Infosys Digital Radar 2019: Barriers and Accelerators for Digital Transformation in the Utilities Industry

By Jeff Kavanaugh, Arunkumar Ranganathan, Jeff Mosier June 2019   |   Report   |   28 min read   |   Email this article   |   Download Infosys Digital Radar 2019: Barriers and Accelerators for Digital Transformation in the Utilities Industry

The digital transformation journey

Utilities executives are accustomed to thinking large and long-term. The industry is built upon billion-dollar infrastructure projects, from power plants to natural gas pipelines, that are designed to last for decades or longer.

Now the traditionally cautious industry must react rapidly as an evolving energy mix, increasing storage options, government mandates and customer demand for more data and clean energy options make change a necessity.

The rise of electric cars and renewables, digitally-native electricity retailers and advances in energy trading have pushed companies to accelerate innovation. Even heavily regulated utilities – ones with guaranteed profit margins and no competition – feel the pressure to advance their digital transformations.

In early 2018, Infosys surveyed more than 1,000 senior management-level executives working in large organizations around the world with more than 5,000 employees and over $1 billion in annual revenue. That research on their digital evolution included responses from dozens of utilities industry executives.

Based on that survey, we produced a report — The New Champions of Digital Disruption: Incumbent Organizations — showing that incumbent organizations (as opposed to digital natives) fall into three clusters determined by their progress along the digital transformation journey:

digital transformation journey

Knowing that many organizations are rapidly intensifying their digital transformation efforts, Infosys conducted a new survey in November 2018 to gauge the pace of that change. This new research shows that the percentage of utilities industry visionaries increased slightly, while the number of watchers and explorers decreased. Overall, company executives told us they can advance from the watcher to the explorer level without herculean effort, but reaching the visionary level is significantly more difficult.

In a 2018 Infosys survey, 46% of respondents from the oil, gas and utilities industries said they were “building AI into the company ethos.” Utilities have little choice but to reinvent. The growth of distributed energy resources and demands for smart grids are fundamental changes that utilities can’t ignore.

Fewer watchers, more visionaries

Fewer watchers, more explorers

The need to be visionaries

Almost every incumbent in the utilities sector is being pushed by disruptors or peers to digitally transform, including how electricity is sold and distributed across grids. Many companies will only survive if they become digital transformation visionaries, although some monopoly organizations are more insulated than most from outside pressure.

Some incumbents unable to keep up with the pace of technological change have already succumbed to competitive pressures. Many more in the utilities industry will likely fall by the wayside. To avoid being blindsided by competitors and stay relevant, companies must find ways to transform their products, processes and business models using digitally-enabled approaches and technologies.

Navigating the transformation journey

Our most recent study takes a closer look at the transformation journey. We identified 22 key digital initiatives and then asked respondents where their companies stood on implementing each initiative:

  1. Not started (or in planning).
  2. Completed multiple proofs of concept.
  3. Completed pilot projects.
  4. Operating at scale.

We then developed the Digital Maturity Index and assigned each company an index score from 0 to 100 according to its progress on pursuing and implementing the 22 key initiatives.

Companies on the digital journey

Companies on the digital journey

Comparing clusters on their digital transformation journeys

As utilities companies advance through the digital transformation journey from watchers to explorers to visionaries, they operate more and more key digital initiatives at scale. The types of projects change throughout the journey and can be grouped into four categories:

  • Foundation initiatives must be implemented to modernize legacy systems.
  • Mainstay initiatives represent the core elements of digital transformation, including automation and artificial intelligence (AI).
  • Customer initiatives primarily impact the customer experience. They include omnichannel marketing and content personalization.
  • Forefront initiatives harness cutting-edge technologies, such as augmented reality (AR), drones and blockchain.

Visionaries stand out – cluster progress across 22 digital initiatives

Visionaries stand out - cluster progress across 22 digital initiatives

As shown in the previous figure, utilities visionaries are significantly more advanced than explorers in their implementation of all initiatives, and watchers are far behind.