Energy Source and Distribution talks with Capgemini corporate vice president and head of Utilities and Smart Energy Services Perry Stoneman about digital utilities transformation and consumer-driven agendas.
In the face of changing regulatory requirements, rising consumer demand and increasing environmental pressures, utilities are transforming their operations to ensure compliance, to cut costs and to promote sustainability. Capgemini is one company exploring how smart solutions can benefit global energy industries.
At the helm of Capgemini’s Smart Energy Services – a business unit that encompasses smart metering, sustainable city planning and electric vehicle infrastructure – is Perry Stoneman, a Canadian who began building smart meter and smart grid solutions back in 2004.
Under Perry’s direction, Capgemini became a global leader in smart grid and advanced metering infrastructure, and today, provides Smart Energy Services to more than 75 global utility clients. Only one month ago, he was named as the new head of sectors for Capgemini Group, further expanding his utilities portfolio.
Perry’s experience with international grids gives his opinions regarding Australian networks a certain weight. After touring the country for two weeks in February, he is quick to confirm there is a lot going on in local networks, which are experiencing an unprecedented rate of change.
“Very few industries in the world are going through as much change as utility industries, particularly that in Australia,” he says.
“In addition to modernisation of the grid, in addition to having renewable generation added – sometimes in locations that don’t want it – and in addition to having regulators pushing for cost-efficiencies, there is now an exceptional range of technologies that utilities can tap into to push productivity improvement.
“Smart meter technology shows fluctuation in the grid that may cause equipment to have a shorter life, social media technology ensures information is continually fed to the community during major events such as storm surges, and mobile technology enables workforces to tap into data they wouldn’t normally have, so they can, for example, query how a transformer’s feeders are actually operating and do predictive work to replace that asset in advance of an outage.
“Never before have we had so much information at our fingertips.”
Shifting the focus
from technology to business outcomes
With so much information available through digital technology, the challenge for utilities then becomes ensuring the right infrastructure is in place to drive productivity – not only within information technology systems, but also within the general business.
Capgemini employs what Perry calls the “immediate model”, an approach to driving productivity improvement that enables a shift in focus from technology challenges to business outcomes.
The model is designed for industries that need to cope with a lot of data and a lot of change, making it well suited for utilities.
“The easiest way to describe the model is that there are three, bottom-up layers. The foundation layer is made up of the systems of record, which for utilities would be the GIS, OMS, MDM, CIS and DMS-type of systems – those that are built to carry the information of utility’s operations. We call them the systems that are built to last, as you don’t want to tweak them too often,” he says.
“The next layer up is the systems of differentiation. This is where you would put social [media] to see if you want to watch sentiment during storms or have communities contribute. You could even put a mobile phone out there that allows social to take photographs of things, send GPS co-ordinates and so on. It’s also where your big data would reside and where your analytics layer would go – where you can play with your data, look for correlations and look for outcomes.
“The top layer is your systems of integration, which is where your channels go. This is where you communicate out using chat, web, SMS, calls and mobility. This is the face of the company to your workers and your customers.”
Of course, the advantage of having multiple layers of information is that in three, four or five years time, the utility can establish a game plan – a strategy to tap into the data and begin to present it to customers through meaningful channels. This, is digital transformation.
In November 2011, a three-year study conducted by the MIT Centre for Digital Business and Capgemini Consulting concluded only one-third of companies globally have implemented an effective digital transformation program, which addresses the intensity of digital initiatives within a corporation and the ability of a company to master transformational change to deliver business results.
Last October, the two groups published the findings of more up-to-date digital transformation trends in a study titled Embracing Digital Technology: A New Strategic Imperative. Involving more than 1500 executives in 106 countries, the study revealed that while the potential of digital transformation is absolutely clear, the journey to get there is not. More specifically, 78 per cent of respondents felt digital transformation would be critical to their organisation within the next two years and, where digital transformation is a permanent fixture on the executive agenda, 81 per cent believed it would give their company a competitive advantage.
