Are Utilities, as we know them today, condemned to extinction?
Well, regarding the current panorama and the future expectations, I would not know what to say to be politically correct.
What I know for sure is: thousands of startups and technology companies eager to assault the Utilities Industry, little time to react, people who want to generate their own energy and their own resources, consumers who want to decide based on the brand values, the capitalism close end and the collaborative pro-commons arrival, technology and robots that can easily improve our processes, a tremendous lack of creativity in our organizations and prejudices, many cognitive prejudices don’t allow us to leave the comfort zone.
I would like to leave this ten minutes video where I’m asking you what we’re facing and which are our opportunities if we don’t act properly. Remedies? I kindly invite you to walk through my website and learn about transformation, agility, design thinking and innovative products generation.
I’m recording this video with the desire to bore you. I do it with a healthy intention, explain things all of you should have already in mind. Because only then, I will be sure that as Industry we’re doing the right things to adapt to what I’ve called the new world digital order. If not, thanks for your attention in advance and sorry if I can seem alarmist or pessimistic. Although you already know, a pessimist is a well-informed realist.
So, in order to achieve this ambitious goal, I’m going to focus at two essential points: explain first what is the new world digital order, and why we can die if we don’t transform ourselves as Industry.
There is only one past. There is only one present. But we all agree there are multiple possible futures. Today we’re all aware about the most visionary expert’s predictions. We’re all trying to see in our crystal ball.
And we’ve got any kind of predictions. The most optimistic who blindly rely on technological progress as the only chance for humanity survival. Or the most defeatist predicting tensions arising from overpopulation, famine, climate change or increasingly bad programs on TV.
Companies like the Royal Dutch Shell oil company know very well the importance of looking to the future. For almost 50 years these gentlemen have been generating future scenarios that help them make critical decisions in times of uncertainty to address problems related to Energy and Environment. This exercise has not only allowed them to anticipate the 70’s Oil crack, the communism fall or the two thousand and eight crisis, but it has marked a future for them to fight for.
Is the Shell oil a group of paranoids? I do not think so. Even when people as smart as Steve Jobs thought that it’s crucial to question the pillars of today's success and mentally prepare for your company’s demise, even it’s doing fantastically well now. Do you remember him? It's the same who said one day “Stay hungry, stay foolish” ...
The new global digital order. We can call it as we want. I personally prefer Jeremy Rifkin’s Third Industrial Revolution concept. For this American sociologist who advises daily the world's leading leaders, these disruptive revolutions have been always based on three main drivers: convergence of radical changes in communications, transportation and energy. We are living the last one, where hyperconnectivity fruit of IoT, electric cars and renewable energies are performing the perfect storm.
Changing concepts in Utilities
The old paradigm Utilities and society overall were used to is shifting dramatically. And that means a change in some basic concepts we all believed had already learned.
Let me mention just five as an example.
The necessary to decode the human genome. The raw data generation velocity. The Moore’s law or number of operations made by a transistor in a second. The worldwide economy growth. The data storage capacity. What do all these facts have in common? They’ve got an exponential behavior. Today things go faster. So much that we don’t see them coming. Technological or social innovation lend an explosive nature to those facts. This is, a rising uncertainty about the future. And what about immediacy? We’re teaching our sons we can get anything customized few clicks away. I'm telling you because I’ve a teenager at home. Everything is now. Wait is no longer possible...
Consumers buy and recommend more and more taking into account their values and transferring them to companies. It’s the so-called purpose economy. A growing part of society demands a brand commitment aligned with its values, rather than the tangible product or service value they buy. That makes it really complicated to create lasting value for the customer, and for company to capture. It’s no longer enough to make products assuring quality. We must commit more with our customer’s values.
Jeremy Rifkin speaks openly about the end of capitalism. A time when marginal production cost will be around zero. A time when society will collaborate before buy things. The Global collaborative common. It will be the moment in which our current profit concept, so close to economic gains, gives way to environmental and social benefit.
We all have in mind a lot of things difficult to build or replicate. Much of those things are becoming simpler. Available technology makes possible things that were unimaginable until recently. Translating whole Wikipedia to another language, almost without making mistakes, in less than a blink. Complexity concept has changed for everyone. And for a geek like me, that’s scary. Because, let's face it, we live in an inflated expectations bubble. People talk about many technological concepts they don’t understand, just to pretend to be an expert and hop on the trendiness bandwagon.
Probably the concept has changed the most in recent years. Now we no longer design products or services. We design experiences. The user-centered methodologies use and their connection to agile paradigm, have revolutionized the way we face our “digital” projects. I’m sure most of you are right now looking for UX companies to buy, or Design professionals to hire. They’re almost like unicorns today. If you’ve got one, keep it healthy.
So, the question is: are the Utilities ready for this shift in the game rules?
