Digital transformation in utilities hampered by leadership conflict

IFS has released new research revealing significant findings regarding digital transformation in the utilities sector. The study, which surveyed 863 C-level executives and vice presidents from utilities companies across the UK, US, France, the Nordics, the Middle East, and Australia, indicates that while artificial intelligence (AI) is a top priority, only 20 per cent of organisations have successfully completed their digital transformation journey.

The research highlights that 82 per cent of executives consider AI essential to their strategy. Despite this, the progression of digital transformation is hampered by issues such as differing opinions on leadership roles and a lack of consensus among senior management. Specifically, 22 per cent of respondents cited the Chief Financial Officer (CFO) as the responsible party, while another 22 per cent pointed to the Chief Technology Officer (CTO).

Data analytics also play a critical role, with 84 per cent of organisations recognising its importance. The study identifies major challenges including the inability to measure the value of investments (32 per cent), a lack of clarity on necessary resources and skills (25 per cent), and a lack of consensus on priorities among leadership (23 per cent).

Asset management emerged as a pivotal factor for ensuring reliable and efficient service delivery, indicated by 36 per cent of respondents. This importance is underscored by the ageing infrastructure and increasing complexity of assets in the utilities sector. Many grid components operate beyond their intended lifespan under severe conditions, compounded by the transition to renewable and distributed energy resources.

Other critical operational areas include resource optimisation (39 per cent), the implementation of robust customer experience strategies (38 per cent), and effective field service management (36 per cent). These areas highlight the multifaceted approach required for successful digital transformation.

Carol Johnston, Vice President of Energy, Utilities, and Resources at IFS, commented, "The utilities sector is at a pivotal moment, where AI-driven digital transformation and sustainability are not just trends but imperatives. Our research proves the need for robust data management and AI capabilities to ensure companies make a success of their transformation. But utilities must also embrace a holistic approach, leveraging end-to-end digital tools and fostering strong partnerships to navigate this complex landscape."

The research further notes a strong demand for composable enterprise platforms, sought by 38 per cent of decision-makers. These platforms allow businesses to integrate various software modules according to specific needs, providing flexibility and modularity to adapt to changing requirements.

Johnston added, "Composable platforms allow enterprises to bring in new functionality as and when required, providing a flexible approach to digital transformation. This reduces complexity and allows companies to adopt technology at their own pace, offering a streamlined solution that integrates various applications seamlessly."

Sustainability remains a pressing concern, with 46 per cent of surveyed utilities businesses setting timelines and goals to achieve sustainability targets. However, only 31 per cent have reached their initial milestones. Key strategies to meet these goals include improving asset efficiency (43 per cent) and investing in energy-efficient assets (42 per cent).

"We don't see sustainability as a trade-off, but as an opportunity to create value for our customers and society. Utilities increasingly understand the importance of accurate data and reliable reports in measuring progress to key sustainability goals and avoiding greenwashing," Johnston added. "Effective strategies include optimising resource use, selecting sustainable suppliers, and engaging customers in programs like energy audits and solar panel installations."

The research concludes by emphasising the interconnectedness of AI, digital transformation, asset management, and sustainability. Utilising AI and digital tools effectively will help utilities achieve sustainability targets while enhancing overall service delivery, according to Johnston.