T keynote 845_valoochi

© 2013 IBM Corporation

Digital Front Office Energy and Utilities Industry Point of View

Michael Valocchi

Global Industry Leader, IBM Energy and Utilities Industry

September 2013

© 2013 IBM Corporation IBM Institute for Business Value and GBS Strategy and Transformation

The emergence of big data, social, mobile, cloud and analytics are fundamentally changing how we live, work and interact

Pervasive

connectivity Big data

Social

Analytics

Mobile Cloud

Digital transformation forces 67% of global consumers want to use mobile devices to

check out

18% of Africa’s GDP is expected to be handled

through mobile money transfers

by 2015

1 out of every 7 minutes spent online is spent

on Facebook

40% of people socialize more online than they

do face-to-face

80% of new apps will be distributed or deployed

via the cloud

1/3 of consumer data will be stored in the cloud

by 2016


These digital forces reset customers’ expectations, requiring enterprises to rethink the end-to-end customer experience…

Instant access to

information, products

and services

Increasingly, customers expect…

To be engaged as

individuals, on their

own terms—anytime

and anywhere

Seamless experiences

that match product and

service quality

Trusted, mutually beneficial

relationships that go beyond

one-time transactions

Transparency from the

companies they interact with


…and are fueling an explosion of data—a new economic asset that has become the basis of significant opportunity

We are here

Sensors

and Devices

Social

Media

VoIP

Enterprise

Data

2013

In just two days we now generate as much data

as was generated in total

through 2003

80% of all data is unstructured and growing 15

times the rate of structured data

Over 1 billion tweets are sent every 3 days

5 million trade events are clocked every day

2015

Percentage of

uncertain data


73% of CEOs are prioritizing investments in customer insights

82% of CMOs Plan to increase the use of social media

74% of CIOs say mobile solutions are part of their vision for increasing competitiveness

70% of COOs Identify supply chain visibility as the top challenge in delivering on their agendas

As a result, leaders are redefining their agendas and reprioritizing investments focused on reshaping the “Front Office”

© 2013 IBM Corporation IBM Institute for Business Value and GBS Strategy and Transformation 5 25 September

2013

Agenda

1. Digital front office in the Energy and Utilities industry

2. New market entrant innovation examples

3. IBM’s approach


2013

FORCES

IMPLICATIONS IN 10 YRS

Challenges and Opportunities

The traditional utility business model is upended; new business models and alliances will be required to sustain revenue growth

Consumers

Consumers want the same high level of service from energy providers as from other consumer-oriented companies

Threats to Revenue

Energy efficiency, slower economic growth, and new entrants negatively affect historical patterns of demand

Information

Utilities now have to manage a huge volume, veracity, velocity and variety of data from both external and internal sources

Data and analytics move from a back-office competency to a critical profit enabler, requiring innovation in the front office

“Innovate, partner, or die” becomes an unspoken mandate as new entrants reach out directly to consumers and bypass energy provider

Key forces are driving the need for new customer interactions, analytics and innovation


2013

This new Digital Front Office delivers compelling customer experiences that create new pathways for revenue growth

…the sum of activities, people, platforms, and processes that interact with the

consumer(s) across all touchpoints and that are transitioning from analog to

digital

…reimagining everything about the way people connect, transact and engage

with companies, institutions and governments—and how they create mutual

value

The Digital Front Office is…

What is the Digital Front Office?

A digital front office should …. Engage, listen and nurture open relationships with energy consumers

Extract and apply actionable insights to interactions and processes –

determine the next best action for consumers

Embrace collaboration and partnerships within the energy ecosystem to

innovate products, services and industry business models themselves

Be integrated internally and externally, across operational components and

functions and into the daily life of consumers


2013

The Energy and Utilities Industry in 2023…

Smart appliances become ubiquitous

Electric vehicles are affordable, and utility-sponsored purchasing programs are available

Home energy management systems are inexpensive and prevalent

Consumer-owned

generation is affordable for

the average household

Microgrids emerge where existing infrastructure is insufficient

Consumers can easily sell surplus energy to the grid or contract with a third party

Battery technology will become increasingly available

Regulatory environment allows new business opportunities for energy providers

Digital Future


2013

Capabilities and Gaps

Recommendations Description

The digital front office will require energy providers to...

