Utilities must pick a business model!

Or the speed of change will force their hand

Phil Carson | May 16, 2012

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Utilities should seize the day and determine their own business model, which could dictate how they engage with customers and consumers—there's a distinction—as well as influencing their technology roadmap.  

That statement isn't particularly groundbreaking, but two trends over the past two years underscore the urgency around taking the initiative in these matters, according to an executive who performs global, power-related consumer surveys. 

Every year Accenture performs a global survey to better understand energy consumers, country by country. You can explore the minutiae around the global consultancy's findings—including North America—in the document, "Actionable Insights for the New Energy Consumer."  

And you can consult the write-ups we've done on Accenture's global surveys in the past three years:

 

 

Today, let's consider those two recent trends I mentioned, and a few related concepts. I spoke yesterday on the topic with Greg Guthridge, Accenture's global managing director of retail and business services for utilities, who oversees consumer-related research in the power industry. 

First, the trend toward the use of social media and self-service options has grown markedly since the first Accenture global survey on consumers and energy two years ago. Second, the number of consumers who will default to their utility for discussions of energy-related matters is falling; increasingly, consumers will speak with anyone who offers value around energy management.

In fact, Guthridge said, set aside "the Googles" for a moment and consider that telcos, cable companies and home security firms are offering home energy management services.

The trends in social media and self service and away from the utility as a trusted source underscore the urgency for utilities to determine their best business model going forward, Guthridge told me.

Accenture has developed four basic business models that utilities are likely to follow, ranging from simple commodity provider to a specialized energy service company with bundled products and services. Those business models reflect whether a utility has the scale and sophistication to "go it alone" or whether it's better off partnering with third parties for value-added services. The failure to determine one's own fate may well pave the way for the dreaded "disintermediation," which simply means that someone else has your customer's attention and, possibly, money. 

Placing power utilities into the context of other verticals illuminates hidden value that awaits discovery and exploitation, Guthridge said. In the utility realm, for instance, about 30 percent of customers use social media and self-service options, while 70 percent are agent-assisted. Those proportions are reversed for most other verticals. 

"This is a huge opportunity to reinvent your customer interaction strategy, save money and improve satisfaction," Guthridge said. "There's a lot of value locked up there." 

On the topic of social media, it's worth noting that electricity consumers have been known to post outage notifications on Facebook, assuming that the utility is listening to that channel. It's important that utilities use social media not only as a means of communication and a type of self service but also to monitor consumer concerns and perceptions of the utility.  

Guthridge had begun our conversation with a frank assessment of power utility rhetoric and reality around "customers" and "consumers" - the distinction I mentioned earlier. 

"Most North American utilities don't know their customers," Guthridge said. "Most say they are `customer-oriented,' but the reality is that they only have a relationship with the bill payer." 

That's an echo of the "one size fits all" approach that is hobbling utilities' efforts to engage consumers, provide them with choices and, possibly, earn their loyalty. 

"There's a gaping hole between connecting with the bill payer and the `influencers' on home energy use," Guthridge said. 

While a home's bread winner may be the "bill payer," other members of the household may be the "influencer," a role that could be played by teenagers, women or elderly parents, based on who is paying attention to related issues or is exposed to educational opportunities or sales pitches from third parties. 

Guthridge also found that utilities need to work on "maximizing consumer willingness to pay." This reflects that consumers generally rank paying their electricity bill rather low, well after their cell phone and cable bills. Among the factors leading to low regard for paying promptly: awareness that service disconnection faces certain legal hurdles and that utilities typically offer flexibility around paying on time.    

"Price signals are effective in getting consumers' attention," Guthridge pointed out. "But you need to add value. You need to bundle price with other value adds."

Food for thought and, possibly, immediate action. 

Phil Carson 
Editor-in-chief
Intelligent Utility Daily
pcarson@energycentral.com
303-228-4757  

 

 

 

 

 

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