SNP Schneider Neureither & Partner : Taking the First Digital Steps Toward Competitive Advantage in the Utilities Industry

Taking the First Digital Steps Toward Competitive Advantage in the Utilities Industry

Michael E. Porter, the founder of modern business strategy, identifies two ways that an organization can achieve competitive advantage over its rivals: product differentiation and cost optimization. While cost optimization is a universal concept, product differentiation isn't commonly associated with the utilities industry, particularly when the historical unidirectional view of energy services is applied.

Many of the challenges faced by the industry have been well documented: consumers becoming "pro- sumers," increased cybersecurity concerns, asset utilization, resiliency challenges in the face of regional or global events, accelerated sustainability demands, geopolitical risks, and regulatory requirements.

The most impactful, however, may be the fundamental change in the profile and expectations of the average consumer. They are either digitally native or digitally influenced, and they demand a level of personalization and value realization exponentially greater than that expected ten years ago. These are consumers who prefer to obtain information via digital content vs. traditional advertising, and who put considerable weight behind the recommendations of their peers and trusted organizations.

In the smart home market, for example, energy utilities aren't competing against each other for the "hearts and minds" of customers. Google and Amazon don't just build smart home devices. They convert the customer data they collect into valuable energy usage insights that consumers demand. This is a source of value that energy utilities must control if they want to truly differentiate themselves and maintain a product differentiation advantage. Ceding this ground to Google or Amazon is very dangerous, particularly since the smart home market is estimated to exceed $47 billion by 2025. Once unthinkable, energy companies could lose market acceptance as energy experts.

Far-fetched? Hardly. Utility Dive published an article in 2021 that noted Amazon Web Services has an oil and gas division with BP and Shell as clients. Additionally, Microsoft has partnerships with Exxon- Mobil and Chevron, and Google has a relationship with Schlumberger for its oil and gas petro-technical software. So-called tech companies could be energy providers sooner than you think.

This means that utility companies must do three important things now: define and execute upon their digital ambitions, put customers' needs and wants first, and dispense with their historically glacial pace of change.

An organization's digital ambition, as defined by Gartner, is the extent to which it will leverage digital technologies and approaches to improve its results. Specific business outcomes and metrics are defined with respect to what and how digital technologies are leveraged, back and middle-office operations are modernized, and business models are adopted. Utility industry players, therefore, will thoroughly re- examine and redefine their service value proposition, maximize operational resiliency, embrace data- driven decision-making, and identify advanced game-changing technology use cases supporting all aspects of the business. If a utility thinks of itself as a power generator only, its days are numbered.

Having a customer-first attitude seems obvious. However, many companies do not understand what that means, or just how important it is. It is not simply providing good service. These days, it has more to do with the means, frequency, content, effectiveness, and value of communicated information. This is where traditional customer service gives way to customer experience management. EY found that businesses with superior customer experience capabilities achieved a 17 percent compound annual growth rate compared to 3 percent for those lacking such capabilities. Need another supporting statistic? 67 percent of customers who have a good or great experience are likely to recommend a product or service. Technology plays a huge part in the success of customer experience management, leveraging AI and real-time analytics on huge volumes of structured and unstructured data.

Finally, with respect to pace of change, market participants can no longer sit back and assume that time is on their side, particularly when they are competing against new market players who are "born digital," meaning that digital concepts are second nature and not introduced as something fundamentally new that must be learned, accepted, and implemented. Moore's Law aside, the pace of technological change has accelerated at faster rates. COVID-19 has been cited as accelerating cloud adoption by three to five years. Today, companies can implement next-generation ERP technologies such as SAP S/4HANA in mere months, as opposed to multiple years commonly experienced in the 2000s and 2010s. Procrastination and analysis paralysis will merely result in a loss of market share, revenue, and customer attention.

So, what should utility companies do?

1. Firstly, view the recent Digital Transformation Now webinars conducted by SNP that provide critical core concepts in support of digital change.

2. Next, research what leading global utility companies have done to implement disruptive change to their service offerings, operations, and analytical capabilities.

3. Finally, assume that the old way of doing things is no longer appropriate. With respect to digital transformation or digital business optimization, sometimes it's easier to identify what isn't digital.

Here are some examples of what to avoid!

1. A greenfield implementation of your new digital core

2. A sequential approach to projects and prerequisite projects that can now be easily consolidated

3. An assumption that regulations inhibit digital transformation, i.e., a "we can't" attitude vs. a "we can!" attitude

4. An irrational fear of the cloud - it is no longer a technology to be applied, but an inseparable com- ponent of a successful digital ambition plan

About SNP

SNP is a world-leading provider of software for managing complex digital transformation processes. Instead of traditional IT consulting in the ERP environment, SNP offers an automated approach using specially developed software: The Data Transformation Platform CrystalBridge^(R) and the SNP BLUEFIELD^TM approach allow companies to restructure and modernize their IT landscapes much more quickly and securely as well as migrate to new systems or cloud environments more securely. This gives customers clear qualitative advantages while at the same time reducing their time and costs.

The SNP Group has around 1,600 employees worldwide. The company is headquartered in Heidelberg, Germany, and generated revenue of around EUR 144 million in the 2020 fiscal year. It serves multinational companies in all industries. SNP was established in 1994, went public in 2000, and has been listed in the Prime Standard segment of the Frankfurt Stock Exchange since August 2014 (ISIN DE0007203705). Since 2017, the company has been trading as a European company (Societas Europaea/SE).

More information is available at www.snpgroup.com

For more information, please contact:

Darren Shaw
Acting Vice President of Marketing & North America Cloud Leader
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