Beacon 2021: Energy & Utilities Leaders Stay the Course for Transformation

In a rapidly evolving energy & utilities (E&U) landscape, leaders see promise for the year ahead, even as they continue to adapt to new remote ways of working driven by the COVID-19 pandemic and emerging mobility trends. They’re powering through ongoing uncertainty by maintaining their focus on secure, customer-focused operations.

In North Highland’s annual Beacon survey of cross-functional industry leaders, the E&U industry is prioritizing cybersecurity (79 percent) and customer experience (CX) (79 percent) in 2021—a strategic agenda that’s consistent with that of recent years yet is still fueling optimism. Nearly half (46 percent) of E&U leaders are excited and energized about their respective organizations’ strategic priorities for 2021. And nearly two-thirds expect that agenda to pay dividends, with revenue anticipated to grow compared with three years ago and compared to last year.

Cybersecurity continues to be considered a priority because the E&U industry is especially vulnerable to cybersecurity threats. This is due in large part to the high value of industry assets and data as well as the sector’s heavily automated processes and networks. The increasing adoption of digital capabilities across the industry is creating even more risk.

Other notable priorities for the industry are related to data and technology. Specifically, E&U leaders say they are focused on data and analytics (D&A) (75 percent) and digital capabilities (74 percent) as the number three and number four priorities for the year, respectively. It should come as no surprise, then, that industry leaders cited data and technology as the top area for transformation in 2021 (59 percent), followed by digital (50 percent).

The industry stands apart in its emphasis on operating model flexibility (70 percent) and talent management (70 percent), which are considered higher priorities in E&U than in other industries we surveyed this year. Talent management is a newfound focus for E&U. We believe this is likely because E&U companies are focused on managing aging workforce-related attrition and on adapting to new ways of working in the current market landscape.

We’ve also gone beyond these high-level findings to shed a light on several key trends that are fueling the sector’s approach in 2021. Read on for that deep dive as well as practical steps your organization can take to evolve with these trends.

Customer-centricity is Energy Well-spent  

The industry is rapidly transforming into a customer-centric one. That’s a sea change for an industry that has traditionally had little interaction with customers and long believed that customers simply wanted to pay as little as possible to flip a switch and have the lights (or the gas, water, etc.) come on. While E&U customers represent a broad group, both B2B (commercial and industrial) and B2C (residential), 79 percent of respondents say CX is a priority for 2021, with 45 percent calling it a very high priority and 34 percent a high priority. Nearly half (45 percent) of E&U leaders say CX will be a top focus for transformation efforts in the year ahead.

Alex Lal and Ian McRae of our Cordence Worldwide partner State of Matter emphasized this new focus in a recent article: “To remain competitive in the future, [E&U] companies are transforming from integrated, regulated service providers into agile, customer-focused and digitally-enabled organizations,” they wrote. “Customers continue to demand new and innovative products and services, and energy customers are no different. They have become active market participants expecting utility companies to improve their approaches to customer engagement and customer experience.”

E&U leaders recognize that it will be important to evolve the customer journey as they navigate the new year, and they will be looking to enhance their digital capabilities to deliver on the promise of better CX. Digital adoption and evolution is considered a top internal catalyst (by 39 percent) driving the strategic agenda, including the focus on CX.  

It’s All About Operations

The traditional, rigid distribution operating model prevalent in the E&U industry had already been under stress due to technological advances, changing regulations, and increased competition, among other factors. The pandemic has only increased those pressures. Leaders recognize that their operating models must evolve in a way that allows them to rapidly respond to shifting customer expectations. As such, E&U leaders are looking to improve operations in the new year—more than half (60 percent) say it’s the top functional area for transformation in 2021. Operating model flexibility increased as a strategic priority over last year, with 100 percent of respondents calling it at least “slightly more” of a priority and 25 percent calling it “much more” of a priority. Of note, 46 percent of respondents say internal operations is the top internal catalyst shaping the strategic agenda, including the focus on operational efficiency and flexibility, in the new year.

Operating model flexibility (70 percent) and operational efficiency (72 percent) fall just behind CX in terms of importance for the year ahead, but improving operating model flexibility will also help industry players achieve better CX in 2021. While industry players tend to indirectly service end consumers (B2B as opposed to B2C), operational challenges that may exist in E&U organizations nonetheless have an impact on customers.

