In a recent survey of power executives conducted by Deloitte, a full 95 percent agreed that digital transformation is a top strategic priority. That’s a pretty convincing stat. But are power companies taking full advantage of the opportunities that Industry 4.0 technologies offer?
Sure, power companies are making progress on digital transformation and many have explored technologies that would be considered disruptive—such as AI, analytics, and machine learning. But, less than half of respondents to the survey chose this as an area they are exploring. What’s more, when asked about what digital capabilities they were most interested in, only about 30 percent of respondents deemed capabilities that used deep analytics and robotics “extremely important.”
What these responses seem to indicate is that while digital transformation is a priority, it may need more traction in the sector to deliver on its true potential. With such revolutionary technologies available, power companies may need to think bigger. But how?
Finding the right opportunities
A range of factors are yielding opportunities in the power sector—from the falling price of renewables to the increasing electrification of the transport and other sectors. Advances in digital technology can spur innovative approaches that can help power companies make the most of these opportunities. Not only can digital technologies help power companies achieve operating efficiencies and remain competitive, but they can also potentially create new value through additional revenue opportunities. Technologies such as AI and IoT are already accelerating the development of new business or operating models that can optimize and augment performance.
In some cases however, these opportunities can be leveraged by new entrants as well. While selling power itself may not be an option in some heavily regulated markets, startups, entrepreneurs, and companies from adjacent industries are ready and willing to take advantage of anything they see as a market opportunity. Already big tech is eyeing ways to use data from smart thermostats and other connected devices in the home.
The digital imperative
The good news is that incumbents have the home field advantage—with assets and customer databases in place as well as strong brand identification in many parts of the world. But this advantage stands only if they are willing to change their culture and move with more purpose into the digital age.
When it comes to the digital transformation continuum, many power companies are still in the exploring phase, dabbling in new technologies—and potentially leaving themselves vulnerable to disruptive entrants. Still others are doing digital “as needed”—implementing one-off digital projects rather than building an enterprise-wide digital strategy and culture.
Power companies need to push past these phases to “becoming digital.” They should consider adopting agile business practices and shifting their mentality toward a more flexible and collaborative environment. For example, instead of delivering one completed project at a time, they could develop the capability to deliver smaller releases more frequently by establishing a “digital foundry.”
While the utility industry is not known for its fast-moving culture—companies can take some concerted action to start their digital journey or keep the journey moving once begun. Here are some steps to consider:
- Chart the path: The first step is to recognize that the transformation to “being digital” will be a substantial, significant, and a long-term undertaking. It’s an ongoing process that won’t end anytime soon. Start by defining your organization’s ambitions and then chart a path to success by developing a road map to achieve those ambitions.
- Develop innovation capabilities: It’s important to establish repeatable innovation capabilities to continuously supply the business with a robust pipeline of digital projects. Ideally, the innovation process will enable your organization to rapidly design, test, and iterate each concept through to launch.
- Develop or acquire new technology: Participate in a technology incubator, start a venture capital organization, or consider investing in or partnering with technology companies to develop innovative products, services, or business models and test use cases.
- Transform culture: Cultural transformation involves not only adopting new technologies but incorporating a digital mindset into the DNA of your organization. This requires developing processes to encourage experimentation and innovation as well as a transformation that introduces organizational, operational, and behavioral changes and instills them enterprise-wide.
- Invest in a digital foundry: This is a hub for all digital activities—a dedicated function that can continuously ideate and carry concepts through implementation. It will use new skill sets and new ways of thinking, such as agile and design thinking.