Digitalization, decentralization, and decarbonization are powerful forces for change in utilities. In response to the COVID-19 pandemic, utilities have accelerated a number of digitalization and innovation efforts to improve the customer and employee experience.
While innovation is more complex now, it is an imperative for successful transformation initiatives. In a traditionally risk-averse industry, the ability to advance and sustain innovation has been a difficult challenge. Utilities have a genuine opportunity to build on the innovation momentum begun in response to the pandemic, and continue to transform for the energy transition.
Each year, CGI leaders meet with business and IT executives around the globe to learn about the key trends affecting their organizations. This year, the resulting CGI Client Global Insights for utilities show that while 50% of utilities executives measure the ROI of innovation investments, only 10% are highly satisfied with that ROI (compared to 22% across industries).
So, why is there such a gap and why do barriers persist? To get to a next level of insight, CGI’s U.S. operations commissioned a survey of more than 100 utility professionals on the state of innovation in the industry, including the role of people, processes, and technology in enabling that innovation.
The findings of that survey provide insight into the industry’s innovation culture and how it is changing. They reveal key drivers of, and challenges to, generating and implementing new ideas. They also uncover some reasons why utilities are not seeing innovation ROI, including how culture affects transformation success. While the survey was conducted among U.S. organizations, we believe these insights are insightful/inspirational for utilities worldwide.
Innovation is stymied by business constraints
Our analysis of the survey findings reveals a common thread. While utility culture generally promotes innovation, business constraints keep them from moving forward. Following is a summary of our findings, along with recommendations for sparking and sustaining innovation in utilities.
1. A majority sees their company culture as conducive to innovation and thought diversity. 58% of survey respondents perceive their individual company cultures as conducive to innovation and 60% say those cultures can maintain their zest for change and transformation even when under duress. 62% believe they have strong diversity of thought within their organizations.
Recommendation: Continue to pursue an innovation conducive culture, able to adapt to changing customer preferences, business conditions, and regulatory demands. Also continue to foster diversity, which creates an environment for generating new ideas to meet new challenges.
2. The cultural focus on safety has grown, while the focus on innovation has lessened. While utilities’ focus on safety has increased significantly, from 29% over the last five years to 45% today, their focus on innovation is much lower and has decreased over the same period from 10% to 7% respectively.
Recommendation: View safety and innovation as complementary, not mutually exclusive. There is a common misconception that a focus on operational excellence and safety limits the ability to innovate. Yet, survey respondents say operational improvements are the biggest driver of innovation (33%). With the increasing pace of change, it is critical for utilities to implement innovative ideas to maintain safe and reliable operations.
3. Business and IT are working in silos when it comes to process and technology change. Interestingly, 51% of survey respondents say individual business departments control and monitor process change and 58% say that the IT department controls and monitors technology change. The consequence is that innovation happens in silos and does not create the expected outcome.
Recommendation: Encourage working in concert across the enterprise. When individuals, teams, departments, and business units collaborate with a unified cadence and rhythm, and with a common goal, organizational transformation can be realized.
4. Innovation decisions often are made at the department level. 30% of respondents say directors/managers make the decision to implement a new process or technology, indicating significant departmental decision-making (29% say CEOs, 10% COOs, 9% CTOs, and 3% Chief Innovation Officers).
Recommendation: View innovation as intrinsic to the entire enterprise. By working in concert across the company and strengthening human connections, innovation can become second nature as opposed to just the responsibility of an isolated team.
5. 87% say they feel empowered to take innovative ideas to superiors. However, this doesn’t mean an idea will result in a meaningful change. Implementation barriers to new ideas are budget (62%), resources (59%), and lack of time (40%). Business silos and company structure (31%) also contribute to these challenges, as they prevent decision makers from considering how solutions create value across the enterprise.
Recommendation: Promote a culture that fosters human connections (e.g., with customers, between teams and business units, and among employees). Culture also is a main contributor to the success of change management initiatives and is the primary reason half of respondents (53%) consider these initiatives to be successful.
A new focus is needed on improving innovation ROI
As utilities rethink their innovation models, the ability to create and strengthen human connections, which may need to be virtual for the time being, is a key to creating value. In a culture that is heavily dependent on legacy systems, processes and centralized control, distributed resources require orchestration at an executive level to ensure independently empowered teams are driving toward the same outcomes. Utilities also must invest in employee skills to drive innovation as a team.
Ensuring innovation provides sustained results at scale and are aligned with business needs also requires establishing clear KPIs—with a proven framework to ensure those KPIs are measured and tracked, with regular reviews at all levels of the organization.
For more information on the results of the survey conducted for CGI by energy research firm Zpryme, along with CGI’s analysis and recommendations, please contact me.