How utilities can speed up their digital transformations

By transforming its systems and ways of working through digital technologies, a utility can cut its operating costs by up to 25 percent—savings that can translate into lower revenue requirements or higher profits. Lured by this promise, many utilities have launched digital initiatives, such as adopting predictive maintenance or optimizing omnichannel customer experience. Yet, few of these efforts have resulted in fully fledged digital transformations.

Why not? In our experience, three issues are holding utilities back: working methods and mindsets that revolve around safeguarding major assets and minimizing operational risk; the difficulty of attracting digital talent to what are perceived as analogue-era organizations; and the presence of complex legacy IT systems that slow innovation down.

Overcoming these issues isn’t easy, but we’ve seen leading utilities succeed by taking three critical steps. The first is adopting digital ways of working, which will involve increasing their agility—their capacity for sensing challenges and opportunities and quickly mobilizing their organization to respond. This takes time, so some utilities seek shortcuts by acquiring or partnering with digital start-ups or setting up an in-house digital factory to produce digital applications using the latest technologies and working methods.

The second key step is attracting and retaining digital talent—a tall order for organizations seldom seen as innovative, cutting-edge businesses. To boost their recruitment efforts, utilities can emphasize the intellectual challenge and reward of the digital agenda, the social value of providing a community with reliable energy, or the role technology can play in reducing a utility’s environmental impact. Other helpful tactics include pursuing a diverse talent pool and partnering with local universities to source digital talent and ideas.

Finally, leading utilities progressively modernize their IT architecture and environment—first by simplifying their product portfolio and business processes, then by shifting from their old monolithic systems to a new modular IT architecture. They use off-the-shelf software packages to meet essential needs but develop custom applications for settings where distinctive capabilities can confer competitive advantage, such as mobile-enabled field operations.

While a comprehensive digital transformation can take years even for the most advanced utility, following these three steps can certainly help companies accelerate the process and improve their competitive position.