A new report from McKinsey asks a simple, yet profound question: If digital could enable a utility to provide a fundamentally better product and services at lower rates, what could that do to the utility industry's underlying structure?Â
It seems most industries are using digital tools to improve and more efficiently deliver their services, and companies who have bet their futures on the usefulness of these tools have not only disrupted their spaces, but separated themselves from the packs and have become titans of industry. Think Google, think Tesla, think Amazon. Digital is the present and future of these companies, and they acknowledged that from the start. Electric utilities are in a different position — their business models and services predate digital and they are now in a position where they need to adapt. Yet, the monopolistic structure of many utility markets has not injected the same urgency into this adaptation/disruption. It's expensive, difficult and, from a business perspective, relatively unnecessary, or at least less necessary, despite promising results.Â
The McKinsey report shows utilities who have deployed digital solutions have seen a 25-30% increase in field productivity from AI-powered scheduling; an 80% capital reallocation based on machine learning insights into the health of their assets; 30% boost in customer satisfaction in some areas; a 30% improvement in reliability and resiliency outcomes.Â
"While almost all major utilities are utilizing digital, data, and analytics in some fashion, it appears that few executive teams can articulate a cohesive strategy on how a comprehensive digital, data, and analytics platform could provide 'best-in-class' outcomes across reliability, safety, resiliency, affordability, and customer experience—with no trade-offs," the report reads. "In our perspective, if a cohesive strategy is not devised within a three-to-five-year timeframe, likely no one will 'break out of the pack' and the industry will continue on its linear improvement trajectory."Â
Yet, the industry has lacked leaders who are willing to go all in on digital and disrupt the existing business model. Leadership and renown await the utility executive who takes the risk, according to McKinsey.Â
"Bold industry companies that adopt a digital platform could achieve a step-change performance ahead of peers and, more important, use the once-in-a-generation opportunity to fundamentally restructure the entire industry," the report reads.Â
So, what is holding the industry back? Is it the monopolistic structure of the market? If competition was a legitimate concern of utility executives, the innovation we would see would be exponential. Right now, most innovation is either an efficiency measure to improve bottom lines or through mandates by the government. Electric utilities are waiting for their Steve Jobs or Jeff Bezos, yet I fear that with the current structure of the market, there is only a little incentive that comes with the large risk of going all in on digital.Â