“We call the companies that aren’t moving to digital technology ‘beginners’ and those that are moving to digital technology ‘Digerati’. The study with MIT discovered the Digerati are 26 per cent more profitable than those who are in the average of the group. Companies that are beginners, that are not adopting digital technologies, are 24 per cent less profitable,” Perry says.
The 50 per cent range certainly gives weight to claims digital technology and digital transformation improves operations and the customer experience. Of course, successful companies are those that not only embrace these technologies, but also manage them appropriately. Among those recording the best return on investment are companies that don’t limit digital transformation to information technology systems, but rather ensure the architecture cuts across the entire business, including new data.
For Capgemini, a big part of digital utilities transformation is implementing a total digital customer experience channel; an ‘energy-for-all’ strategy that enables consumers to engage with their service providers via their preferred channel. Importantly, this means not only offering digital channels, but also using analytics to intercept and intervene when customers need help.
“There are some great examples around. Say, you’re on a utility’s website and maybe you’re trying to find a bill payment option but you’re getting lost. A customer service person can see you’re getting lost and, with Interactive Voice Response software, takes you to a chat, which can then refer the customer on to a call,” Perry says.
“You can satisfy the customer before they become dissatisfied, concerned or irate, and it prevents an angry and lengthy call with the utility. It radically reduces costs.”
Moving into the next regulatory reset period
As Australian utilities head into the next regulatory reset period, some in 2015 and others in 2016, Perry says productivity and efficiency will be at the top of the agenda. Capgemeni Australia’s vice president and Energy, Utilities and Chemicals sector leader Dominic Del Giudice, who supported Perry on his Australian visit, agrees, saying from the board down local energy distribution businesses are looking to technology for opportunities to improve business processes.
“Moving forward, we’re going to see more of the disruptive technologies, locally. There are a number of pilot studies going into the next reset, particularly around renewables, solar penetration and battery storage activity. And, with consumers looking for alternate energy sources, we will definitely see a change to the way distribution businesses interact with customers,” he says.
The customer hasn’t traditionally been high on the agenda for distribution businesses. However, with the introduction of competing energy sources, Perry says distribution businesses are increasingly recognising the importance of understanding their customers’ needs and wants. More importantly, they are also mastering how to do it.
In Australia, Perry points to Victoria’s advanced metering infrastructure (AMI) as a good example of information management and analytics initiative.
“A big focus we’re going to see going into the next regulatory period is leveraging the data collected from all the devices out in the field, that I mentioned earlier. Not just capturing interval meter reading data, but also really seeing what is happening in the field from an assets perspective – where is real value being driven by the distribution businesses? It will certainly give distribution businesses a better feel for their grid,” he says.
“We’re also going to see a number of initiatives around end-to-end process improvement moving into the next five or so years. We’re talking about the basics, but also a lot that’s underpinned by technology improvements and technology refreshes,” Dominic adds.
A consumer-driven agenda
Operating amidst so many changing regulatory requirements, customer demands and environmental pressures does, of course, present clear challenges. Nonetheless, Perry says it’s easy to move forward if business decisions are based on the simple question, “who is driving the transformation?”.
“For many years, it was the regulators driving the agenda. Then, in the last 10-15 years, politicians became far more active in the energy sector, so the regulators tried to align themselves with the political bosses,” Perry says.
“Now, when you really look at what’s happening in many jurisdictions, it’s the consumer demanding change and understanding knowledge that’s translating to political will in the energy sector – this translates to energy policy.
“And you have utilities in this ecosystem, which are firstly trying to handle all the change and secondly trying to get the regulators to understand what they are dealing with and to support them in the rate cases.”
Perry is not the only person in the utilities sector to say regulators are slow to change with the times. With the rest of the industry accelerating forwards with such momentum, he says the next step for regulators must involve them looking at creative models with utilities – and quickly.
“The shift is definitely upon us, from a regulatory-driven mandate, to a consumer-driven mandate. We’re seeing customer engagement move from simply meter data and your consumption information to potentially providing insights and more value,” he says.
“A chief executive officer of one of our large customers in the US said, after 125 years, they are now launching their second product. The first product was electricity, and their second product is now information. This sums it up for a lot of energy businesses in 2014.”