Tuesday, February 6, 2018

Accelerating Digital Transformation : A Playbook for Utilities McKinsey&Company Adrian Booth, Eelco de Jong, and Peter Peters

All industries have realized the need to transform themselves using Information Technology tools. This article exposes the reasons why utility firms lag many other industries in adapting technologies for greater efficiency and effectiveness and what steps they can take to overcome barriers. Attempts at incorporating agile or lean management strategies or adding piece-meal digital technologies yield modest results.

By reorienting their focus, utilities can realize performance gains, according to the article, in areas such as "safety, reliability, customer satisfaction, and regulatory compliance" (p. 1).  Specifically, the article mentions improvement to technologies that enable "reimagining customer journeys, adding digital leak detectors to gas grids, using predictive models to schedule maintenance, and other asset management activities, and equipping field workers with mobile devices that let them access technical instructions while in the field" (p. 1).

The authors acknowledge what they view as the barriers to transformation. The first, utilities operate  to protect existing infrastructure investment and reduce asset investment risk. Second, as an industry not considered on the cutting edge, the utility sector has difficulty attracting innovators, such as data scientists. Third, legacy systems, processes, and procedures deter innovation.

The article offers solutions to these impediments to change by suggesting three focus areas and their key tasks. The focus areas include: "adopting digital ways of working, attracting and retaining digital talent, and modernizing the IT architecture and environment" (p. 2). The key tasks included for adopting digital ways of working, "Gain support of senior leaders so a digital transformation has high priority" and "Build a digital factory to produce new applications and insights using digital-native methods" (p. 2). For the focus area, attracting and retaining digital talent, the authors listed two key tasks: "highlight the intellectual challenge and social value of the utility's work" and "Tap into a broad pool of digital specialists who value the balance and stability that a utility offers" (p. 2). The last focus area, modernizing the IT architecture and environment, the authors suggest these key tasks: "Simplify the utility's product portfolio and business processes" (p. 2) and "Shift from all-in-one, monolithic IT systems to modular IT architectures" (p. 2).

The article's prescriptions apply to large utilities with the financial capability to engage in a multi-year,enterprise-wide change.


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