The world of energy generation and distribution, and the relationship between energy firms and their customers, stands on the cusp of great change. Large utilities that saw other large firms as their competition now have to cope with a future where individual homes are able to store solar generated power and where innovation in user experience and smart devices counts for more than brand identity in a commoditised market.
Perhaps the biggest challenge for these firms is scale. They need to operate at both the scale of a utility and the intimacy of the home, which is not easy given where they have come from.
But other new entrants, not just the traditional utilities, also face challenges in responding to the threats and opportunities of digitisation, the Internet of Things (IoT), data and artificial intelligence. Connected markets and connected products demand a connected company – and most companies are not set up that way today. How can you operate real-time data sharing networks with customers if your firm operates as a traditional cascading hierarchy that is slow to change and where decisions are made by navigating up and down the chain of command? How can the best products that combine hardware, software, data and services be developed, if each of these disciplines is a different silo within our organisations?
Breaking down hierarchical silos
For companies to succeed in a software driven world, they need to operate more like software themselves in order to achieve the agility and adaptability that these new market dynamics demand. The old world of hierarchical management and departmental silos will not cut it. One trend we are seeing is the rise of business as a-platform models, where companies embed core services, rules and processes into a shared service platform – an alternative to hierarchy. This model allows small, agile teams to operate on top with relative autonomy, staying as close to customers and their needs as possible. Another approach is to operate highly distributed teaming models, where teams are encouraged to work with customers and partners at the edges, perhaps in liminal spaces, that also include start-ups working in the same field. These teams are then joined together with networks and communities, using organisational data and social network analysis to build a picture of the overall health of the firm.
Companies in this sector need to live and breathe software, data and user experience if they are to compete against highly focused start-ups that are observing the market for opportunities. Without consistency between how they operate internally and how their products and services work for customers, they are in danger of falling foul of Conway’s Law that states:
“Organisations which design systems … are constrained to produce designs which are copies of the communication structures of these organisations.”
If you believe data services and user experience are key differentiators in the market, then create and share open data flows within the organisation so that anybody in the firm can identify trends or anomalies that might lead to opportunities. Many new offerings will emerge from smart uses of customer data, but right now this tends to be locked away in marketing or customer service departments. Social media teams tend to be close to customer insights, so they might be a good place to start in developing a more data- and customer-focused mindset through the organisation. However, there is also a need for smarter, more agile IT and digital functions and an increase in digital literacy within the organisation.
The ‘connected’ enterprise
Digital transformation in the energy and utilities sector is not just about new products and services that can be invented and sold by existing companies. It is also about fundamentally new business models that are made possible due to the rapid rise of connectivity in the modern world today. If the market cannot deliver the connected behaviours and values seen in consumer markets, energy and utility companies are unlikely to succeed against more digitally-native, agile start-ups.
Research suggests that many executives are frustrated by their inability to realign their organisations to meet these challenges, citing a lack of digital literacy and culture, problems with outdated organisational structures, and inadequate alignment with rapidly changing consumer behaviours as major factors holding them back. The best way to solve this is not just to invest in technology, but to initiate a top-to-bottom review of the organisational capabilities required to succeed today and tomorrow. Also key to the success of any major organisational shift is the inclusion and participation of all individuals, motivating them to own the change that is needed.
Going into the world of smart devices and data with the mindset of a utility company is a recipe for costly failure. Harnessing the experience and knowledge in new, more adaptive and fluid organisational structures can create opportunities for scale advantage: meaning that existing energy firms could come to compete with the Googles, Amazons and Apples of this world, at least on their ‘home ground’ of serving domestic customers. MI
ABOUT THE AUTHOR:
Lee Bryant is the director of Shift*Base, a research and insights company focused on the future of work and organisational development.