Miguel Ángel Devesa of Viesgo and Melissa Reynolds, Chief Customer Officer, AGL share their experience from the front line of moving their utilities into the digital future.
Price changes, social and cultural shifts, evolving technology and a changing regulatory environment are all weighing on traditional utilities, while outside competition sees an open door to the sector. These new competitors are taking advantage of cultural and behavioral shifts impacting how customers interact with businesses today.
“When you think about what energy customers want today, it’s as much driven by other industries and other sectors as energy. That becomes really important when we think about digital transformation,” according to Reynolds, Chief Customer Officer at AGL, among the largest integrated energy companies in Australia.
“Some new players who were not in the industry in the past are entering with new gadgets or products and services for our customers,” added Devesa, General Director of Administration, Finance and Control at Viesgo, which serves more than 730,000 customers in Spain.
“We have to have an eye continuously on the environment, to respond to all of these challenges with less hierarchical and more flexible operational models,” he added. “We have to be more sophisticated, more creative and more proactive with customers.”
AGL is in the midst of a three year, $300 million digital transformation, one of the most significant transformation initiatives in Australia and the energy industry, according to Reynolds. An effort of this magnitude requires strong communication and a defined purpose.
“People have very different interpretations of what digital even means,” Reynolds said. “So you might have a digital strategy endorsed by the board or executive team, but the translation of that to the people doing the work and impacted by the work needs to be black and white.”
Viesgo focused its efforts by process of prioritization. When the company launched Project Millennial, a five year, organization-wide plan for digital transformation, it initially identified an unwieldy 140 initiatives. The company's first move was to pare down those initiatives based on strategic impact, cost and practicality to 65 encompassing 43 managers and more than 70 partners or vendors. “Keep the focus on the areas that need digitalization—not the ones that ask for it,” Devesa said.
A solid governance model defines roles, helps manage teamwork dynamics and ensures a process for keeping management informed, according to Reynolds and Devesa.
Viesgo calls its governance model the 'Digital Hub,' which is organized under the CEO, reports to a Transformation Office, and is supported internally by digital leaders across different areas of the company and externally by KPMG in Spain. Coordination through the hub helps ensure that the multiple transformation initiatives tap expertise and capture technology synergies around the company.
Even with a governance structure in place, company leaders need to stay closely involved, Reynolds said. “They can't just operate at 30,000 feet. They need to be able to get into the details and straddle both strategy and execution.”
Devesa agreed. “Executive sponsorship is absolutely key. People have to see that the CEO and executive team are fully committed to digitalization.”
“Digital transformation is underpinned by the capability that technology provides, but in my view, transformation is actually much more around culture, people and customer change,” Reynolds said.
That includes shifting the traditional, cautious utilities mindset into a faster, more risk-taking one. AGL went ahead with an idea to create a video to help customers understand their often complicated bills; the customers hated it. But the company learned to take a chance and accept mistakes, and ultimately it pursued a better, more customer-focused effort to simplify the bill itself.
“In order to really drive transformation, you have to be able to transform from the inside out,” Reynolds said.
While many industries are bending over backwards to figure out how to cater to young, digital-savvy consumers, the power and utility industry typically has a wider range of needs to serve.
“The customers are not necessarily millennials who are digital and who've been brought up this way, it's moms and dads and grandmas and grandpops who still like their paper bill and don't like to do things over the internet and are pretty much set in their ways,” Reynolds said. When it came to introducing digitally enabled products and services, “we sort of assumed, `build it and they will come.' No. Getting customers to change the way they do things is harder than we thought.”
However, agile development incorporating customers into the process can encourage that adoption, Reynolds continued. “In the old days we would go out and do customer research, we'd build a solution and then go back to customer. Now we bring them into our offices, we go into their homes, and we do a lot of feedback along the cycle so customers are always involved in the development of these solutions.”
“Transformation has to be really embraced by the entire organization and not seen as a project,” Reynolds said, going on to caution that labeling efforts as 'business as usual' vs. 'digital transformation' should be avoided. Once digital transformation begins, “there's no such thing as business as usual anymore.”
Finally, be prepared to pivot the transformation, she said. “It's not a `set and forget.' We've had to shift our priorities and sequencing, and we had to reorganize the whole effort itself, because every transformation requires you to continually reflect, review and renew.”