21 Sep 11 Customer Centricity Utilities survival strategy for the future

Consider, for a moment, that the utilities industry is a large, slumbering giant, who had sweeping, unquestionable powers over the industrialized world. For more than a hundred years, homes and factories have been dependent on it for their essential “services”, such as electricity, water supply, heating and sanitation. Findings from the upcoming ValueNotes research report, titled “The Utilities Sourcing Landscape in 2011: Are Global Utilities Outsourcing Smarter?”, have revealed that the utilities industry is slowly waking up to the fact that they need to be more customer-centric to overcome challenges such as rising costs and high competition.

Awakening the giant
The last 30 years or so has, in a way, awoken the utilities giant. It is in the midst of continuous rapid change due to both external and internal factors. Major externalities include deregulation, change in governmental policies, global awareness regarding energy conservation, mixing of renewable energy sources and newer technologies regarding IT and power generation. Added to this are internal pressures such as eroding profit margins, post-recessionary effects and an ageing workforce. These are adding to management stress to deliver, to both shareholders and end consumers. These changes are forcing utilities to evolve to a more competitive and aggressive market, in which customer experience and loyalty becomes the prime focus.

The “golden” era prior to deregulation was where utilities could “push” their services to consumers, without facing any backlash or competition. Consumers too had limited interactions with their utilities, for activities such as opening new accounts and billing enquiries. This brought out a very quiescent view of all utility functions, from a consumers’ point of view. Slowly, things started to change when deregulation brought in competitors for utilities services. Worldwide, state controlled entities slowly had to give way to privately owned enterprises, who offered better quality at lower rates.

Customer focus – Integral to the Smart Grid
Customer engagement is gaining a lot more importance for utilities today. Access to the internet and disruptive technologies such as the “Smart Grid” has empowered the customer and changed their behaviors. The “Smart Grid” setup involves the installation of a two-way digital communication network between the utility company and the meters installed at every home. This has led to customers getting more information regarding their energy consumption patterns, as data is continuously sent from their meters to their utilities providers. The introduction of mobile technology and customised internet portals will encourage younger consumers to play an active role in their relationship with their utilities.

A huge benefit of involving customers in analyzing their consumption patterns is that the end consumer can play a big role in decreasing the overall energy load. Utilities can give their customers choices to help manage their energy usage. A couple of ways by which they can achieve this is by offering information about shifting energy usage to off peak times and strategies to save and achieve their energy consumption goals. Some companies are helping customers install solar panels in their homes, also paying for “putting” all the extra, unused energy back on the grid. These offerings help both parties – utilities and consumers achieve savings and improve the overall energy distribution pattern.

How can service providers help?
Utilities are now turning towards outsourcing service providers to help improve their level of customer satisfaction. Providers have started viewing utilities as serious, long-term partners and are offering technology intensive innovative solutions, which will bring about a more collaborative customer service experience. The first step involves setting up the “Smart Grid” for these companies, which will enable better communication between the utility and their customers. The next step involves a complete revamp of the existing Customer Information Systems (CIS) to accommodate digital, mobile and online channels of customer servicing. The shift towards customer-centricity will also bring data management into sharp focus. Service providers are exploring data analytics, digital control, data security, and storage solutions for utilities to help them cope with this “data deluge”.

However, there is no single solution to address customer queries across all environments. Companies must address each customer demographic across geographies and ages differently, and must work to develop unique customer experience strategies for these segments. Other factors may include disposable income, energy usage patterns, regulatory environment and customer adoption of technology.

The first level of support provided by service providers to utilities involved systems integration of the ERP platform in the mid 1980s. We are now experiencing the next wave of systems integration between the “Smart Grid” and the utility’s devices, meters, equipment, customers, partners and employees. The integration of this technology with CIS and other customer relationship management (CRM) tools will increase customer control over the way they use these services, such as home electricity, water and heating.

Future – Rise of the Smarter consumer  
Utilities must keep in mind that they cannot have a single minded focus on pushing the “Smart Grid” on their customers without humanizing it. The end objective should be a “Smarter Consumer” and not simply the Grid to support it. We will see consulting firms specialised in the utilities sector offer synergistic technology solutions complemented with smarter customer-centric offerings. As part of any utilities company’s long term strategy, a balanced mix of technology and customer focus will ensure that these companies can drive more value to their customers, anticipate disruptions easier, and truly become “customer friendly”.

ValueNotes Research
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