How’s your company’s Digital Transformation going?

I have bad news. It will never be finished.

It is becoming clear that Digital Transformation is not a task to be undertaken, finished and put away then re-examined a few years later. With technological advances speeding forward at an ever-increasing rate, it is an ongoing process.

In their study, The Sorry State of Digital Transformation in 2018, Forrester noted that 21% of firms surveyed reported that their Digital Transformation had been completed. Forrester comments:

“Firms think they are transforming but many don’t realize that transformation will be a permanent state of being.”

It is CIOs and CDOs who are leading Digital Transformation in 37% of the firms surveyed, so it is at their feet that this endless task falls.

The good news is that a successful Digital Transformation strategy, one that delivers consistent digitalization and transforms a company into a data driven organization, will help CIOs to overcome many of the challenges they face going into 2019 and beyond.

The CIO as Strategist

With so many CIOs leading Digital Transformation in their organizations, it is not surprising that many are reporting a more strategic element to their role. In the past, CIOs have been viewed as a kind of internal problem-solving, emergency service, now they are also seen as strategic business partners.

They are under pressure to lead digital and technological enabled innovation. In fact, according to the IDG State of the CIO 2018 report, 88% of CIOs polled said that they felt their role was now more digital and innovation focused.

According to this survey, the biggest challenge facing CIOs today is aligning IT goals with business goals as technology is increasingly at the heart of all businesses. Digital Transformation must ensure that technology provides solutions for every element of their business whether this be cyber security or customer satisfaction. It is essential then that the strategy-focused CIO is familiar with all aspects of their company and with factors impacting the wider business environment.

For CIOs working in the utilities sector, the influences impacting their wider business environment are frequently summed up by the 4Ds:

Digitalization

Digitalization is forcing changes onto all business sectors and the utility sector is no exception. New and emerging technologies such as AI, Big Data Analytics, IoT and Digital Twins are leading the way towards the fourth industrial revolution. In an environment where we are increasingly digitally dependent, data has become increasingly important. However, according to IDC, 90% of unstructured data is never analysed and this figure does not show any sign of waning, as the big data revolution churns up copious amounts of structured, unstructured and semi-structured data, which is collected and stored by utilities without any real purpose other than compliance.

Decarbonization

The recent report by the UN Intergovernmental Panel on Climate Change (IPCC) states that urgent and unprecedented changes are needed to reach the Paris agreement pledge to keep global warming to a maximum of 1.5C. To achieve this, carbon pollution would have to be cut by 45% by 2013.

The report finds there has been unexpectedly good progress in the adoption of renewable energy, but it goes on to say that increasing shifts towards electric transport systems are essential. In many regions, governments are regulating to ensure this happens. Norway will be stopping the sale of new fossil-fuelled cars in 2025, India and France in 2030 and the UK and China in 2040.

Decentralization

Where once the energy sector was ruled by a few big players, digitalization and the trend towards renewables is leading towards smaller energy-producing hubs. Consumers are also producing their own energy, for example though solar panels. It is often the smaller producers who are driving innovation at the grid-edge.

Democratization

The consumer is becoming the producer and taking on the role of Prosumer. Prosumers are producing their own energy and selling what they don’t use back to the grid. In Germany in 2017, 42% of the renewable energy installed was down to citizens.

Some governments are actively encouraging the move towards the Prosumer. Government policy in Denmark allows permits for wind projects, only if at least 20% of the development is owned by local communities.

In the future, improved storage technology will enable Prosumers to use their own energy when they most need it or alternatively sell it on to other consumers.

For utility companies these external forces are driving utilities towards Digital Transformation. For the CIOs, of these businesses, aligning their company’s business goals with IT goals, necessitates keeping the 4Ds in mind.

CIOs must put the I for Innovation in their role to drive Digital Transformation

5 Key Challenges facing CIOs today.

1. Build a modern and flexible IT infrastructure to foster data driven innovation

An over-arching Data Strategy must be put in place to avoid a piece-meal, fragmented approach. If infrastructure is purpose built to handle data and integration, data can be used to maximum effect. A comprehensive strategy will prevent data becoming siloed and allow it to flow freely around an organization. This will enable cross-fertilization of knowledge and ideas, increasing opportunities for innovation.

While an incremental strategy has the potential to deliver a fragmented infrastructure, in practice it may be the least disruptive way to put a strategy in place. In addition, utilities may be dealing with legacy systems which are impractical to update all at once. An incremental approach which takes these concerns into account may be the most practical way to proceed.

2. Deliver on Data

With the adoption of smart meters and devices, the quantity of data is not usually an issue for utilities, but often the data is not fully used. Digital Transformation and integration are the first step towards presenting the data in a useable format, but then what? A process needs to be developed so that insights can be gathered and then applied to create new ways of working or services that customers want.

The rise of prosumers and the increased use of electric vehicles will have a massive impact on the demand for energy and fluctuations in energy requirements. The ability to collect and analyse the data that accompanies these changes will give companies a competitive advantage.

According to WEF, getting this right has enormous benefits, not only for energy companies, but also for wider society,

“Optimizing the grid to manage real-time supply and demand is worth $191 billion for electricity utilities, while the value this could deliver to society is three times as much ($623 billion).”

3. Prepare for Partnerships

One significant change for utilities is the movement away from the ownership of assets as the prime driver for generating income. Decentralization and the adoption of new technologies both by utilities and their customers will force utilities to form new partnerships both with the end user and with a range of suppliers and service providers.

A Digital Transformation strategy must take this into account. New energy technologies that are adopted by consumers, such as smart thermostats, roof-top solar panels and microgrids, are out of the control of utility companies.

Utilities may need to integrate with their customer’s energy technologies or even their Digital Assistants. They may find themselves forming partnerships with other suppliers such as EV charging companies.

This creates interoperability challenges for utility companies who need to partner with a growing number of ecosystem partners as well as their own internal innovation and IT teams.

4. Embrace Disruption

Easy to say, but hard to do!

Much of the disruption to utilities arises from emerging technologies and the companies who have been able to adopt them. Utility CIOs are frequently the ones leading digital innovation, so it falls to them to identify and prioritize the technologies that best suit their company’s business needs.

Much of the disruption is originating from the grid edge. Innovation is often driven by consumer pressure to reduce costs for example through connected devices and grid sensors.

One of the advantages that utility companies currently have is the volume of data they have access to. The uptake of AI will enable faster and improved data analysis leading to a more efficient innovation cycle. Utilities’ Digital Transformation strategies should therefore include plans for the adoption of AI.

5. Ensure CyberSecurity

CyberSecurity often cited as the major concern of CIOs. 36% of CIOs listed it as one of their top priorities for 2018. Wherever there is data and data analysis, cyber security is a key concern. Utilities are especially under threat, but according to a recent study, they lag behind other industries in preventative measures.

A recent survey of IT decision makers found that 75% thought that AI and Machine Learning were the answer. However, as the report points out it is relatively easy for cyber criminals to stay one step ahead and other steps need to be in place.

Conclusion

Digital Transformation is not just about using new technologies to automate existing ways of running a business. It is about using emerging technologies to reinvent business models in the face of enormous changes to the world we are living in, a world that continues to be changed by new technologies and new customer demands.