Personalize engagement

to extend brand reach

beyond the meter

Understand your customers and speak to them in their own words

Use social media analytics as a source of innovative inspiration and

positive brand reputation

Improve customer responsiveness through automation

Create a core competency

in data management and

analytics

Be first to market by seeking explosive growth in analytics

capabilities

Deeply understand the nature of the data you already have and will have

and use this to create breakthrough innovation for new products and

services

Invest in people and technology to harness the power of analytics Evaluate threats to core

revenue; plan defensive

and growth-oriented

business model

innovation strategies

Find the quickest path to innovative business models whether it be

in-house innovation, partnerships, or co-creation vehicles

Re-imagine partnership beyond the obvious; unfamiliar combinations

will be successful at meeting real consumer needs

Use recognition of the threats from new competitors to engage in

constructive dialogue on regulatory change


2013

Consumer

Experience

Analytical

Insights

This digital front office transformation yields essential business benefits

▲ Diversify revenue base as load

growth flattens

▲ Increased overall customer

revenue and profitability

▲ Increased EBIT and ROE

through higher customer

satisfaction levels

▲ Improved customer satisfaction

▲Reduced regulatory or legal

impediments

▲ Find target segments for

attractive products/services

▲ Optimize partnership revenue

and profits

Operational

Flexibility

▼ Use attractive, relevant

product/service tie-ins to

create switching costs in

competitive regions and

improve retention

▼ Predict and prevent outages

▼ Reduced marketing spend

through optimized marketing

performance

Create transformational

“beyond the meter” relationships with

consumers

Use data to improve

system health,

consumer segmentation,

and partner ecosystem

benefits

Benefits

▼ Lower restoration, repair,

and liability costs from

severe events

▼Decreased churn from

dissatisfied customers

▼ Avoidance of penalties from

governments/localities

Instill confidence and

trust that the electricity

system can adapt to a

variety of threats

▲ Minimize revenue losses

due to long outages

▲ Foster image of “reliable

and trusted provider” that

carries over to other

products/services

Benefits Opportunities Impact on:


“A new era of computing is upon us … it is defined by computing moving to the front office."

- Ginni Rometty, Chairman and chief executive officer of IBM; Investor Day, May 9, 2012

The convergence of all of this change is transforming the front office—the systems, processes and people that touch the customer.

Back office

Channels

Empowered

consumer

Physical Web Social Mobile Call Center Broadcast

Enterprise resource planning

(ERP) systems Legacy applications Data warehouses

Front office digitization

Increase business partner

and supplier visibility Optimize supply and demand

to changing consumer needs

Create best- in-class

marketing capabilities

Engage based on deeper,

more actionable customer

insights

Innovate business models,

products and services

Define a unified cross-

channel vision for customer

engagement

Capabilities


2013

Agenda



3. IBM’s approach


2013

Engage with customers in a simple and fun

way

Use gamification to inspire customer

participation in utility company programs, e.g.

Biggest Energy Saver

Enable utilities to play a leading role in the

customer relationship

SimpleEnergy helps utilities engage with customers through gamification

Competitive landscape is

strong and barriers to

entry low

Market is immature,

fragmented and slow

moving

A firm value proposition

has not yet been

established

Customer concerns about

privacy still exist

Fewer than 5% of

households today take

advantage of energy

efficiency programs

Energy providers could play a strong

role in this business model if they are

able to white label customer

communications

Sources: utilities.simpleenergy.com, http://biggestenergysaver.com/

Digitization: Challenges:

Results:

Simple Energy’s

Customer Engagement

Platform supports utility

smart grid, energy

efficiency and demand

response programs by

making them social, fun,

and simple.

