The next steps for utilities to take in their digital product journey

The energy transition is driving a fundamental reset of the traditional utility business model. There is an acceleration of interconnections of distributed energy resources (DERs) and large-scale renewables, a generation of utility experts are retiring, and the pandemic shifted a largely in-person workforce to a hybrid one. Utilities have responded by starting to embrace digital as a permanent and valuable transformation. 

Though a handful have momentum when it comes to embracing digital, utilities as a whole have embarked on a relatively limited set of use cases and only just started to capture the benefits from digital. To truly unlock the value potential of a digital transformation, utilities must overcome blockers and make step changes in their approach.

The current state of digital transformation in utilities

The business case for a utility to be digital is compelling. Utilities understand that system investments are critical to achieve the infrastructure modernization demanded by the energy transition. And these significant capital investments required can be funded in large part by expense savings realized through transforming people and process inefficiencies using digital solutions. 

Utilities have sought to integrate digital solutions using IT with OT for decades, pursuing IOT product development as a means to improve reliability, customer experience, and cost efficiencies. Grid modernization solutions like Advanced Digital Management Systems (ADMS) or Advanced Metering Infrastructure (AMI) are well-known examples. But while smart grid technology such as digital sensors and distribution automation have advanced, so have customer expectations and regulatory requirements. These factors have paved the way for a digital utility future. 

In recent years, innovative utilities have started to deploy IT-based solutions by leveraging an agile software development lifecycle approach. This is a departure from the traditional waterfall deployment approach employed for many utility initiatives and involves adopting a product-based mindset versus a project-based one. While a project approach is focused on a small set of major releases, the digital product lifecycle consists of multiple stages such as ideation, human-centered design, development, launch, and scaling. Over the course of these stages, a product mindset prioritizes continuous improvement and delivers outcomes and key results through iteration, testing, and learning. 

Early use cases for digital products have been focused on the customer experience.

Catalyzed by customer expectations, utilities tend to start their digital product journey with mobile apps and web portals that enable customers to pay bills online, access energy usage information, learn about interconnecting DERs, and receive outage-related alerts. More recently, utilities have started to look at digital products as an employee experience solution. A common first use case for enhanced digital employee experience has been the development of a new employee portal that is driven by more automation and self-service. 

On the organizational side, utilities who have embarked on a digital product journey have made adjustments to their operating model to deliver custom digital products more efficiently and effectively to their end users. Some utilities stand up a “digital factory”—or digital product organization—that centrally builds and allocates the specialized expertise needed to design, build, and execute on various launches of digital products. Typically, this talent is grown out of IT and deployed in close partnership with the business. With greater commitment to the digital journey, product teams eventually become more embedded in utility business units, as is the practice with more digitally mature sectors such as high tech and healthcare.

What’s holding utilities back in their digital journey? 

Despite such great potential, most utilities have yet to realize their desired value from digital—in fact, many utilities have encountered the same set of challenges: 

• Limited use cases: Few utilities have broadly explored the true value of bespoke enabling digital products outside of customer-facing applications or an employee intranet. The industry has also seen limited use cases when it comes to leveraging artificial intelligence (AI).  
• Organizational resistance: Building a digital product portfolio requires a significant cultural and organizational transformation, including new processes and ways of working. Stakeholders may also experience change saturation with new digital ways of working and an agile workflow and release schedule; without proper change management, resistance to digital grows stronger. 
• Building and sustaining technical capability: There is heavy competition to attract and retain the specialized talent associated with the product lifecycle. Without a strong digital-focused culture, retaining talent layers an additional level of complexity. 
• Lack of overall strategy and roadmap: Without a holistic approach, brainstorming bottom-up ideas may lack cohesion and a unified purpose, leading to confusion, competing priorities, and inefficiency. 
• Unclear decision rights: An effective agile development process relies on team empowerment with clear decision rights. Partnerships between business and IT will not be effective without clarity of responsibilities and accountabilities. In addition, senior executives new to the digital ways of working will struggle to empower their team members to decide what’s best for the product lifecycle—which requires quick decision-making and fast failure. 

How utilities can take the next step 

Fortunately, there are sound approaches to learn from utilities that have matured their digital product journey. Utilities should adopt a formal product portfolio approach that includes: 

• Developing a top-down strategy across the portfolio: Ensure the overall portfolio has cohesion and coordination, especially if responsibility of the portfolio is distributed across leaders. 
• Establishing clear portfolio objectives: Be clear on top-level portfolio measures and have specific goals for value, efficiencies, and operations. A best practice approach is optimizing the portfolio valued on overall bang for your buck. 
• Establishing a rigorous and competitive process by which concepts are introduced into the portfolio and funded: Allocate constrained resources to those products that create the highest sustained value while supporting the business unit vision and portfolio objectives. 
• Leveraging real option thinking: Consider the value of small investments for downstream learning, such as a proof-of-concept application for a limited user set prior to a minimum viable product (MVP) launch. Such learning can even result in the abandonment of a product if it does not pass a validation stage, which has the value of avoiding unnecessary expenditures in the future. Ideally, this option value should be built into the business case for a digital product. 
• Employing a light-touch governance structure that fosters empowered decision making: Having clear decision rights assigned to those closest to critical information gives teams the ability to move quickly, fail fast, and achieve milestones with a sense of ownership. 
• Harnessing the value of change management through the portfolio and product lifecycle: Use a formalized yet flexible change management approach to roll out the digital way of working as well as specific products. Resistance will increase, adoption will suffer, and the benefits cannot be realized if business stakeholders don’t understand and desire the change. 
• Building a flexible resourcing model: Product demands can shift quickly, and it’s important to adapt. Consider developing centralized or regional pools of talent including product managers, software engineers, change practitioners, and designers that can shift within the portfolio as needed. 
• Involving the end users in the process from the start: Bring the users along in the product lifecycle early on, including involving them in the ideation. This will lead to a greater sense of ownership in the solution and ultimately greater adoption of releases from MVP and beyond, which enables the realization of value. Consider crowdsourcing ideas from the field in a high profile, competitive forum.
• Expanding the portfolio opportunity set: Utilities should actively explore field operations for digital use cases. There are several applications of digital products driving value in electric, gas, and water field operations. These include better inventory management to generate cost savings, automated assignment of field activities, and digitalization of recordkeeping activities—all of which can be enabled through AI. While many utilities have constrained their digital journey to the customer organization, there’s tremendous value available in operations.
• Explore applicability of new technologies and approaches, like Generative AI (GenAI): Utilities should more actively explore applying technologies such as GenAI to activate new use cases. Start with brainstorming how GenAI might enhance aspects of employee efficiency, customer experience, and service delivery. Hypotheses can be validated with quick proofs-of-concept and scaled into pilots, refining the target use case along the way based on findings from the pilots.

Each element of the product pipeline requires investment within a constrained portfolio, and not all products live on to maturity. The methods above have been proven to achieve realizable value and can drive success in a digital utility framework.

Conclusion 

Building and managing a transformative digital product portfolio is an exciting step for a utility. It can lead to significant financial value that can fund the energy transition investments, energize a utility’s employee base with the spirit of innovation, and meet the needs of a customer base with growing expectations of a seamless digital experience design. However, it also requires best practices in portfolio-based planning and execution, as well as a willingness to take risks, experiment with learning-oriented approaches to product development, and explore innovative applications of new technologies such as use cases for AI in utilities. The utilities that successfully overcome these challenges will unlock significant financial value for their customers and their shareholders, and successfully transition into a digitally-driven energy future.