Energy Biz - July/August 2008 - (Page 40i) The Utility Enterprise of the Future in ibm’s rEcEnTly complETEd 2008 cEo survEy, ovEr 1,100 CEOs were interviewed in person about their views of the Enterprise of the Future and how well their businesses fit that vision. An important revelation in this survey is that executives recognize the emergence of a more informed and active consumer. Three in four CEOs believe this informed and active customer will have a positive impact on their business and plan spending to provide new products and services to these customers – and to reach new segments of customers. Spending is expected to increase by 22% over the next three years. We predicted a similar emergence in the utility industry in our 2007 IBM Institute for Business Value paper Plugging in the consumer: Innovating utility business models for the future (read the report at www.ibm.com/energy/ plugin). As part of the research for that paper, we surveyed 1,900 consumers from six countries and almost 100 industry executives around the world to understand how the industry might evolve over the next five to ten years. We concluded that the industry would progress steadily toward a Participatory Network, a business model with a smart grid or an intelligent utility network at its core. This will enable a wide variety of information gathering, data analysis, and energy management tools. Ultimately, it will pave the way for integration of a wide array of customer-controlled resources into the network – from today’s small distributed generation options to tomorrow’s micro-grids, energy storage devices, and even plug-in electric transportation vehicles. Utility executives clearly recognize this; spending increases planned by utilities to address the needs of more engaged customers are about two-thirds larger than the full cross-industry, global CEO sample. However, the percentage of utility executives that believe this trend will have a positive impact on their business is about 10% lower than the overall respondent group. At first glance, these bigger relative spending increases coupled with lower confidence that they will translate to a positive business impact represents a paradox. However, another way of looking at it is that it demonstrates that the executives understand that the move toward a Participatory Network will require dramatic changes over time in how the industry generates value. Revenue models will move from being centered solely on energy flows to focusing on capitalizing on both energy and information flows. Burgeoning information flows and evolving consumer demands will attract a new cadre of competitors eager to take their share of new product, service and business model opportunities, forcing a need to reevaluate how utilities segment and serve customers. Utility CEOs may be apprehensive about these changes because they have historically been less accustomed to expectations for fundamental business model innovation than their counterparts in other industries. In fact, utilities had the lowest percentage of executives who reported in the 2008 CEO Survey that they have been strongly focused on business model innovation. The good news is that this triumph of instinct over experience in spending priority is clearly in line with tangible customer expectations today. In our 2007 consumer survey, we saw strong evidence that growing reliability concerns, fear for the environment’s future, and higher energy bills have a majority of consumers wanting to actively manage more of their own energy decisions. Over 80% of the customers surveyed would change their usage patterns to save money, and 70% would do so out of environmental concerns. Depending on the costs and specific benefit sought, up to 65% would even consider generating their own power. It is becoming clear that if customers can obtain the types of information enabled by the appropriate technology that enables them to be more active participants; they will shoulder more responsibility for energy usage that is consistent with both their needs and the interests of the utilities. As the Participatory Network business model with an intelligent utility network at its core deploys in more parts of the world, we believe that utilities will become increasingly confident in their ability to harness innovation to meet their objectives and, as importantly, those of their customers. F. Michael Valocchi, Global Energy & Utilities Leader, IBM Global Business Services John Juliano, Global Energy and Utilities Lead, IBM Institute for Business Value 9 http://www.ibm.com/energy/plugin http://www.ibm.com/energy/plugin http://www.ibm.com/energy/plugin
For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.