Improving operations will also help the industry overcome challenges that have cropped up for this industry (and many others) during the pandemic—namely, budgetary constraints and labor availability. In the E&U industry in particular, as an aging workforce retires, many are finding it difficult to replace them with employees who have the skills to move the industry forward.

Emerging mobility trends and supply chain vulnerabilities are also inspiring the industry’s goal of nimbler and more efficient operations in 2021. The increasing and rapid adoption of autonomous/electric vehicles, Mobility as a Service (MaaS), and regulatory pressure to use renewable/alternative energy sources will have a significant impact on E&U players. As such, leaders say emerging mobility trends are the top external catalyst shaping the E&U strategic agenda for 2021 (46 percent), followed closely by supply chain management (45 percent). With more flexible operations, industry players will be better equipped to navigate market disruption and supply chain vulnerabilities.

Transformation Starts with People

The ability of E&U companies to achieve more flexible operations and deliver better CX in 2021 is closely connected to their workforce strategy. That’s because what happens internally—whether workforce-related or operationally—tends to cascade down to customers. It makes sense then that 70 percent of E&U leaders we surveyed consider talent management a high priority for 2021. And for 90 percent of respondents, it’s a higher priority than it was in 2020.

Along the same lines, E&U leaders recognize that workforce skills (80 percent), workforce capacity (60 percent), and labor availability (60 percent) may hold them back from achieving their strategic goals if left unaddressed. But while E&U leaders are placing a greater emphasis on talent management in the new year, our survey indicates that they may not have a complete understanding of the workforce picture or its connection to the customer experience and operations. Specifically, they may be disregarding the cultural components of talent management.

For example, employee experience (EX) fell near the bottom of the list of priorities for the year ahead, with just 57 percent of those we surveyed calling it a priority. According to HR Technologist, “talent management is defined as the methodically organized, strategic process of getting the right talent onboard and helping them grow to their optimal capabilities keeping organizations objectives in mind.” Based on this definition and our experience in the space, EX is a key part of talent management. It is vital to retaining the right people, fostering their growth, and enabling them to be catalysts for change in the organization. More on that below.

Taking Action: How to Build and Empower a Workforce Able to Drive Continuous, Customer-led Change

  1. Expand your view of talent management. Improving your ability to plan, source, attract, engage, develop, reward, and mobilize your employees and leaders to maximize performance and capitalize on the potential of their workforce is a good starting point. Taking it a step further, however, to create more fluid, adaptive operating models and improve customers’ experience with their brands will require E&U leaders to expand their view of talent management. Specifically, they must focus on building courageous cultures that empower employees to entice the next generation of innovative leaders into the industry—something that has historically been a challenge. Prioritizing culture will also enable continuous transformation, which is critical for any business operating in today’s rapidly changing market landscape. 
  2. Implement Accelerated Service Design to drive customer-centric transformation. Accelerated Service Design (ASD) can help E&U players create more efficient, flexible operations and achieve better customer outcomes. The approach, which is unique to North Highland, incorporates critical elements of service design, such as crafting, aligning, and optimizing operations to better support customer journeys and improve stakeholder experiences and outcomes, with a few other elements: design thinking (problem exploration), lean (building the right solution with a focus on process optimization and quality), and Agile (iterations and value-based prioritization). The result is an intentionally designed future that aligns the organization and connects why work gets done with how it gets done.
  3. Capitalize on digital and D&A. To remain competitive in the new year and beyond, E&U companies must become more agile, customer-focused, and technologically enabled organizations. You can meet this mandate by implementing more digital capabilities and taking advantage of data and analytics (D&A). Just 29 percent of leaders from all industries we surveyed said they feel very prepared to handle digital capabilities—a sentiment echoed in the State of Matter article quoted above: “The technology required to enable improved customer experiences is commonly either not deployed or poorly implemented” in this industry. But digital and D&A are not lost on E&U industry leaders. In fact, 60 percent of those we surveyed said IT is a top functional area for transformation in 2021. Further, 56 percent say digital is much more of a priority in the year ahead, and 33 percent say it is slightly more of a priority in 2021. For E&U players, developments such as drone technology, digitization, cloud computing, artificial intelligence, and deep machine learning can enable horizontal collaboration across lines of business, improve operational efficiencies, and enhance CX in the new year.

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