This series of blog posts builds on the 2018 CGI Client Global Insights, providing insights into how utilities are making progress toward digital transformation. The findings and perspectives are based on 1,400 in-person interviews with business and IT executives, of which 127 are from the utilities industry. CGI expert Ana Domingues explores the way forward for utilities, notes the focus of other industries, and shares lessons learned from the digital transformation leaders.
The 2018 CGI Client Global Insights reveal that utilities have made substantial progress with their digital transformation strategies and are advancing their ambitions by including a wider ecosystem of partners. However, they are finding it more difficult than other industries to digitally transform. Why are they lagging behind and what can they do to catch up?
Becoming a digital organization continues to gain momentum across all industries, with most organizations at the tipping point of transformation. Among the utilities executives interviewed, 49% acknowledge building or deploying a digital strategy across the enterprise, and 47% are extending their strategy to include the wider ecosystem of partners. Only a few though are truly reengineering their core business in a manner that is changing the way they create value, deliver that value and engage with consumers.
Lagging behind in extracting value
Our insights reveal that across industries, organizations are finding it more difficult than expected to extract the full value from their digital transformation initiatives. However, those organizations in competitive environments, such as the retail banking and communication industries, perform better when it comes to achieving their digital transformation agendas.
Utilities, in particular, find it challenging to produce results from their transformation initiatives, which may threaten to delay the move to a new energy system. Of the utilities with a defined digital strategy in place, 10% are realizing results from a strategy for one or more divisions or geographies, while 7% are at similar stages with strategies that extends across their enterprise.
The insights reveal that utilities are 5 percentage points lower than the average of other industries when it comes to seeing results from digital initiatives. This gap is even more evident for more complex strategies that include embracing a wider ecosystem: in most competitive industries, 14% of respondents report achieving results, while it is an average of 11% for the 15 industry sectors covered in these insights. At 5%, utilities executives report the lowest score among all. Still, past and present insights reveal that utilities, except for the highly competitive ones, began their digital transformation journey at about the same time. What is holding utilities back? How can they innovative more effectively?
Taking pilots to full-scale implementations
Learning is a key element in our vision for a utility’s journey. Utilities recognize the potential of digital technologies and multiple trials are ongoing to discover how these technologies can support new business models. To accelerate adoption, these pilots need to be followed up with a progressive, enterprise-wide roll-out of these innovative digital enablers that demonstrate a clear ROI. Utilities, though, seem unable to scale some of their digital initiatives, which end up being limited to a function in the organization.
Are utilities struggling with the business case? Or with the change that full-scale deployment brings?
At CGI we design pilots and choose technology based upon a clear focus to scale these activities if their ROI is proven. It is essential to define what success looks like right from the beginning to enable continuous learnings from various iterations of the pilot to actually lead to decisions.
Keeping the human element front and center is imperative. Adoption of new technologies cannot be seen only as an IT project and limited to one department. While technologies create new ways of working across functions, the “buy-in” of multiple stakeholders to adopt these technologies is key. Stakeholder engagement must start at the very beginning in a manner that goes beyond “involving” to “embedding” so they understand first-hand the value technology brings and how to work on changes to their own models. Without this approach, it is easy to fall in the trap of “garbage-in, garbage-out” data problems, or of automating old business processes that somewhat improve productivity, but not as much if you were automating good processes.
The key challenge to transformation revolves around attitude and not technology. It is not about developing one bolted-on mobile app overnight, but rather, creating an end-to-end solution that integrates the backend and cuts across multiple silos.
A risk-averse culture fuels unseen passive resistance
This year, 89% of utilities executives interviewed agree that cultural change continues to be the top challenge to transformation. At 67%, data management and data quality comes in a not-so-close second. Utilities executives feel the urgency to scale up their digitalization efforts, but is the workforce feeling the same pressure? Humans instinctually freeze when scared, and these new technologies and deep changes are not easy. Is the heavy regulatory environment driving a reactive mentality—one that focuses more on the “why it can’t be done”? To help counter this, some organizations are investing in helping employees become more tech savvy, exploiting their move to digital lifestyles as a way to accelerate buy-in.
Disruption is difficult for many incumbents to experience as mature institutions tend to downplay the rapid pace of change underway. For utilities, this is reinforced by a “no fail allowed” DNA that drives them to trial extensively and change only after they have a full understanding of the future. Is disruption still invisible to traditional utilities? CGI Client Global Insights reveal that only one-third of utilities executives see digital transformation having a high impact on their organization’s business models, while 41% say their organization has very low agile levels.
Is the trick to ‘think big, start small’?
For utilities executives to transform their core business, they need an enterprise-wide digital strategy and roadmap. Execution is a big challenge and results come slowly; implementing proper platforms cannot be done overnight. Taking a balanced approach—without compromising the digitalization of end-to-end processes—can help utilities meet the immediate needs of optimizing the business with minor technology add-ons and capitalizing on the successes of low-hanging fruit. Most utilities feel pressure to generate value every quarter for their customers, and cannot wait to deliver value when major platforms are in place.
Starting with what you can control builds workforce confidence in the ability to exploit digital enablers. Building buy-in and finding the right pace and partnerships, while releasing cash to finance the next, more ambitious phase of the transformation, creates a positive spiral of employee engagement, driving pace and scale of change.
In my conversations with utilities executives, a number of other elements that contribute to the industry’s slower pace of driving digital transformation have emerged: user experience, digital talent war, slower adoption of agile development, MVPs mushrooming, too many ad hoc digital initiatives, and lack of “people empowerment”, among others.
Clearly, digital transformation concerns all aspects of the organization and is much more than just adding digital point solutions. Faced with an urgency to transform, there has been a much bigger focus on technology, many times without a clear line of sight between digital initiatives and business imperatives. Yet, it is critical to remember that to successfully execute an enterprise-wide digital strategy, people and culture are key elements—ones that are more difficult to steer.
For more details on our insights, perspectives and work, contact me at email@example.com.
About this author
Vice President, Global Utilities and Communications
Ana Domingues is the Vice President responsible for CGI’s global utilities and communications portfolios and leads transformational programs for the electricity, gas and water industries across Western Europe and North America. Ana has 20 years of experience in both these sectors, with extensive expertise in ...