Mark Hunt, chief technology officer, Oneserve Customers, Finance and investment, Innovation, Strategy & management, Technology, Opinion, Data, data analytics

The utilities sector has been slow to embrace data analytics, but the technology is already having an impact and, predicts Mark Hunt, is on the verge of revolutionising productivity and efficiency.

The utilities sector has been notoriously slow to embrace data analytics, but the progress it has driven in other sectors has demonstrated just how impactful it can be. Despite the restraints that a naturally monopolised market can have on its resident businesses, utility giants are increasingly turning to data analytics to drive improvement in terms of “know your customer”, customer service and business decision-making.

Data analytics have revolutionised all manner of industries. Ranging from finance to beauty, the application of analytics to both new and historical data sets was initially led by businesses looking to differentiate themselves from their competitors.

The benefits of data analytics are clear – data interpretation allows company leaders a much deeper understanding of the many facets within their business including; the efficiency of their production processes, the behavioural patterns of their customers and the efficacy of their business procedures.

The impact that these insights have had on operations is so critical that data analytics has become a fundamental part of running a business in a vast range of industries.

The uniqueness of utilities

The utilities sector has been noticeably slow to incorporate analytics into its business processes and this is most likely a result of the market’s unique nature.

As a market dominated by natural monopolies, and subsequently subject to rigorous and comprehensive regulation, the utilities market doesn’t feel upward competitive pressure in the same way that others do.

The finance market, for instance, saw disruptive start-ups entering the market offering customers innovative solutions that challenged those offered by some of the market’s biggest players. As a result, market leaders had to be adaptive and reactionary to firms who were making better use of data than they were in order to retain their competitive edge.

However, the natural monopoly model leaves very little room for new challenger firms and, as such, the utilities sector has not experienced the competitive pressure that has forced other industries to adapt technologically.

Paradoxically, however, the monopolistic nature of the biggest firms in the industry means that the data sets that are available to them are much larger, and as such much more insightful, than those accessible by firms in more contested markets.

With such a large and diverse customer base, the data that the utilities sector has privy to could theoretically provide analysis of behavioural patterns from virtually every cross-section of British consumers.

Further, the lack of competition in the market has allowed the technology that these firms do implement to exist as closed-loop. Where other markets rush to develop their technology so that it is compatible with the latest innovative software and methods, the utilities market has been able to function comfortably with dated and inflexible systems.

The efficacy with which other sectors are harnessing the power of data analytics has illuminated to the utilities sector just how useful it could be to them.

The data revolution is coming

The industry has already started making steps in the right direction, adopting data analytics in three of the biggest areas; “know your customer”, customer service and business decision-making. Understanding patterns of consumer behaviour helps businesses to allocate their resources in a way that is not only the most efficient but also tailored to the needs of their customers.

A leading water provider recently employed PwC to implement a data analytics system that would help them understand which of their customers are eligible for social tariffs and are therefore more prone to falling into debt. By understanding their customers in this way, the firm can see where their resources are best allocated.

Customer service is another area where the sector has been rolling out data analytics. The lack of product diversity within the sector means that firms must distinguish themselves by the quality of the service that they provide.

Data is being used to solve individual customer problems – for example – customers can log online that their power has failed and an aggregation of similar logs in a specific geographic area will quickly flag to engineers that there is a problem that needs addressing. This allows the business to understand where best to focus their resources and, as a result, maximise the quality of the service they provide.

Making complex decisions is the final major area where progress is already being made within the industry in terms of data analytics. All the sub-sectors within the utilities industry rely on machinery and hardware for the delivery of their goods and, as such, it’s maintenance is expensive. This means that the decision to repair, replace and update the machinery is a complex one.

Data analytics can help in this example by providing comprehensive reporting to substantiate and inform the case for a business solution. “Dumb sensors” are fitted which quantify the operational functionality of each machine and are reported to business leaders for analysis. This application of data helps businesses to make decisions in confidence, preventing them from potentially wasting time and money.

The utilities sector has been able to operate with outdated technological systems for much longer than many others because of its monopolistic structures, but the benefits that data analytics offers are becoming too great for it to ignore.

With incremental but significant steps being made in the industry to incorporate big data analytics into a range of its business processes, the industry is finally making the changes it has long awaited.

What to read next