CFE
Analysis  
14 March 2017

Digitisation? What’s the rush?

David Socha, Teradata’s Practice Partner for the Industrial IoT, discusses the gap between utilities’ digital strategies and their actual investments in enabling technologies and capabilities.

In recent weeks, I’ve talked with a couple of major utility companies about digital transformation.  That’s no surprise.  It’s a hot topic - and an unavoidable one too. Digitisation is coming to utilities whether they’re making it happen, or watching it happen.

As it…eh…happens, I think the companies I talked to most recently do have a handle on what needs to be done to take advantage of digitisation.  Admittedly that conclusion probably has some selection bias, given they were talking to an IoT consultant from a data & analytics business.  But hey, I stand by it.  More interestingly though, I believe that this awareness and willingness to act decisively puts them in the minority.

It seems there’s no rush.

Late last year, PwC published the results of a survey on the digitisation of utilities.  It’s a good read.  But I can summarise it in two sentences: Utilities can see the threats and opportunities digitisation brings.  But they’re mostly too dumb to do very much about it.1

The survey results start with a rallying cry from PwC, stating that not too many utilities are sufficiently funding their digital aspirations.  OK, so we might well take such opening statements with a pinch of salt.  Those of us that have been around a while (and that’s a lot of us in the utilities business) expect such things.  Otherwise, how is the owner of any survey like this going to set up the pitch to sell us something, right?  But bear with me here.

The body electric

Following the somewhat predictable opening, the results initially paint quite an optimistic picture of the digital landscape in utilities.  It’s not perfect, but there are certainly a number of fairly positive responses about digital strategies, digital offerings and capabilities.  Entre nous, I was quite surprised by what I was reading and was starting to think I’d need to reassess my own understanding and opinions on digitisation in the market today.

Or at least dig into the survey results further to find out why they didn’t quite correlate with my own view.  But then, everything fell back into place.  I wasn’t in the Twilight Zone after all.  I got to the section on measuring preparedness.

As the authors accurately state in the preamble to that section, data and IT infrastructure; governance; and actively managing culture change are fundamental to the digital transformation.  And here’s where things really start to fall down.

The digital man

It’s true that many utilities have gone through major change programmes before, such as in times of privatisation or market deregulation.  So most should be capable of managing another change, with the appropriate guidance and assistance.  So far so good then.  Also, most say they’re hunting for people to fill critical new roles, like a Chief Digital Officer.  But let’s not get into that today.

Maybe in another blog we can debate the (potentially very real) merits of such a role versus the box-ticking exercise it can often be2.  Instead, let’s look a little more closely at what the survey says about data and analytics investments.

Something for nothing?

The survey says that nearly a quarter of those that responded have no data analytics capabilities or infrastructure.  And that more than three quarters of those that do, have fewer than 20 people allocated to these capabilities.  Furthermore, not even a fifth of them have any plan to monetise their data.

Let’s stop and think about those points for a moment.  These results come from a survey specifically focusing on digitisation.  The people who responded to that survey are likely to be some of the most digital-savvy people in their organisations.  And yet they report that to all intents and purposes, their digital strategies are really just talk.  Buzzword bingo.  Because how do you go digital without taking advantage of your data?  Does anything else even count?
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This lack of investment in data & analytics is not sustainable.  Today, there’s probably still time for that new CDO to start authorising these key investments that will underpin the new digital utility.  But the window is closing.  Assuming they were ever really engaged at all, very soon digital-savvy customers will disengage.  We’ll turn the page and find that actually, we don’t need our traditional old monolithic, inflexible analogue utility company any more.  And you know what?  A strategy mostly based on saying buzzwords isn’t going to fix that.

Grand designs

In their closing statements, PwC make a great point.  They suggest that “the struggle that utilities are experiencing in matching their digital ambitions with actual investment is somewhat ironic for an industry whose pioneering innovations included the electrification of the world”.  They’re right.  It seems to me that most utilities have forgotten how to innovate on a grand scale.  Maybe even forgotten why they would want to innovate at all.  Let’s face it, when the UK Regulator needs to pay utilities to innovate, something’s gone horribly wrong.

Yes, many utility companies may have begun to realise that digitisation is an inevitability, not an option.  But it’s now time to also understand the consequences of this new reality.  A digital world is a data-driven world.  To thrive - or even to survive - in a data-driven world needs new capabilities and new technologies.  That might mean big, disruptive change.  But it also means a bright future.

It’s time for utilities to remember those heady days when they electrified the world.  And do it again.

 

1 Clearly, this is not the way PwC put it.  I’m using a little artistic licence here.

2 My apologies to any CDOs reading this.  I’m sure you are the valuable kind, not the box-ticked kind.

 

About the author:

David Socha is Teradata’s Practice Partner for the Industrial Internet of Things (IoT).  He began his career as a hands-on electrical distribution engineer, keeping the lights on in Central Scotland, before becoming a part of ScottishPower’s electricity retail deregulation programme in the late 1990s. After a period in IT Management and Consulting roles, David joined Teradata to found their International Utilities practice, later also taking on responsibilities in Smart Cities and the wider Industrial IoT sector.

 

Image credit: Shutterstock

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