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Author's profile photo Florian Froemberg

Why Are Utilities Stuck in a Rut?

Yesterday I had a discussion with some colleagues about Utility Retailers and the way they are stuck in the current state and not innovating enough. In that chat we focused on the deregulated, competitive markets in particular; although I believe a lot of that applies to regulated markets as well, even though the outcome and entry points might look different.

Why not extending beyond traditional B2C household, price comparison websites and highly individual quotes for industrial prospects?

What is blocking the Utilities to explore new grounds? Is it that the current business is still lucrative enough? Lack of ideas how to conquer new ground?

There are only a few examples where I see true innovation and new business models.

Having a clear vision of what to achieve, and how to improve engagements, is not done on a tissue during the coffee break. Being clear on the company strategy and how this is supported by digital channels is a crucial and time-consuming aspect; but it can be a rewarding one.

But how do you come to such a plan, what are the right “New Business Models” to invest in? There is no definitive answer, but I want to give you one example of a Utilities customer here in Germany. I think they did a good job in defining such a case, evaluating and then eventually turning it into reality. It is about a customer portal that includes selling and digital services:

This company was looking at their customer base and it mainly consisted of two categories: household customers and big commercial / industrial customers. But what about the Small Medium Business customers, they are plenty but too individual to be served with a standard B2C rate, but not big enough to justify being handled by an account manager. Would it be feasible to invest into that segment and create a kind of “Self-Service Selling” mechanism for them?  – To verify this idea the utility went into a kind of field test. They used a handful of dedicated salespeople to check with the to be acquired client segment and checked if those would be willing to accept a highly competitive offer (machine generated, based on the provided input) that, in return, would require them to use a portal to sign-up and perform certain actions. Eventually it is a mix of mechanics that are well established for the price sensitive household segment and individual quotes covering the needs of a business such as a bakery franchise or a hairdresser.

The result was documented in a business case that proved that the costs for such a project would not only be covered, but this whole endeavor would be a profitable business model. So, investing time and effort into checking upfront if an idea is viable seems to be a valid approach. Way too often I hear from Utilities that they shy away from potential costs of investing into new ways. This is for sure right, if you don’t build a measurable “what you get out of it” side.

Another customer, this time in the US, took a different approach: They did not evaluate their plan with a comprehensive business case. Their goal was not (necessarily) revenue as the main KPI, they wanted to learn about how to engage in digital channels and how their customers would accept new offerings and what their desire really is. So, they setup an eCommerce shop and went live with it, and other SAP CX components, in less than five months. They listened, observed and gained valuable experience in the area of online selling of commodities and non-commodity products and services.

How the future Utilities business models look like can differ very much, based on market role, geography etc., but coming back to my initial point that I wanted to make: going beyond the current methods is more than just new trend. Learning and gaining maturity in the digital area can be lifesaving. No one can predict how the industry will look like in 10 years. Customers, in all segments, are already requesting the best experience and more from a Utility then commodity business. And that does not mean that more work is needed to fulfill these requirements. Today’s software in the cloud can do the work, especially if you want a provider who has the knowledge cross industries and help you getting to speed with a flexible and powerful system landscape to boost the customer experience. Guess what, yes! SAP is here to help Utilities achieve that, like the company that I mentioned in my example.

In short: focus on the needs of the market/your consumers, use best practices from other industries, and validate your ideas. Foster a strategy and execute along, no need to achieve everything in the first step, an online digital world brings new experiences, for your company and your employees. Leverage those to develop and grow into the direction you want and your customers request.

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