Next Gen Utilities: Pioneering the Future of Energy

For instance, as customers begin to feed electricity back into the grid, new business models are essential to handle this fundamentally new dynamic.

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With consumers evolving into prosumers, forward-thinking utilities players are taking steps to gain ‘Next Gen’ status, equipping themselves to cope with new levels of billing and grid management complexity. This means striking the right balance between business and technology know-how in a scalable way.

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Those that successfully achieve ‘Next Gen’ status will tap into game-changing advantages like automation, enhanced resilience, and cost efficiency, but there are hurdles to prepare for. Regulatory issues, skills shortages, and transformation fatigue present major threats to ‘Next Gen’ progress, but the right framework and Platform Excellence will help ensure success.

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The ‘Next Gen Utilities’ Framework

‘Next Gen’ utilities are characterized by superior customer centricity, efficient and automated core processes, flexible delivery, as well as data excellence. We have developed our ‘Next Gen’ framework (Exhibit A) in alignment with these four critical characteristics.

To achieve the seamless journeys associated with superior customer centricity, legacy tech stacks need to be replaced with modern, lightweight, automated systems. In many cases, the replacement of IT systems dictates how business processes will ultimately look, presenting an opportunity to boost agility, streamline product development, accelerate time-to-market, and promote flexible delivery.

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Data excellence is vital to make the steps outlined above a reality, which calls for superior data governance and the allocation of roles to maximize quality. The goal is to create a single source of the truth when it comes to information, making sure it is no longer possible for business units to replicate documents and end up using different, inaccurate datasets.

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What Platform Excellence Looks Like

Building a modern, comprehensive platform that spans all four layers of our Next Gen Utilities Framework is essential for a successful transformation.
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1. Provide a coherent frontend that makes energy products accessible, and invite customers to be involved in co-development. Product cycles should be short with integrated feedback loops.
2. Adopt highly automated, standardized processes that can be dynamically adjusted to changing environments. Examples include CRM, workforce management, asset management, market communication, and billing.
3. Prioritize full interoperability and crowdsourcing expertise to overcome the complexity associated with the Next Gen Utilities transition.
4. Gather real-time data insights on customer behavior, ‘prosumption’ patterns, and generation assets. IoT and smart grid data should be leveraged to help drive progress across all dimensions, from customer satisfaction to operational efficiency.

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BCG Platinion Tech Delivery Framework ensures success by optimizing the delivery process end-to-end with integrated view across three perspectives

In a recent BCG article, it’s been highlighted that those that truly excel as ‘Next Gen’ utilities players will combine funding, people, and assets to deliver products and services in an agile, resilient manner. They will implement an operating model that supports their digital initiatives, eliminates duplication, and maximizes results. Let’s take a closer look at the benefits that ‘Next Gen’ industry leaders will unlock.

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Assessing the Advantages

Those that embrace the new era of utilities and adopt ‘Next Gen’ capabilities will empower customers with greater control over their own energy balances, made possible by superior customer experiences. As a result, customers will be able to evolve alongside utilities players as partners and strengthen precious relationships.
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Talent and resource constraints pose a growing threat as innovation becomes increasingly crucial, but by adopting automation, ‘Next Gen’ utilities players can close the gap. Handling major tasks, especially those involving large datasets, is drastically accelerated by using AI-enabled solutions.
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‘Next Gen’ companies are also able to significantly enhance resilience and reliability by adopting advanced infrastructure components. The use of microgrids is a prime example, significantly reducing the likelihood of large-scale blackouts that are reputationally and financially costly.
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Operational costs are set to soar as system complexity spikes, but those that innovate strategically will cut operational costs while simultaneously improving energy efficiency. The ability to reduce energy bills and offer a competitive cost-to-serve are unignorable, differentiating advantages.

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Challenges to Confront

Before beginning the journey to ‘Next Gen’ status and the associated benefits listed above, there is a complex landscape of financial, regulatory, and organizational challenges to be aware of. Addressing them will require a strategic, resilient, balanced approach.
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• Initial investment: Next Gen Utilities promise a step change in business models. However, building these business models on top of advanced technologies requires significant upfront investment.
• The right skills: Attracting new talent and providing upskilling programs will be essential to facilitate the transition and maintain progress.
• Regulatory hurdles: Regulations vary across countries and regulatory developments are difficult to anticipate. We do not yet know how fast network infrastructure will grow, or what the tariff models of the future will look like.
• Transformation fatigue: Embarking on the journey towards adopting Next Gen Utilities is a major transformation, especially for those that have faced years of crises and been impacted structurally. Because of this, resistance to further change can be a huge but essential barrier for some to overcome.
• Cybersecurity: Enhancing threat detection, monitoring, and communication security for critical infrastructure must become a top priority for those transitioning to Next Gen Utilities.

