Is customer engagement the answer to the ‘existential threat’ facing Utility companies?

Enhanced customer engagement was shown to be the top outcome that UK Utility companies looked for from their digital transformation initiatives. That’s according to research…

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Martin Richards

April 6, 20186 minute read

Enhanced customer engagement was shown to be the top outcome that UK Utility companies looked for from their digital transformation initiatives. That’s according to research that has just been completed by Utility Week and OpenText. This blog looks at the reason that customer engagement is so important for the industry and whether a fresh perspective is needed.

In preparation for Innovation Tour in London next week, we’ve just completed some market research in partnership with Utility Week. We wanted to know where UK Utility companies were on their digital transformation journey. What we discovered was that the overwhelming focus for the respondents was on Customer Engagement. Nothing unusual there, I thought. But, then, one quote from the research made me think again.

It was a simple enough question: Overall, how optimistic do you feel about your organisation’s ability to thrive in a future defined by digital capability? Most of the answers talked about the company’s optimism from having the right teams, processes and technologies in place to deal with everything the market can throw at them but one energy retailer said this:

“At an organisational level, positive. Energy retailers are essentially data brokers, and digital technologies should empower us to excel. At an industry level, the outlook is grim. In an increasingly digitally mature world, the role of ‘middle-man’ or data broker is largely irrelevant. Combined with increasing government manipulation of the market environment, I believe it paints a dire picture for the 10-15 year horizon.”

Traditional Utility companies are faced with so many challenges: changing customer demand and usage patterns; new competitors and new technologies; an increasingly complex governmental and regulatory environment. It’s beginning to feel like an existential crisis for some organizations.

Customer engagement and building value

Utility Week, our partner in this research, has long seen effective customer engagement as essential for Utility companies. In it’s article Customer engagement is the key to success for utilities, the magazine says: “When selling a commodity, only your price and service can set you apart, and in an intensely competitive commercial climate, the companies that engage with, listen to and act on what their customers tell them, will adapt.”

Our research suggests that this is exactly the approach that UK Utility companies are looking to embrace. When asked, 94% respondents said that the area of their business most likely to be ‘radically transformed’ by digital transformation in the next three to five years was customer service – miles ahead of the next choice of operations, mentioned by 70% of people.

The most important outcome of digital transformation, according to our respondents was ‘enhance customer engagement. 70% of companies thought this was very important – compared to 53% of the next largest category of ‘greater efficiency in business process’ – and, in all, 94% of respondents thought it important. Little surprise, then, that CRM/CEM was the second highest area of digital investment at 76% as companies look to build a technical foundation to drive customer engagement.

In fact, the investment area that came top in our research also gives an indication of companies looking to deliver better, more customer-centric solutions. By far the most important digital investment – quoted by 85% of respondents – was data analysis. The companies surveyed also believed that ‘advanced analytics’ was the most important technology in driving digital transformation – scoring 84% compared with 72% for the next most important (the Internet of Things).

It would appear that UK Utility companies are looking to combine the insight gained from applying advanced analytics to their vast amount of customer and operational data with their CEM investment to deliver more focused, targeted and personalized products and services.

A challenging operating environment ups the customer engagement stakes

It’s clear where UK Utilities see the risk to digital transformation lying. When we asked ‘How highly would you rate the following as risks associated with the digital transformation you want to see in your business?’ two categories of answer stood out. Topping the risk list was ‘Government intervention in the market’, closely followed by ‘changes to the utilities regulation’.

Third on the risk list was ‘being outpaced by new or diversified competitors’, but only half of respondents rated this as ‘very important’ compared to the leading two categories. Nonetheless, customer engagement is a core activity to retain customers, build business, sell in new and innovative products and gain customer loyalty, ensuring they remain with you as Government stipulations and regulations change.

A different approach to customer engagement

In its excellent article ‘The future of customer engagement’, Utility Week says: “For decades the energy sector has been talking – and spending money – on ‘engaging with the consumer’ trying to cajole them into being active energy consumers. Sometimes energy ‘engagers’ have sounded like Englishmen abroad – ‘if I shout loud enough they will understand me’”.

In effect, customer engagement has really just been thinly veiled sales, but that is no longer appropriate. The successful Utility company will be determined by how well they can use the data available to predict buying trends and individual consumption patterns. Then, the company has to be able to target and deliver their service to their customers at levels they expect in other areas of their life – this goes for business customers as well as consumers.

This is not just about quickly changing consumption patterns but also about the ability of Utility companies to adapt to new – perhaps radically new – business models. As Utility Week says: “Energy suppliers might become predominantly a B2B business or possibly the data companies themselves will buy energy directly from the system operator with no need for the ‘wholesaler’. Energy might well become an ‘invisible’ service and energy service companies might be squeezed out of the system as intermediaries procure directly … This is the big challenge ahead – not between energy companies but between energy and much more consumer-trusted and engaged brands”.

This requires some fresh thinking about customer engagement. In the past, many organizations have felt that customer engagement, at best, touched the sales, marketing and support functions within the organization. In addition, companies have investment in point solutions – such as CRM, marketing automation, web experience management – with very little integration.

However, our research suggests that UK Utility companies are beginning to understand that customer engagement stretches right across their organization – and beyond. To break down the departmental silos and gain access to the correct data and turn this into effective insight – underpinning operations, new product development and customer communications – requires a much broader Enterprise Information Management (EIM) approach. EIM provides seamless integration between Customer Experience Management, Advanced Analytics, Data Discovery and Content Services to deliver the most comprehensive technology platform for 360-degree engagement throughout the entire customer journey.

We’ll going into much more detail about the Utility Week research results at this year’s Innovation Tour London. You’ll also hear how OpenText’s EIM strategy can provide connected solutions to meet the challenges the industry faces.

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Martin Richards

Martin Richards is a Senior Director for Industry Solutions at OpenText. For over twenty years, he has worked with ECM technology, running professional services and driving solutions across multiple industries.

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