DFO Leaders


2013

Easy to use device interface for

thermostat and user application

User trains the device to adjust to their

needs and preferences

Active online community for heralding

energy savings builds consumer

preference

Nest offers a smart thermostat for promoting energy efficiency and enabling usage comparison with friends and family

Market is immature,

fragmented and slow

moving

Many large players have

exited market due to poor

product sales – e.g.

Google, Microsoft

Direct to consumer

business model does not

involve utility

A winning entry point and

value proposition is not

defined; companies that

were not competing

before are now

competitors, e.g. OPower

Sources: www.nest.com, http://gigaom.com/2013/05/08/how-nest-and-opower-quietly-morphed-into-competitors

Energy providers could benefit from

collaborative business partnerships

to keep them at the center of the

energy ecosystem


Results:

Nest produces a learning

thermostat/application that

manages energy usage

based on homeowner

behavior. The company also

offers energy service

providers demand response

and energy efficiency

services. It purchased the

startup, MyEnergy that

allows consumers to

compare their usage with

friends and family.

DFO Leaders

http://www.nest.com/

© 2013 IBM Corporation IBM Institute for Business Value and GBS Strategy and Transformation 15

25 September

2013

SolarCity provides a comprehensive platform for low cost energy generation

Fragmented and

competitive solar market

with a variety of customer

focused business models;

no winning value

proposition yet defined

Supply still outweighs

demand with the global

solar market growing at

14%; some countries/

states/ regions are

growing at much faster

rates of demand – NA

growing at 70+%

Sources: www.solarcity.com, Solar Voltaic Industry – Columbia University, Investopedia

This company’s business model makes

them a direct competitor with traditional

energy providers.

Provides solar energy with free installation and

charge for usage just like a utility

Supplies customer monitoring system through

SolarGuard application so customers can

monitor their system, energy consumption and

solar system output

Guarantees system will produce electricity for

20 years and that the prices are less than local

utility


Results:

Founded in 2006, SolarCity

is the leading solar

provider in the United

States providing full-

service solar system

design, financing,

installation and monitoring.

Customers include

homeowners, schools,

government and corporate

clients including eBay, Intel

and Wal-Mart.

DFO Leaders

http://www.solarcity.com/


2013

Agenda


2. Innovation and leading examples

3. IBM’s approach



Key Innovations

Watson Engagement Advisor Next Best Action Social Data Accelerator Provides intelligent but

automated channels for

customer support which

increases customer satisfaction

and lowers cost to serve by

empowering customers to take

action in an intuitive, fast,

accurate, and consistent fashion

Enables analysis of big,

unstructured data from

social media sources and

integration with enterprise

information

Deliver the most

appropriate action at the

right time across

channels using real-time

analytics to anticipate

customer needs

Smarter Marketing Smarter Analytics Social business Smarter Commerce™

Leveraging Big Data and Analytics


2013

The roadmap is different for each client – you must first understand your customers’ journey to identify which capabilities to enable

IBM’s Approach

1

2

3 Envision

Evaluate

Enable


2013

IBM Contacts

Michael Valocchi

Global Industry Leader, VP and Partner

[email protected]

610-212-9763

Global Energy and Utilities leader

North America

Chris Lilley

Energy and Utilities Industry Leader, Partner

[email protected]

484-319-7511

EMEA

Ricardo Klatovsky

Vice President

[email protected]

+34-91 397 73 95

Asia Pacific

Andrew Weekes

GMU GBS Energy and Utilities Leader, Partner

[email protected]

+61-409070366

Regional Energy and Utilities Leaders

Center of Competency Global Lead

James Strapp

Global CoC Leader, Partner

IBM Energy and Utilities Industry

[email protected]

415-478-3187

Global Contacts