The utility industry is evolving and the customer is at the centre of this evolution. Industries having to adapt to customer needs is not new. The first customer evolution began in the 1980s with ‘Relationship marketing’. While customers became the focus in most industries (Telecom, Insurance, Banking etc.), regulated industries like utilities were left behind due to monopolistic nature of the market. With deregulation during the past two decades, increasingly customers may choose to switch suppliers, making customer management even more important to success and sustainability. This is more pronounced in areas where market maturity and competition are more pronounced like the UK, Victoria in Australia, and Texas in the U.S., and it is just a matter of time before deregulation spreads to other places presently operating as regulated markets.
Customer evolution has been further accelerated because of the informational storm with connected technologies.
Today’s utility customer is:
- Energy Conscious – increasingly conscious of energy supply, usage, service standards, and costs;
- Connected & Engagement hungry - more mobile, socially and digitally interconnected;
- Demanding – desire the best services at a fair and reasonable price
In addition to evolving customer preferences, utility industry regulatory bodies are more concerned about customer treatment and how the utilities industry can contribute to energy security, reliability, and affordability.
Are the companies able to keep up with the changing customer and regulatory requirements? Will they be ready to manage the changing customer in five years from now? Are the organisations ready to embrace change and challenge the status quo?
If the customer is changing at an incredible rate, then utility companies should also evolve their approach to marketing, selling, and interacting to meet customer expectation five to 10 years from now.
The power of customer centricity
There is lot of talk about whether smart metering, smart grids, and even smart cities will really solve for customer and regulatory requirements. Going by what happened with similar implementations in other markets, it won’t solve any of the above. If you look deeper, you would find companies have adopted latest technologies but not changed their core operating model. For example, many countries have adopted Smart Metering, but they have not designed operating models to enable customers to understand how to leverage Smart Meters or reduce consumption. Even in a technology-driven world; utilities companies can ill afford to forget basic ethos of customer service.
What utility providers really need is to implement operating models focused on customers’ current or future needs. Technology advancements like smart metering should enable companies to reach the desired outcomes and not vice versa. Benefits of the customer-centric model will be exponential. Customers would not just remain loyal but would also act as promoters for utilities companies. As the competitive market increasingly evolves, customer centricity becomes a differentiator.
Customer centricity can’t be achieved unless it is embedded into business operations and is not just driven by behavioural attributes, which is how conventional approaches were structured.Conventional customer service approaches are founded upon awareness, coaching and training to develop a better understanding on customer needs. However, conventional methods are failing because they overlooked changing processes, procedures and measurement techniques. Customer centricity can only be embedded if people understand what customer needs, it’s inherent to the work they do, and they are measured/ incentivised to provide great customer service. In addition, operating models not only needs to be customer centric but also smarter to manage the pace of change and be relevant in five or 10 years.
A customer-centric operating model
The framework below outlines how to embed customer-centric approach driven by customer outcomes and enabled by analytics into business operations to assure consistent outcomes.
1. Customer outcomes
Success of the customer-centric model depends on understanding and measuring customer outcomes.
The usual mistake in defining customer outcomes is that most people confuse this with process outcomes (like setting up of customer on supplier’s system in five days). Process outcomes were typically established due to the ‘silo’ or functional- driven operating models.
In the customer on- boarding process, the customer outcome is timely supply and timely first bill.
Timeliness and accuracy cannot be driven by industry, process, or system constraints, they need to be derived from Big Data and customer behavioural analytics. While analytics are increasingly being leveraged by other industries, utility companies haven’t been able to use and embed them effectively in their operating models.
2. Customer journey-based smart operations
Most utility companies are segregated based on front- or back-office teams.
Operations need to be designed based on the customer touch points so that they deliver seamless service without shuttling customers between front- and back-office or third parties.
The organisational design change required to do this is probably the biggest barrier to delivering great customer experience because it can lead to a large restructure of organisation and systems. For example, customer on-boarding should be managed by one leader/team irrespective of whether the specific processes are managed by what would typically be classified as the back- or front-office.
In addition to having the right organisational structure, process inputs and outputs are best driven by analytics to highlight trends and areas for improvement. Analytics should be challenging the drivers of the process and predicting likely downstream impacts on the customer. This can make utilities companies more proactive in managing their customers as opposed to reacting to issues after they happen to now dissatisfied customers.
3. Smarter quality models
In any service industry, companies measure quality based on existing processes and system constraints, which is typically ineffective from a customer point of view. Customers care about the “right” outcomes (from their perspective) and have little regard for energy providers’ process guidelines.
Outcome-based quality assurance has existed in other industries like manufacturing for many decades but not yet widely embraced by service industry. Another challenge with traditional quality models is the use of small sample data versus leveraging information about the whole population. The best way to solve this is through the use of analytics that identify patterns of non-conformance and their first-degree causes. Improvement opportunities can then be towards the process, system or associate handling the customer account
Utility companies by and large realize they need to improve customer relations, a need exacerbated by increased deregulation and the competition it brings. Underpinning this realization however will be the operating model that supports customers throughout their lifecycle. As utility companies consider their journey toward transformed business operations they should consider a few key points:
- Focus on the right outcomes
- Utilities should consider whether they are measuring success based on customer-centric outcomes or tracking process outcomes simply because they are easier to measure or control.
- Structure operations to support the customer
- Utilities companies should review structure for all business operations that touch end-to-end customer lifecycle to ensure the accountability to drive improvements.
- Develop smarter quality model to assure sustainable outcomes
- Providers will need to ensure that the customer outcome is assured with right controls and that a feedback loop exists to sustain operational improvements.
- Business operations will need to be enabled by analytics and advanced technology like Smart Metering but the technology alone will not be insufficient. To keep pace with the evolution of customer centricity in this industry, utilities will need to update and evolve towards smarter customer-centric model than they have today.