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Facilitating Successful Transformations

At BCG Platinion, we have a large pool of experts dedicated to accelerating the transformation of utilities and supporting the energy transition. These specialists equip clients for long-term Next Gen Utilities success by helping them develop sophisticated platforms. The four-layer framework outlined above is an essential tool in this process, ensuring that transformations are comprehensive. In this section, we will explore each of the layers and highlight how BCG Platinion helps clients act on them.

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Superior Customer Centricity

We help our clients build seamless customer experiences and instill a digital mindset into their customer engagement teams. From conceptualization through to implementation, we take a truly end-to-end approach when supporting clients with the development of future energy use cases. This means driving customer acquisition, implementing modern billing processes, adopting smart home services, and many other important steps.

The deep industry expertise our teams have at their disposal means they are able to help handle requirement engineering, target architecture definition, the development of the underlying business case, and the rapid build-out of MVPs. These capabilities help drive tangible change and build much needed momentum.

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Example: Building a smart energy product matching engine MVP, taking the client’s CRM landscape to the next level in just 8 weeks  

We supported our client in "liberating" their customer data into an AI-ready architecture to generate a 360° view of their customers. Using relevant dimensions and parameters, the tool maps customer profiles against the product and service portfolio to recommend the best offering bundles.

The solution can sit on top of any legacy core systems, such as S/4 utilities, SAP CX, Salesforce, and others. In just under 8 weeks, we built a functional prototype with a state-of-the-art UI/UX.

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Our solutions help end-customers to configure customized product bundles and optimize their individual energy setups. This leads to significant improvements in overall customer satisfaction and Net Promoter Scores. End-customers that have multiple contracts with a supplier tend to demonstrate higher brand loyalty, and as a result, lower churn rates. This ultimately drives customer lifetime value and leads to revenue uplifts of up 15%.

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Data Excellence

As mentioned at the beginning of this article, a critical aspect of transitioning into Next Gen Utilities is effective data governance, which is essential for overcoming organizational silos.

Best in class data management ensures access to high-quality, reliable data, which is crucial for operational automation and excellence in real-time. Our experts support clients with all key steps required to operationalize best-in-class data governance.

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Example: Rolling out a data centricity program for a large electricity grid operator

A joint team from BCG and BCG Platinion began the mission of helping the operator to provide data-as-service as part of a business-led organization structure. We refined the group-wide data domain map and defined central program elements based on business value.

In a second workstream, existing data solutions were analyzed and initiatives for an integrated, long-term data platform and technology stack were developed. The team then prepared it for implementation. A third program module was dedicated to the development of a governance and team structure, tasked with fulfilling new strategy needs.​

Efficient and Automated Core Process

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Providers of Next Gen Utilities need modern core systems that are equipped with automation to offer competitive products and superior services. This capability reduces the technical burden of legacy systems and helps the user progress towards achieving tech stack modernization. We have observed and defined three distinct architectural approaches associated with a modern utility platform.

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One-Vendor approach‍

Monolithic solution with broad functional footprint used as the core system for almost all processes.

Business oriented platform

‍Mainly SaaS solutions are being utilized in a best-of-breed approach to support the value chain end-to-end.

Product oriented platform

‍The value chain along a specific product is supported by microservices and re-usable components on central platforms.

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All three archetypes come with their own benefits and risks. For example, while the “one vendor approach” requires lower integration effort overall and can be very cost-effective, it also comes with less options for differentiation and greater lock-in risks.

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Example: Modernizing the sales platform of a mid-sized regional energy utility company.

The client’s B2C sales platform was no longer equipped to handle future business requirements, which called for the existing “one vendor approach” to be replaced by a flexible SaaS solution. We supported the client in all major organizational, conceptual, and operative activities, including the tender process to select a new vendor.

Our fundamental belief is that all archetypes are valid, depending on the unique context and business ambitions of the organization. But the success of an approach is often determined by the quality of the delivery model used.  

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Flexible Delivery Organization

Delivering the other three layers in an efficient way requires product centric, cross-functional BizDevOps organization. Business andIT functions need to work together to master state of the art DevOps practices, and to achieve sufficient time-to-market for new solutions and products.  Our tech delivery framework not only supports clients by defining their target state at organizational, technology, business and DevOps levels, but provides guidelines in terms of how to transform the existing organization.

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Example: Transforming the IT organization into a product centric DevOps organization

The client started the transformation and defined the target operating model, but they lacked the ability to execute.

We provided transformation management by devising a scalable rollout plan. By equipping the client with comprehensive guidelines, a timely, high-quality transformation was achieved. The team also challenged existing concepts set out by the client to identify improvements, leveraging our DevOps, cloud engineering, and developed learning expertise to upskill the organization.