Utilities build a new workplace in the age of reinvention

This is a guest blog post by Nick Mayes, Principal Analyst, at industry analyst group CXP

Europe’s leading energy and water retailers are in a state of flux.

Volatile wholesale prices, the swing to renewable sources, changing customer demands and an evolving competitive landscape are all having a clear impact on the progress of the established order.

Only four of Europe’s top ten utilities posted an increase in operating profit during 2017, with those active in highly competitive markets struggling the most. Centrica said that its British Gas subsidiary lost 750,000 customers last year, while EDF lost 1 million customers during the same period. The latter is facing a new domestic challenge with oil giant Total moving into the retail space through the acquisition of Direct Energie.

Across Europe, energy retailers are making sweeping changes to their business models. France’s Engie is two years into a three-year, €22bn transformation programme that will see it focus on low carbon activities, integrated customer solutions and activities not exposed to commodity prices. Italian leader Enel is investing €17bn in a three- year programme targeting areas including renewables, grid technology and operational efficiency.

A new wave of M&A activity is also sweeping through the sector as companies look to combine in order to diversify, build economies of scale and share the burden of investment required to support transformation. Both France’s EDF and Spain’s Gas Natural have attempted to buy Portugal’s EDP, while the break-up of E.ON into two separate organisations looks set to trigger consolidation among German utilities. The UK’s “big six” may soon become a “big four” with SSE and Innogy agreeing to merge their UK retail activities, while Innogy itself is being absorbed by E.ON.

In order to navigate through this disruption, utilities will need to become more agile and responsive to these market dynamics. They will need to provide their workforce with the right tools and working environment and culture to ensure that the business can continue to reinvent itself at speed and attract the right talent to take it forward.

But what sort of workplace experience are utilities providing for their employees today?

Today’s Workplace is Falling Short

PAC recently partnered with Fujitsu to interview 192 senior decision makers at utilities organizations in Europe, ANZ and the US to understand the current challenges they face in delivering a truly compelling and productive workplace strategy.

The majority admits that their current workplace approach is failing to deliver in many areas. 81% of utilities believe that high staff attrition is a challenge to productivity, while a quarter (24%) state that their current workplace IT infrastructure has a negative impact on their ability to attract and retain new employees.

This is a worrying finding. Utilities are aggressively rebalancing their workforce in order to have the right skills in place to support their digital centric strategies. SSE increased its number of new recruits by 17% during its most recent financial year and ramped up its number of training exercises by 64% as it looks to plug what it views as “a looming skills gap in 2020.” If utilities already believe that today’s workplace is holding back their ability to harness the best talent, it is something that needs to be addressed as a matter of urgency as they look to bring more millennial and Gen Z talent into the organization.

Changing the skills mix is one key aspect of the future strategy of traditional utilities, and driving innovation at pace is clearly another. As part of Engie’s broad transformation program, it has committed to spending €1.5bn on developing innovative new offerings over the next three years. However 19% of the participants in the study stated that their current workplace approach has a negative impact on their ability to foster innovation within the business – again the highest rate across any of the five industries covered by the study.

The other interesting finding from the research was that workplace technology is often acting as a barrier to productivity, rather than an enabler. 50% of utilities see striking the right balance between robust workplace cyber security defenses and user experience as a challenge, while 83% state that a lack of access to the right productivity tools is holding their employees back. A new approach is clearly needed.

Where is Workplace Investment Going?

The study looked at the actions that utilities are taking to tackle these challenges, and it as was encouraging to see that many are taking important steps at a policy level to drive lasting change.

Almost half (48%) are changing policies to ensure access to tools and platforms to create and share innovation with the wider ecosystem. Again, this was the highest level out of any of the industries covered by the study. United Utilities recently talked about how its Innovation Lab is looking to harness external innovation by working with a potential community of 1,500 partners and start-ups to drive “healthy disruption.”

Almost three quarters (73%) are implementing new policies to improve the work/life balance for employees, while two thirds (68%) are aiming to deliver a more agile and compelling workplace experience. This will be underpinned by investment in technology such as social enterprise platforms (65%) and digital virtual assistants (37%). Interestingly, utilities also lead the way in terms of planned investment in smart building connectivity (35%) as a way to enhance user experience while also driving energy efficiency.

As we have seen, current approaches to identity and access management are slowing workers down, so utilities are taking a new approach. The majority have either implemented or plan to rollout biometric, contextual analytics and single sign-on technology, and it is the most aggressive sector in planning to implement behavioral analytics tools during the next 12 months (39%).

However, the utilities sector has historically trailed other industries in the adoption of new technology, and it remains behind the curve in harnessing the potential of robotic process automation and crowdsourcing/open innovation and hackathons.

Some final thoughts

The utilities industry is going through a period of unprecedented change.

It is difficult to think of another industry sector where traditional business models are being turned upside down to the extent where retailers are now encouraging their customers to consume less energy, or where service diversification (insurance, home connectivity, broadband services) is becoming so prevalent.

Innovation and agility are critical components of a future-proof strategy and this needs to start at the workplace level. Failure to attract and retain the best talent or to provide them with the right tools to harness innovation from both inside and outside the organization will see them falling behind in an increasingly competitive market.

It is encouraging that the study shows that most already recognize the importance of taking immediate action.

Join us for our live Utilities webinar on 30 May at 10.00 GMT/11.00 CET to find out how you can future-proof your workplace.

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