Historically, utility customers have had limited interactions with their electric or gas utilities, except to start or stop service, report outages, and pay bills or resolve billing questions. This situation is changing as the result of factors that include rising energy prices, increasing concerns about the environment and trends toward more customer interaction and control among other service providers – such as cell phone companies. Over the next five to 10 years, we expect utility customers to continue seeking improvements in three key areas:
- Increased communication with their utility company, through a greater variety of media;
- Improved understanding of and control over their own energy use; and
- More accurate and timely information on outage events and service restoration.
Moreover, as the generations that have grown up with cell phones, the Internet, MP3 players and other digital devices move into adulthood, they will expect utilities to keep pace with their own technological sophistication. These new customers will assume that they can customize the nature of their communications with both friends and businesses. Utilities that can provide these capabilities will unlock new sources of revenue and be better able to retain customers when faced with competition.
The intelligent utility network (IUN) will be a key enabler of these new customer capabilities and services. But not all customers will want all of the new capabilities, so utilities need to understand and carefully analyze the value of each among various customer segments. This will require utilities to prepare sound business cases and prioritize their plans for meeting future customer needs.
One of the first initiatives that utilities launching an IUN program should undertake is the development of a “customer value transformation road map.” The road map approach allows utilities to establish the types of capabilities and services that customers will want, to identify and define the gaps in current processes and systems that must be overcome to meet these needs, and to develop plans to close those gaps.
TRANSFORMATION ROAD MAP DEVELOPMENT APPROACH
Our approach for developing the customer value transformation road map includes four tasks, as depicted in Figure 1.
Task 1: Customer Requirements
The primary challenge facing utilities in defining customer requirements is the need to anticipate their desires and preferences at least five to 10 years into the future. Developing this predictive vision can be difficult for managers because they’re often “locked into” their current views of customers, and their expectations are based largely on historical experience. To overcome this, utilities can learn from other industries that are already traveling this path.
The telecommunications providers, as one example, have made substantial progress in meeting evolving customer needs over the last decade. While more changes lie ahead for telecommunications, the industry has significantly enhanced the customer experience, created differentiated capabilities for various customer segments and succeeded in developing many of these capabilities into profit-generating services. This progress can serve as both an inspiration and a guide as utilities start down a similar path.
The first step in defining future customer requirements is to segment the customer base into the various customer groups that are likely to have different needs. Although these segments will likely vary for each utility, we believe that the following seven major customer segments serve as a useful starting point for this work:
- Residential – tech savvy. These are customers who want many different electronic communication pathways but don’t necessarily want to develop a detailed understanding of the trends and patterns in their energy usage.
- Residential – low tech. These customers prefer traditional, less high tech ways of communicating, but may want to perform analysis of their usage.
- Residential – low income. These are customers who want to understand what’s driving their energy expenditures and how to reduce their bills; many of these customers are also tech savvy.
- Special needs. These customers, often elderly, may live on fixed incomes and are accustomed to careful planning, and want no surprises in their interactions with providers of utility services. They frequently need help from others to manage their daily activities.
- Small business. These commercial customers are typically very cost-conscious and highly adaptable and seek creative but relatively simple solutions to their energy management challenges.
- Large commercial. These are customers who are cost-conscious and capable of investing substantial time and money in order to analyze and reduce their energy use in sophisticated ways.
- Industrial. These very large customers are sophisticated, cost-conscious and increasingly focused on environmental issues.
The next step in defining future customer requirements is to understand the points in the utility value chain at which customers will interact with their utility. Based on recent trends for both utilities and other industries, the following “touch point” areas are a good starting point:
- Reliability and restoration;
- Customer service;
- Energy information and control; and
Not all of these requirements will be important to all customer segments. It is essential to establish the most important requirements for each segment and each touch point. Figure 2 provides one example of a preliminary assessment of the relative importance of selected customer requirements for the reliability and restoration category, across the seven specified customer segments. Each customer need is assigned a high (H), medium (M) or low (L) rank.
Once this preliminary assessment is completed, utilities should consider conducting several workshops with participants from various functional departments. The goal of these workshops is to obtain feedback, to evaluate even more thoroughly the importance of each potential requirement and to begin to secure internal acceptance of the customer requirements that are determined to be worth pursuing. Departments that should participate in such workshops include those focused on regulatory requirements, billing, corporate communications, demand-side management, customer operations, complaint resolution and outage management.