Modestly, I doubt it. And I’m working in one of them. I don’t know why but each time I think on, Jurassic Park comes to mind. We are diplodocus in a velociraptors world. Why do I say this? Because there are few external and internal factors to our industry that make me think that way.
External and internal factors
Let me explain some of them.
Do you know how many startups have emerged around Banking? More than ten thousand. We have just two thousand around, but growing every day. Never before so many people had thrown themselves into the entrepreneurship and innovation pool. Anyone with a disruptive idea can take away a juicy cake’s piece. Ok. Only a small number of startups get it. But these ones, buck the system. Please, consider also the fact that those who invest in these startups are banks trying to transform, or investors with a lot of money eager to find the new unicorn. Beware of banks. They’re the future tech companies.
INDIVIDUALITY and SELF-SUFFICIENCY desire
Do you know the concept of self-sufficiency? Or shared economy? Surely yes. In this increasingly globalized world there’s a clear trend to do it yourself. People doesn’t want to be dependent anymore on big corporations that control us and suck our data as vampires. People want to be able to have a voice, to decide in a globalized world. To get it, they don’t hesitate to go to renewables or 3D printing.
Am I the only who’s tired to hear Blockchain everywhere? The internet of value they say. And it’s true. It is really an attractive concept. Because it has to be safe, immutable and distributed. A real distributed trust. For Global collaborative common prosumers that means avoid to work with opaque corporations and take care of their own data. Because times are changing. Time ago, information was handled by a few. Now information flows freely and makes us powerful as customers. However, there are many who are trying to control it using the famous informative bubbles, or directly lying to us.
In nineteen ninety NASA made an experiment among one thousand and six hundred children of different ages to look for creative geniuses, the future NASA engineers. They asked ten appropriate to their age questions. If they were all right, they considered them geniuses. 3-5 98% 8-10 32% 13-15 10% More than 16 2%. As you can see on the picture, the results were devastating. They arrived to a well-known secret conclusion: Adults are less creative and need more tools than children. And nowadays things haven’t improved at all. In my opinion, there’s a creativity and divergent thinking lack to innovate in Utilities. Well, in almost everywhere.
This is the key factor for me. The human being has many cognitive prejudices that predispose us to inaction. We know our comfort zone it’s difficult to leave. We all recognize phrases like "Our industry is different ...", "that's how the business works ..." or "our customers would not accept this or that ...". And that’s because we’ve got aversion to risk: better to lower a small risk to 0 than larger profit assuming risk. Or because the sunk costs: It’s easier to stop a one hundred thousand euros’ innovation project than any millionaire operative ongoing project. Or because validation by frequency effect: The more times you listen to a fact (even if it is a lie), the more predisposed it is to validate it.
The fat smoker syndrome
At this point, I would like to concentrate in maybe one of the causes: the fat smoker syndrome. Sure you’re going to understand very quickly. Our Utilities middle management wants things fast. They love short-term strategies, which is an incongruence itself. In the short term it cannot be strategy, but tactical. They want strategy, but they want short run results. It's like the smoker who knows he has to quit and he knows how to do it. But he doesn’t have enough determination to do it. The next cigar pleasure is too strong. He can always leave it for later. Until it's too late and damage is irreparable. At that point, technology, consultants gorgeous Power Points or other miraculous cures are no longer valid for middle management. It’s too late.
There are very creative people out there, who are setting up agile and powerful companies. People who are investing in business models innovation, not in process or product innovation. Large corporations invest ninety per cent of their budget in product and process innovation. Only ten per cent, in lucky cases, goes to Business Model Innovation. They’re many companies engaged in RPA (Robotic Process Automation) adoption. This is making shit faster. That will serve to extend the value and competitive advantage only for few years. But new companies, usually created by geeks and designers like the ones you’re seeing on the picture, have understood this is not the way. They’re the ones playing with things like Thick Data, a concept that I recommend if you are wasting big amounts of money in Big Data without results. They will be those that we’re going to find in five or ten years at last with disruptive value propositions, closer to brand new digital consumer and totally oriented to the new digital world order.
Summarizing. Thousands of startups and technology companies’ eager to assault the Utilities Industry. A short and accelerated time. People who want to generate their own energy, their own resources. Consumers who want to decide based on brand values comparison. The end of capitalism and the arrival of Global collaborative common. Technology and robots that can easily improve our non-creative processes. A tremendous lack of creativity in our organizations. And prejudices, many cognitive prejudices and fear of leaving the comfort zone.
Everything I’ve explained can easily be perceived as threats. I prefer to see them as opportunities. That is why I’m playing with artificial intelligences, drones, sensors, field operators, customers ... Because we want to break the rules to be able to see further.
The challenges before us as Utilities are huge: resources scarcity, water wars ...
So, let's be paranoid and start now to change the future.