Utilities: The future can’t come soon enough
April 11, 2017
This blog is from the archive of Adaptive Lab, now known as Idean UK
By Fiona Hannah
To me, water, gas and electricity are some of those services that exist in the necessary-but-not-so-exciting category. My approach has always been to think about my water and power suppliers as little as possible. Which, besides when I last moved house, has been surprisingly easy to do.
However, my-not-so-engaged perspective got all shook up last week when I attended a 2 day conference on The Future of Utilities. What I anticipated as being a rather dry (I admit) few days ended up being rather eye-opening. Emotional even!
Here are some of the interesting takeaways I wanted to share.
Turns out I’m not alone in my apathetic approach to utilities. The energy industry in particular has a massive image problem and NPS scores are at an all time low. Over 34% of customers have never switched providers*. Energy is “too complicated, too confusing and too painful” to interact with. Customers don’t trust suppliers and don’t want to engage with them, which ultimately hurts no-one except ourselves; most of us are paying way too much for our bills.
Energy is “too complicated, too confusing and too painful” to interact with.
Our apathy is costing us billions
Here’s where it got emotional for me. 16 million UK households are on a Standard Variable Rate (SVR). While SVR sounds ok, it should really be called ‘Worst Possible Rate Ever That Nobody Should Ever Be On’ as it is usually always the most expensive. And 9 million UK households have been on this rate for 3+ years, which is an estimated overspend of £7 billion a year*. £7 BILLION! When these figures went up on the big screen at the end of Day 1, I felt pretty outraged.
The low customer engagement and high mistrust shouldn’t be that surprising because as far as I can see, traditional utility organisations have been pretty slow to respond to a world which is changing faster than they can write a ‘sorry we overcharged you’ letter.
Customers expect better. This shouldn’t be a surprise.
It became apparent to me that providers have been slow to recognise the importance of the customer in their business compared to other sectors. Across different talks given by industry leaders over the 2 days I heard from companies who were only just realising the high expectations that customers have of them and the clear gap there is in the current experience.
Our customers expect us to be more like Amazon and deliver personalised, fast and digitally centric services.
Well, imagine that? Furthermore, 41% of millennials interact with energy supplier via social channels but many utility organisations aren’t designed for these preferences and are having to work hard to catch up. Improved websites and mobile apps are appearing but this is just the tip of the iceberg to service transformation and engaging with customers in a more meaningful way.
Regulators Ofgem and Ofwat called out the increasing importance of utility companies identifying and looking after Vulnerable Customers. This further highlights the need for companies to know more about their customers needs and behaviours and design services that work for everyone.
Technology to the rescue?
As in all sectors, technology is playing a massive role in shaking things up. All UK households are to be fitted with Smart Meters within the next 4 years in an £11bn rollout. Smart Meters have the potential to provide customers with real time, transparent information about their usage. This should mean that customers can make better decisions about their energy, reduce billing complaints and enable easier switching. Should. But there are already major issues at play. The rollout is behind schedule, customers are complaining of inaccurate readings and meters are hard to use. On top of that, only 33% of people understand Smart Meters and their potential**. Not exactly the energy revolution that Smart Meters were billed as creating. It seems to me the industry has led with technology, without fully understanding the value to customers and what they want.
New competitors, new opportunities
But things are changing. Quickly. And potentially painfully for those that aren’t up for the ride. There were analogies of earthquakes, seismic shifts, tidal waves of disruption shaking up the industry.
There are some awesome new entrants out there shaking up the industry e.g Bulb and First Utility, both who spoke at the conference. These companies and others like them, e.g. Flow, Octopus and Flippa offer transparent products, operate agile business models and deliver seamless customer services. These companies are, quite rightly, scaring traditional energy companies (‘The Big 6’) because they offer products and customer service in a way that bigger, organisations are struggling to achieve. They’re demonstrating that innovation, even in a highly regulated industry, is possible and their high TrustScores scores show that their customers love it.
And this change can’t come fast enough
In the future we’re also going to need more energy. National Grid has forecast we will need 3 x more energy in 2050 than we do today (all those electric cars you see). Given the UK still needs to cut carbon emissions, this energy is not going to come from current sources. This is a massive challenge that has to be filled with new sources of energy and lots of it. To fill that gap, companies like Northumbria Water are innovating with renewable energy sources such as biomass or gas produced from our sewage water being re-injected onto the grid.
So where to next?
It was great to hear stories from organisations who are changing, innovating and trying to do it better. Customer Experience Teams beginning to harness the power of data and analytics. Innovation Labs being built so organisations can innovate from within. A recognition of the importance of agile thinking, story telling and having customers at the heart of innovation. But there is still a long way to go.
I don’t think I could summarise the opportunity for change better than this great boat analogy from Ken Hughes, who spoke on Day 2.
The future is fast, adaptive, flexible. Surround the Oil Tanker with Speed Boats
Adaptive Lab is one of those speed boats and that makes me pretty excited about the opportunity of the Utility revolution. From everything I saw and heard I believe Service Design thinking has a real role to play in helping transform Utilities towards delivering better services to more engaged consumers. And not just designing the digital services, but all levels (products, people, process and proposition) needed to deliver a connected, proactive, customer relevant service.
Now this is the kind of challenge that I like to get out of bed for.