with promises of great customer experiences, so how can the big players rise to the challenge and become the new chal- lengers themselves? Traditional advantages Traditional utility companies have certain core strengths that set them apart from the challengers. First, they have an established customer base that they can work to retain and cross-sell to. They have the advantage of respected and trusted brands and the good- will that comes from this, alongside proven capabilities such as highly experienced engineers and tried and tested technol- ogy. They also have the necessary financial resources to invest in new propositions and marketing campaigns, while having access across multiple sales channels to promote their offering. However, these organisations also have their weak spots. Energy is a commodity, which by its very nature can make custom- ers disloyal and price-focused. This means it can be difficult to retain customers, thereby threatening profitability. Plus, these firms may enjoy the benefits of a well-known brand name, but some have been tar- nished by reports of poor customer service or scandals. In addition, pressure is being exerted by Ofgem that, aer a two-year investigation by the Competition and Markets Authority, is forcing the market to be more competitive. So traditional providers will have to work hard to make their own offerings more appealing to encourage customer loyalty and retention. The new tech on the block The Internet of Things is one of the largest technological trends utility companies can't ignore. Networked devices for the smart home are the modern way for consumers to man- age their lives. British Gas has launched a number of smart and connected homes ini- tiatives, including smart metering and Hive. From heating to plugs to sensors, Hive puts the control of everything in the home back into the hands of the customer via an easy- to-use smartphone app. The possibilities are endless, and big businesses need to be investing in this smart technology and creating their own innova- tions in order to succeed and grow in the utilities sector. Five ways to keep on top Consumer needs and expectations are driv- ing rapid changes in the market. This is bad news for traditionalists who love and live by long-term strategy. There are five main areas, which utility companies need to keep top of mind to ensure they stay relevant: • Agile working – this concept focuses on rapid growth and transformation. It requires a change in culture that focuses on delivery rather than process and finds rapid ways to test, learn and go live. Proposition sprints enable companies to go from an idea to a launch that's live in customers' hands in days and weeks, rather than months, moving from idea to prototype to decision much more quickly, saving unnecessary work and cost. • Data – the big players have a huge amount of data available to them. It's knowing how to turn this data into useful insight to meet those changing needs that will prove pivotal in their success. • Technology – big utility companies need to take advantage of technical advance- ments to keep up and stay relevant. • Changing customers – it is impossible to predict what modern consumers will want in the future, so focus on what they want in the short term and deliver it quickly and effectively. • Traditional barriers to entry – these are now open doors to start-ups. Regula- tory changes are knocking down these barriers, driving change and more com- petition. Traditional corporations must respond to new technology rapidly and overhaul their short-term planning to make sure they don't get le behind In summary, while challengers are enter- ing the market, the traditional companies still have time to act. Many start-ups do not have the pedigree of employee or inves- tor you would find in a traditional util- ity company or do not offer the breadth of products or the same customer support. So larger utilities need to embrace the techno- logical innovations and digital trends to stay ahead in this competitive and fast-moving marketplace. Robin Scarborough, managing director, London, Market Gravity Adapt or die Robin Scarborough shares his insights on why utility providers must find new ways to innovate, or face being left behind as brash new entrants grab market share. A case study: shiny and renewable RWE in Germany recently unveiled a pio- neering new platform, Shine, that enables consumers to power their own homes and use, buy, sell and share locally-generated, renewable energy. Shine helps households better understand their energy usage, learn what steps they can take to become more independent, and how to use more renew- able energy. Ways are now being explored in which to help bring this exciting innovation to UK consumers. Market Gravity worked with RWE to create a new, disruptive proposition for the energy sector to bring Shine to the German market. Within ten weeks a proposition unlike anything else in the energy space had been created, with a clear customer promise and product offering. And this really came to life once the brand personality was designed to cement the offer.

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