Utility Week

18 | 4TH - 10TH MAY 2018 | UTILITY WEEK Policy & Regulation Analysis Executive summary The results of the digital transformation survey reflect a UK utili- ties sector torn between a desire to be ambitious in the pursuit of digitally-enabled opportunities and the realities of a tough business environment in which investment is hard won and key policy and regulatory frameworks are in flux. While the survey findings show a high expectation that digital transformation will drive "radical" changes in utilities' organisa- tion, this tended to be over the longer term, with respondents largely reluctant to suggest radical change is on their doorstep. Industry commentators on the findings were divided when it came to expressing empathy with this longer-term change scenario, with some saying it is right and reasonable for utilities to take an incremental approach to digital transformation and others objecting that a failure to become digital native companies within the next five years will render utilities irrelevant. Whether digital transformation is characterised as abrupt and disruptive or incremental, survey responses suggested it will drive significant structural changes within utility organisations – for example, by rebalancing required skill sets and potentially decen- tralising IT functions. This expectation was endorsed in industry commentary, with some contributors going further, to say digital transformation will drive wider change to industry supply chain and contracting arrangements. Such changes will not be realised, however, before certain key barriers are overcome. Utility Week and OpenText's survey found that a significant proportion of respondents are being obstructed in cre- ating the digital change they would like to see in their organisation because of difficulty in securing investment – this was especially the case for retail-focussed utilities. A secondary barrier was identified as weak digital strategy, while political and regulatory change were also seen as disruptive. The finding around investment struggles sparked particularly animated contributions from commentators. While some could not understand how a clear business case linking digital investment to core business outcomes could be ignored – for example, its potential to deliver improved customer service and engagement – others strongly empa- thised with the investment issue raised in the survey. Speculating as to which kinds of companies were most likely to find it troublesome to secure investment, commentators were again split in their opinions. Some suggested small retailers and new entrants are most likely to struggle, because of the level of invest- ment needed to significantly upscale core IT infrastructure and digi- tal platforms in order to accommodate growth. Others, meanwhile, felt that large organisations with inflexible legacy systems, unsuited to iterative change and integration of spot digital solutions, are more likely to be on the back foot. Asset-heavy utilities were considerably less likely to find digital investment a challenge, and commentators suggested this is due to strong regula- tory incentives which create clear and attractive business cases for investment. It was no surprise to see customer service rated by respondents as the business area most ripe for digital transformation, nor that enhanced customer engagement was identified as the most impor- tant outcome from digital investments by asset-heavy and retail- focused utilities alike – though one contributor was sceptical as to whether this ambition is really true for incumbent energy suppliers who they said are still reliant for large proportions of their revenue on disengagement from customers sitting on expensive tariffs. FOCUSING ON THE NEXT 3-5 YEARS, DO YOU EXPECT YOUR ORGANISATION WILL INVEST SIGNIFICANTLY IN ANY OF THE FOLLOWING SOFTWARE SOLUTIONS TO SUPPORT ITS DIGITAL TRANSFORMATION STRATEGY? Data analytics software Customer relationship/ experience management (CRM/CEM) Field force management software Asset management software Distribution/network management software Business process management (BPC) Supply chain management (SCM) None Enterprise information management (EIM) Enterprise resource planning (ERP) 85% 76% 52% 48% 36% 30% 30% 30% 18% 6% 67% 30% 3% Yes, digital technologies will drive significant changes in organisational structure No, digital technologies will have no impact on organisational structure Yes, digital technologies will have some impact on organisational structure, but changes will be driven by other factors too FOCUSING ON THE NEXT 3-5 YEARS, DO YOU EXPECT YOUR ORGANISATIONAL STRUCTURE TO ALTER AS A RESULT OF DIGITAL TRANSFORMATION?

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