Utility strategies for a post-utility world
This author no longer works for DNV GL.
Not long ago I wrote about the all too early epitaph being written for the electric utility (see Utility Death Spiral – Not So Fast). The point I was making focused on how central the traditional wires utility will remain in the years to come and those that would trumpet their end were incredibly pre-mature. That said, I also mentioned there was a shift underway and those that failed to adapt could indeed find themselves looking rudderless next to their peers as alternatives take hold that challenge the status quo. Will it be the end of the traditional utility? Unlikely. Do all utilities need a plan for the future that embraces change? You bet they do.
So what does the progressive utility need to be doing in the months and years to come as smarter energy management/lifestyle technologies take hold, more distributed resources become economic, and consumers demand 21st century engagement methods for their attention and loyalty?
First, utilities should to be focused now on developing an aligned strategy linking to customer perceptions of the electric utility value add. Going forward business as usual will become less and less profitable without strong customer perceptions of value from the services they receive.
Second, even regulated wires companies need to build strategy like a service provider that does not have a regulated service territory. This is about becoming a key service provider to customers above and beyond the “must purchase” level. You see even customers that don’t have a choice of electric companies have some choices that can impact the top and bottom line of the local utility. If customers only think of the utility as a limited value toll taker then they will keep looking for ways to minimize the toll. Or worse, they will find a higher value alternative for a similar price.
Third, and most importantly, utilities need to define their core competency such that consumers recognize and value it in the face of alternatives that might seem equivalent or possibly superior. If the value add is reliability, for example, then make sure customers understand what that means. Further define and enhance value add services strategically to build upon that core customer need and build the perception to match the message.
Development of an effective strategy comes down to understanding the nature of the opportunities and challenges from both utility and consumer perspectives. This must be followed by a detailed assessment of business use cases and their connection with core competencies. Once developed and implemented, an aligned strategy will position the utility to fully realize the benefits of the changing expectations and technologies for customers. A well-defined strategy will also provide a means to meet evolving regulatory requirements and maintain or improve investor returns despite growing competitive pressures.
Fundamentally, a cohesive strategy represents the key pillar in the evolution and maintenance of the regulated utility business model in the face of changing energy supply and management technologies.