The need to address the challenges of leading change comes at a time of enormous upheaval for utilities across de-regulated energy markets and regulated monopolies.
While regulator-driven water and networks companies are pushed to drive down costs while putting customers at their heart of their business plans, de-regulated energy firms face the threat of an increasingly hostile political environment and rising competition from smaller ‘challenger’ retailers.
Utilities need to “consciously take a winning mindset”, said analyst Mark Thomas from event sponsor PA Consulting.
A roundtable discussion consisting of senior members of the big six companies, leading analysts, and supply chain firms agreed that the need for change is clear: conventional generation has always been at the heart of these firms but as the “money has dropped out of the generation business” the need to engage better with customers has grown.
Both the water and energy sectors recognised the need to forge a future which is based on the consumer. But the pressures on each set of leaders to mould a clear vision of what this looks like means a way forward is not always clear.
The roundtable identified three key areas which pose challenges to leading change in the industry:
- The shifting pressures of a changing political landscape mean that leaders are focused on reactive strategies rather than a proactive vision.
- The ‘old guard’ hierarchical nature of many of the larger utility companies means that creating a change in culture or vision can be difficult to communicate and sustain.
- Potential change in the wider industry mean that it’s more difficult than ever to know exactly who the competition is.
Previously, one roundtable delegate said, a big six utility knew who it was competing with: “the other five”. But now, the net effect of multiple small new entrants is cutting into market share and increasingly decentralised energy solutions emerge. Further in the future, disruptive change-makers such as Google could emerge as a real threat to traditional energy companies, others added.
“What can a utility do to defend itself against a world where anyone can do your job?” one roundtable member said.
But the uncertainty of future competition is met by the more pressing uncertainty of the regulatory environment. Political heat on the energy sector has forced many industry leaders to rethink their strategies, but they also risk basing their strategy on a reaction rather than a proactive and authentic approach. On the other hand as a general election looms and the sector’s competition probe rumbles on, companies face a danger of putting off important leadership decisions which could cost them a competitive advantage.
In a separate roundtable on the same topic leaders from the water industry countered this problem by insisting that a customer-focused vision should always remain constant, while the shifting demands of Ofwat will fall within that unified focus. But both energy and water sectors though face similar challenges in implementing change in companies which often have a long history of legacy inefficiencies and unchallenged approaches to problem solving.
And the response to these challenges? Thomas urged delegates to embrace the opportunity posed by the changing environment in the same way that today’s strongest firms embraced the opportunities presented by the economic recession.
None of the challenges faced by utilities are existential, and advancing technology is on our side, delegates added. Leaders should drive change now, before threats become imminent, and while there’s still everything to play for.