What 2019 holds for utilities

Utility incumbents are transforming their business practices in order to keep up with their smaller, agile rivals. With this in mind, Mike Wilks gives his key ­predictions for the industry in 2019.

Disruption to the UK utilities market continued in 2018. The big six’s ­battle against the growing list of digital-first start-ups rages on, with the incumbents ­ceding further ground.

According to the latest report from Ofgem, the big six energy suppliers accounted for just 77 per cent of the market in the second quarter of 2018 – down another percentage point from the end of 2017.

Other utilities are facing similar challenges, particularly water companies, as all eyes are on them as they search for the most efficient ways to reduce the damage of water leakage.

But with competition comes change and we are seeing active efforts from incumbents to transform their business practices in order to keep up with their smaller, agile rivals. With this in mind, here are my key ­predictions for the industry in 2019.

The customer is key

Last year, we saw the digital-first entrants continue to encroach on incumbent energy providers, loosening their vice-like hold on the utility sector. Playing to their strengths in customer experience, the new entrants are slowly gaining the upper hand – ­personalising, streamlining and enhancing the customer journey, making it simple to switch suppliers and move energy plans to new homes.

The big six know their service has not been up to scratch, and are actively searching for ways to evolve and become more agile. We are going to see a real drive to transform the relationships they hold with their customer base, which traditionally have been transactional, to a more personalised and customer-centric approach. Innovation is desperately needed by the incumbents, with investment in the customer interface a primary focus leading into 2019.

There is also the need to appeal to the most important customer of all – the employee – be it attraction, retention or upskilling. We anticipate a strong impetus to personalise to the individual as workplaces recognise how diverse their workforce is. This will be delivered through leading-edge digital services and learning offerings to cater to the varying expectations of their employee base.

Rise of the robot

The utility sector has always been a late adopter when compared with other sectors such as finance and retail. Now it is being forced to catch up quickly to keep up with new digital-first competitors.

According to our recent research, 100 per cent of players in the energy market expect it to be completely turned upside down by digital disruption within the next five years – and 86 per cent are said to already be transforming their business model as a result.

The latest World Energy Markets ­Observatory report highlights that the ­utility industry is beginning to see traction with cutting-edge technology such as the Internet of Things and blockchain, which are gaining progressive adoption globally. However, in the UK, robotic process automation (RPA) is fast becoming king.

Most large utility providers just don’t have the budgets to entirely replace legacy systems with the most up-to-date ­technology, nor do they appear to have the appetite from a risk perspective. As such, RPA is being looked to as the anchor point from which to kick off the digital transformation at the back-end to streamline processes and reduce overheads – although this is only a short-term solution to a larger problem.

Advances in analytics

Utility companies have been dabbling in data analytics for a few years, but we expect 2019 to be the year they really embrace advanced analytics, to improve asset management and transform their businesses. For instance, the water industry has decades’ worth of customer infrastructure data to call upon, which companies are realising could have great business value, if mined effectively.

However, companies need to be wary of focusing all their attention on one issue as it could be costly in the long term. Organisations need to ensure they aim to implement analytics across the entire company, rather than just focusing on small segments in order to future-proof their organisations for the coming years.

Despite the many hurdles facing utilities, they are changing their traditional mindsets and looking to drive real business change through digital transformation. This is only good news for customers, who should expect a better experience across the industry as a result. The only question that remains is, can large suppliers initiate these changes fast enough to plug their customer leak before competitors gain an even greater foothold?