How do utility CIOs determine priorities in the age of digital utilities?
This is one of the toughest questions for every utility CIO today, writes Thorsten Heller, CEO of Greenbird.
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In the last 10 years across the utility industry, no one in the C-suite has been under more scrutiny than the CIO. Amidst the rapid digital transformation sweeping across utility companies, CIOs are often caught between reconciling legacy and new systems, faced with competing objectives and restricted by limited resources.
This changing role of the CIO is highlighted in several well-documented studies. One of the most recent, the 2019 IDG State of the CIO report, reveals that 88% of CIOs say they are more likely to be spearheading their organization’s digital transformation than their counterparts.
With digital transformation spanning dozens of areas that a CIO might be responsible for, we go back to that million-dollar question:
Which one first?
I believe that every utility CIO’s priority list should centre on these major areas:
1. New Talent Acquisition
The utility workforce is ageing. A Greater Scranton Chamber of Commerce survey reveals that 25%-35% of the utility workforce belongs to the 55-and-up age bracket and are on the brink of retirement.
The rise of the digital utility has created a pronounced skills gap between its ageing workforce and the expertise needed to create and manage grids of the future.
Gone are the days when the utility sector conjured up images of hardhat wearing macho men taking care of everything. Digital utilities have ushered in a new wave of utility workers that includes tech-savvy engineers, data scientists, programmers, AI and machine learning gurus and automation experts.
The business continuity of all utility companies relies greatly on their ability to acquire younger talent with digital expertise. As it stands, two out of three CIOs agree that there is a talent crisis. Businesses across all industries are finding it difficult to hire the new breed of experts who will enable companies to compete in the digital arena.
Utility companies cannot do this with ageing infrastructures, technologies and business processes.
CIOs need to take the reins in leading investment initiatives for acquiring new tools and technologies. These technologies must appeal to the younger generation of workers who are needed to upgrade utility grids for the future. At the same time, the skills gap must be closed among older team members so they will opt to delay their retirement and continue working.
2. Lead the creation of the Organization’s digital DNA
Despite all the buzz about digital transformation, the reality is that most utility companies are still more analogue than digital. While there is a conscious effort to modernize infrastructure, these are often projects and not part of the core of the organization.
Digital innovation should be tied into a utility company’s business goals, both short-term and long-term. Organizations should stop talking about “digital innovation projects” and shift the conversation to centre on digital DNA.
Deloitte sums it up perfectly: “Digital is the pervasive thread through all of these disruptive forces—as a catalyst, a disruptor, and an enabler.”
Without digital DNA, organizations cannot be a 100% digital utility. They will get stuck in an endless loop of implementing digital projects without really making changes to their business, operating and customer models.
A CIO needs to be the champion and ambassador for digital DNA. A CIO should ensure that legacy systems take a backseat to more agile, flexible and easily scalable digital technologies. Getting stakeholder buy-in and appreciation is critical to this and the CIO should have a strong voice to address and minimize hesitations, objections and fears.
3. Catalyze the shift to Agile workflows
Professionals in the utility industry are used to dealing with fluctuations.
As it turns out, centuries of dealing with variations in supply and demand, shifts in grid performance and fluctuating market prices have hindered our preparation to be agile for the rapid digital transformation that’s happening today.
‘Agile’ used to be a buzzword among Silicon Valley tech giants. It is now a framework being adopted across all industries and practices, including the utility sector.
Digital utilities who have successfully implemented an agile framework have reaped positive ROI, especially when dealing with volatile, uncertain, complex and ambiguous (VUCA) generation, transmission and distribution situations.
‘Agile’ does not necessarily mean ‘disruptive’, CIOs can use agile management techniques, workflows, and processes to avoid disruption during an organization’s transition to a digital utility.
To achieve this, CIOs must be able to accomplish 3 things:
- Cultivate an agile mindset and attitude. Utility companies have been resistant to change. A CIO’s first step is to make the organization admit and acknowledge this. The next step is to foster a top-down commitment to the changes involved in transforming the organization into a digital utility. They must reassure stakeholders that failures along the way are part of digital transformation.