One way of making the workshop process more “real” and therefore more effective is to develop customer use scenarios that incorporate each potential requirement. For example, the following billing scenarios could be used to illustrate potential customer requirements and to facilitate more effective evaluation of what will be needed for billing:
- Billing Scenario 1. I want my gas and electric bills to be unified so that I don’t have to spend extra time making multiple payments. Also, I want the choice of paying my bill electronically, by mail or in person, based on what’s convenient for me, not what’s convenient for my utility.
- Billing Scenario 2. My parents, who are now retired, receive fixed pension checks, and I want their utility to set up a payment plan for them that results in equal payments over the year, rather than high payments in the summer and low payments in the winter. My parents also want the ability to see a summarized version of their bill in large print, so that they can easily read and understand their energy use and costs.
- Billing Scenario 3. My kids are on their computer nearly all of the time, and the remainder of the time they seem to be playing their video games. Also, they rarely turn off lights, and all of these things are increasing my energy bills. I want my utility to help me set up a balance limit so that if our energy usage reaches a set level, I’m automatically notified and I have the option of taking some corrective actions. I also expect my meter readings to be accurate rather than simply rough estimates, because I want to understand exactly how much energy I am consuming and what it’s costing me.
In addition to assessing the value of each requirement to customers, it is also important to rank these requirements based on other factors, such as their impacts on the utility. Financial costs and benefits, for example, clearly need to be estimated and considered when evaluating a requirement, regardless of how important the requirement will be to customers. To draw all of these assessments together, it is useful to assign weights to each assessment area – for example, a weight of 35 percent for customer importance, 30 percent for utility costs/benefits and 35 percent for the value that regulators will perceive. Once an appropriate weighting scheme is applied, the utility can rank the requirements and develop a list of those with the highest priority.
Task 2: Gaps
To assess gaps in current capabilities that could prevent a utility from meeting important and valuable customer requirements, the utility should next identify the business processes, organizations and technologies that will “deliver” those requirements. This requires a careful analysis of current and planned process, organizational and technology capabilities, which can be challenging because other initiatives will be affecting these areas even as customer requirements evolve. Moreover, many utilities do not have accurate, detailed documentation of current processes and systems. Therefore, a series of workshops and interviews with functional and technology leaders and staff is necessary. The results of these workshops should be supplemented by analysis of planned systems and process transformations, in order to assess current gaps and to determine whether those gaps will be closed – based on plans that are already in place. If such gaps remain, new projects and capital investments may be required to close
them and to meet expected customer requirements.
During the gap assessment process, it’s critical that the customer value team work closely with other IUN teams to ensure that the customer value gap analysis is coordinated with the broader gap analysis for the IUN program. Important areas to coordinate include automated meter information, demand-side management, outage management and asset management.
Task 3: Business Case Support
While conducting the first two tasks, the assessment team should be able to develop a deep understanding of the costs required to meet the important customer requirements as well as the financial benefits. Because it’s typical to develop consolidated business cases for the IUN, the customer value team should work with the overall IUN business case team to support business case development by bringing this information into the process.
Task 4: Transformation Road Map
This final task builds on an understanding of both the customer requirements and the gaps in current operations to create the customer value transformation road map. The initiatives in the road map will typically be defined across the following primary areas:
- Performance metrics;
- Organization and training; and
- Project management.
For each of these areas, the road map will establish the timing and sequence of initiatives to close the gaps, based on:
- The utility’s strategic priorities and capacity for change;
- Linkages to the utility’s overall IUN transformation plans; and
- Technology dependencies and links to other work areas.
Figure 3 provides a summary of the initiatives from a typical customer value transformation road map. The detail behind this summary provides a path to transforming the customer-related operations to meet expected customer requirements over the next five to 10 years.
Our “customer value transformation road map” approach provides utilities with a structured process for identifying, assessing and prioritizing future customer requirements. Utilities that are successful in developing such a road map will be better prepared to build customer needs into their overall IUN transformation plans. These companies will in turn increase the likelihood that their IUN transformation will improve customer satisfaction, reduce customer care costs and lead to new sources of revenue.