If you have any involvement in the information technology industry you will know that the idea of digital transformation is hot, along with its consequence, digital disruption.
To sum these ideas up: digital technologies are changing the modus operandi of every industry, enabling new players to come from nowhere and disrupt major players, decimating long-established players in the process. Think Uber and Airbnb.
Digital transformation is the process by which established players embrace digital technologies to re-invent themselves and defend themselves against disruption.
You might think utilities are largely immune: it’s hard to imagine digital technology enabling anyone to compete with the water and sewage utility, or the operator of the gas reticulation network.
However, competition is already emerging in electricity supply, if not in distribution. For example, a Sydney company, Pooled Energy uses technology to manage backyard swimming pools. By so doing it is able to control demand for electricity (pools use lots of it) so it can negotiate good rates with electricity wholesalers and compete with traditional retailers.
That however is an extreme example. For utilities wanting to become digital utilities there is no shortage of advice. Global software company, Oracle, has a whole division dedicated to serving utilities and in a recent edition of Australia’s Utilities Magazine it offers a three-step strategy for a utility to become a “digital utility”.
Global consultancy Accenture, offers an infographic that “reveals eight transformational plays that can potentially deliver significant value and create new business model opportunities across the utility value chain.”
Rival McKinsey&Company offers The digital utility: New opportunities and challenges and PricewaterhouseCoopers offers a discussion paper onDigital utility transformation. For anyone unsure as to what exactly a digital utility looks like, PA Consulting helpfully has a blogWhat Is A Digital Utility?
IT research firm Gartner has also had a crack at defining a digital utility. It gives this entity the moniker, ‘Utility 3.0’, explaining: “For decades, utility providers operating in single-sided markets have delivered reliable services to society, fulfilling their obligations for ubiquitous and affordable services.” This, it says, is Utility 1.0, “wherein a single utility provides commodities as an integrated monopoly service.”
Most people will be familiar with Utility 2.0, “In which consumers have a choice of providers, [which] has led to a segregation of the value chain into discrete businesses (supply, delivery, retail).”
These models, Gartner says, have now been joined by a third paradigm, Utility 3.0, which is “a sustainable model that will leverage ubiquitous connectivity and abundance of information to enable prosumers and aggregators to participate in multisided markets.”
A prosumer, according to Gartner, is a consumer that has become “an empowered actor in utility markets,” engaged in “informed and profitable interactions.”
To succeed with prosumers, Gartner says utilities will need to “produce, consume and analyse unprecedented volumes of data to glean actionable insights, and to detect and plan responses to the transformational forces taking shape.”
That’s a long way from simply piping water or pumping sewage.
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