The three states of Digital Transformation in the Energy sector
The Energy Sector is in an era of accelerating change driven by a rapid decline in renewable energy costs, improving energy efficiency, “smart” technologies, increased consumer switching and the need to meet the Dual Energy Challenge.
This increasingly complex and dynamic market is witnessing the fall of traditional barriers to entry, opening the door for new entrants to challenge the status quo. Organisations that have traditionally relied on a single source for revenue are having to diversify into new types of energy and deliver multiple services to an increasingly knowledgeable and demanding consumer base.
The threat to incumbents has never been so real and so great. For those who are bold and willing to rethink and reshape their operating model, prototype new business solutions and truly embody an agile approach, then sustained success and growth is likely. For those who are not, failure is certain.
To compete effectively and exploit the opportunities available, energy companies have recognised the need to drive flexibility and agility into their technology solutions and platforms. The most frequently professed approaches are “digital transformation” and a “cloud first strategy”.
Cloud computing is a cornerstone of digital transformation. It provides the foundation for energy companies to be faster in responding to new demands, enabling rapid prototyping, agile development, continuous integration and delivery; and supports IoT, data analytics and machine learning.
Yet making this necessary change to the cloud is proving difficult, with a reliance on legacy CRM, Billing and Metering monoliths cited as the major inhibitor. The transition to becoming a responsive agile organisation is not an easy one.Delivering and using cloud in a way that is effective and tailored to the business specific needs requires a co-ordinated effort across multiple workstreams.
Embracing a cloud transformation does not only mean deciding upon a platform and migrating workloads to the cloud, success demands changes across technology, people and processes from the outset. It is true that energy companies are still invested in costly data centre contracts and maintaining large legacy environment. But this is a truth across the sector, and yet some companies are outstripping the counterparts in their ability to transform.
We see energy companies seeking to become digital in one of three states:
State 1: Technology Choice Paralysis
There is a stated intent to move to the cloud. However, choosing the technology platforms, the tooling and the environments becomes a major programme of endless cycles of evaluation and re-evaluation. Progress is slow, waterfall in nature and measured against a business case that will never be met. Eventually the technology choice is made, the business case for realising savings signed-off and migration starts.
State 2: Unconstrained Consumption
Having decided to commit and having spent multiple cycles converging on the very best technology environment, it comes as a complete shock that the old operating model no longer provides the controls to manage consumption. The focus rapidly switches to one of controlling demand, establishing governance, defining process and defending the now indefensible business case. Conflict between old and new ways of working results in an uneasy compromise and stagnation sets in.
State 3. Being Agile
Those organisations that avoided the mistakes described in State 1 and State 2 are busy shaking up the industry. They are truly focused on being agile, prototyping solutions, incubating new business ideas and adjusting, refining and building out their architecture as needed having established the new ways of working. Many organisations are caught in either:
State 1: struggling to make an effective choice and blindly unaware of the need to change more than just the technology; or in
State 2: lacking momentum, focused on regaining control and missing a clear route to move forward.
In the next article of this series, we will dive deeper into the three states and how to avoid the pitfalls of States 1 and 2 and accelerate to State 3 delivering an effective digital transformation.