- Develop agile structures. CIOs must break down silos to allow better collaboration among teams and spearhead new solutions innovatively.
- Strengthen internal and external networking. CIOs need to boost their organization’s intelligence network to forecast new market conditions, trends and values. Further, CIOs need to investigate potential external innovation partners such as blockchain experts to expand their utility’s digital capabilities outside its own internal expertise.
4. Move to best-of-breed applications
The convenience, assured compatibility, and easy integration of sourcing multiple software solutions from one enterprise resource planning (ERP) vendor made the monolithic/one-stop-shop approach a standard among utilities. However, with the emergence of advanced and sophisticated APIs that can facilitate integration across seemingly disparate software solutions, the case for a monolithic approach is no longer compelling.
Thanks to the growing economy of API utilities, CIOs can now take a ‘Best of Breed’ approach when selecting technology solutions. For example, they can source meter data management from one vendor and advanced analytics from another. Utilities must set parameters, such as needs, resources and internal capabilities and then select the best applications in the category to maximize these requirements.
Often, choosing the ‘Best of Breed’ applications results in better scalability, improved cost-efficiency, greater flexibility and a better performing technology portfolio. It also simplifies and accelerates new software implementations and the necessary subsequent upgrades.
5. Adopting multispeed architecture or bimodal IT
Those who said that you can’t have the best of both worlds have clearly not heard of Bimodal IT.
Gartner defines Bimodal IT as the “practice of managing two separate but coherent styles of work — one focused on predictability and the other on exploration.”
Earlier, I pointed out how CIOs could feel trapped between reconciling tried-and-tested (and sometimes legacy) systems and innovating new, innovative, dynamic and more customer-centric solutions.
A Bimodal IT strategy allows CIOs to navigate areas that are “well-understood and predictable” while making changes in the legacy technology portfolio to better suit the goals of digital transformation. The strategy enables CIOs to look simultaneously into new solutions to solve new problems and to optimize mission-critical areas of a utility company’s operations in times of uncertainty.
Multispeed architecture is closely tied to the concept of agility. We are only seeing the tip of the iceberg in the evolution of digital utilities. As our Communication and Marketing VP Frederik ten Sythoff pointed out in a recent post, a utility company’s digital transformation will never be finished.
The path in front of us is laden with questions and uncertainties. The only way to adapt and succeed is to dynamically embrace these changes. Central to this is the implementation of advanced and data-enabled technologies, led by the CIO.
This will give utility companies the flexibility to constantly adapt to the ever-changing market, environment, and regulatory conditions. It will enable them to build a strong foundation for success, in whatever future the utility sector faces.
6. Own the role as chief innovation officer
CIOs are no longer only the Chief Information Officers of utility companies. Their role now goes beyond managing IT infrastructures.
CIOs have become Chief Innovations Officers, trailblazing the way in future-proofing their respective organizations. The 2019 Gartner State of the CIO report echoes this sentiment, revealing that the biggest role of the CIO is now innovation.
The CIO’s role in facilitating a shift in the culture and mindset of their entire organization is just as important as ushering in new technologies. Even with the most sophisticated technology, any digital transformation initiative will fail if there’s no change in culture.
As Gartner’s research vice-president Elise Olding explains: “A lot of CIOs have realized that culture can be an accelerator of digital transformation and that they have the means to reinforce a desired culture through their technology choices. The logical conclusion is that CIOs should start with culture change when they embark on digital transformation, not wait to address it later.”
In the age of Digital Utilities, CIOs have much greater and more complex responsibilities resting on their shoulders than at any other time. However, it is also an exciting period in the evolution both of utilities and in the role of the Utility CIO. At the core of this new role is the transition to Chief Innovation Officer. The six priorities I have outlined will future-proof this new role and help to build the successful utility of the future.
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