Managing Director & Senior Partner
Bionic energy networks unlock the value that digital initiatives have to offer by taking four important steps.
Despite major investments in digital transformation programs, many energy network utilities have yet to capture the full potential of digital in their core operations. Even companies with the most promising initiatives have grappled with a wide variety of challenges, including a lack of focus, funding constraints, and legacy IT systems.
Using a bionic approach is critical to achieving better results. Bionic networks are able to unlock more value from their digital transformation journey because they take four key steps. They prioritize areas for digital initiatives, create a roadmap for digital products, and deliver products using agile ways of working. At the same time, they build a foundation that supports the transformation program.
Some energy networks develop a plan for digitally transforming the entire company before they begin to execute. But a plan this comprehensive can take months or even years. By contrast, bionic networks identify the areas of their operations that are most critical for achieving their business priorities. After planning and executing initiatives for these areas, bionic networks move on to the next-most-critical operations area, and so forth.
This approach works because bionic networks have a clear understanding of their key business goals—whether they want to reduce operating expenditures, for example, or improve customer satisfaction. These networks also have an end-to-end, top-down view of where they are losing value and where friction exists. As a result, bionic networks know where they can get the greatest bang for their buck. For example, they may start with residential billing and payments and then move on to storm-response operations or new-customer connections.
Most energy networks have no shortage of digital product ideas. But in many cases, it’s unclear how these products will help advance operations to the target state and improve key performance indicators. Moreover, most networks have only a limited understanding of how a potential product depends on other digital products, legacy IT systems, and other ongoing initiatives. As a result, many networks deploy a number of different point solutions, each of which addresses a specific problem in isolation. Because point solutions fail to take related issues into account, they typically turn out to be complex and ineffective. Networks may even spend time and resources on digitizing operating processes that are suboptimal.
Bionic networks take a different approach. They begin by reimagining their core operations as digital operations and estimating the value that a digital transformation program would bring. This approach essentially establishes a North Star that networks can use to create a roadmap. This plan details the development sequence of digital products, itemizes any required IT or process changes, and identifies the back-end infrastructure that’s needed to enable digital capabilities. With the roadmap in hand, bionic networks are able to clearly articulate how digital products are linked to business priorities and the future state of their operations, as well as how these investments will benefit both customers and shareholders.
When defining the scope of digital products, energy networks often aim to implement them across the entire company in one fell swoop, planning multiyear projects that not only entail long lead times to create value but also have significant execution risk. At the same time, companies rely too much on third-party vendors to deliver IT solutions and focus too little on various elements that are critical to success: value, processes, data, user adoption, and organizational change. Consequently, digital products often fail to realize their full potential and come in over budget.
In contrast, bionic networks focus on delivering digital products as they are set out in the roadmap. They use an iterative approach and agile teams to reduce both lead times and execution risk.
Define and build MVPs. Bionic networks define a minimum viable product (MVP) for each digital product they pursue. The MVP has a standalone business case and a delivery timeline of six to nine months. When defining an MVP, networks focus relentlessly on usability, value creation, and technical feasibility. They also carefully think through exactly what’s needed to build an MVP, including the data and user interface, as well as the business processes that need to be changed. As a result, the MVP definition includes not only a list of requirements but also visual mockups and early prototypes.
All these considerations and decisions are critical for deciding whether to build or buy—and, in the case of the latter, finding the most appropriate vendor. In many cases, the best answer is to do both: purchase some critical components from third parties and build other components in-house.
After launching an MVP, bionic networks continue to evolve the product and release updates, each supported by its own business case. Key to this approach is establishing a product mindset, as opposed to a project mindset.
Continuously build, test, and learn. When building an MVP, a bionic network’s product team uses agile sprints and takes a continuous build-test-learn approach to reduce the greatest risks around usability, value creation, and technical feasibility. It tests prototypes early and often to identify missing features and technical issues. And it gets feedback from users and customers frequently during the development process to help ensure that the product will be adopted. Reaching out to users and customers also makes it more likely that the operations staff in the field will buy in.
Deploy multidisciplinary, minimum viable teams. Bionic networks recognize that creating a multidisciplinary, minimum viable team to oversee each digital product is key to successfully delivering an end-to-end solution. Such teams include experts from the business and IT units, as well as resources from digital centers of competence (including product managers, user experience designers, and data scientists), all of whom bring a unique perspective to solving the problems at hand.
To successfully scale a digital program, it’s critical to establish a solid foundation that includes governance and funding, a data and digital platform, and digital capabilities and talent. Bionic networks build the foundation as they go, rather than all at once upfront. The value created by the digital products provides the needed funding.
Governance and Funding. For energy networks, the challenges of governing and funding digital programs are daunting—and the larger the effort, the greater those challenges are.
Bionic networks recognize that, first and foremost, the success of each program requires input from a wide variety of functions, not just one. For this reason, bionic networks create a multidisciplinary board to oversee digital transformation programs.
The board’s responsibilities include allocating funds to digital products. But instead of fully funding a digital product at the beginning, the board unlocks the funding incrementally. The first round of funding comes after the roadmap is defined, the second is provided after the business case is validated, and so forth. Thus, funding is provided as major assumptions are confirmed, the potential for value is proved, and success becomes more likely.
Bionic networks place a strong emphasis on creating value. For this reason, the board tracks the value of MVPs throughout development. If it becomes clear that an MVP is not likely to deliver on its business case, the board can stop funding or force a change in direction.
The board also oversees quality and technical governance, ensuring that the development processes and user experiences of the various digital products are standardized, aligned, and connected. As a result, there’s little risk that product teams will stray from the approved processes, and there’s no ongoing battle to manage overlap in scope and extract synergies from the digital portfolio.
A Data and Digital Platform. Building a data and digital platform at energy networks includes modernizing the IT, grid, and advanced-metering infrastructure. Traditionally, companies have done this work before launching a digital transformation program, but this approach can be inefficient if the new architecture does not fit the companies’ digital needs.
Bionic networks create roadmaps for digital products and the foundation simultaneously, so that the platform is built at the same pace as the digital products.
Bionic networks also create a digital platform team to implement a data and digital platform that enables future digital products to quickly and easily (and cost-effectively) access legacy IT systems and data. The team comprehensively manages data quality and extracts back-end synergies across a full portfolio of digital products. Moreover, it sets up test environments so prototypes can be quickly constructed for build-test-learn cycles.
What’s more, bionic networks do not use traditional methods for providing IT support. With the dramatic increase in the number of services and releases that must be monitored and supported, an agile mindset and ways of working, along with DevOps processes and tools, are key. In addition, bionic networks create DevOps teams that are responsible for developing services end to end.
Digital Capabilities and Talent. For each digital product, bionic energy networks source talent from both internal and external avenues to best meet their needs. The talent has a broad variety of capabilities, including tech, design, and business skill sets. Internally, bionic networks invest in focused training, learning journeys, and upskilling programs to make people effective in their new roles. Externally, maintaining a set of carefully vetted vendors to help supplement internal resourcing and fill gaps can ensure that digital products are not delayed.
Attracting and retaining digital talent can be one of the greatest challenges for energy networks, so thinking holistically about the employee value proposition and talent acquisition strategy can help build a pool of digital talent over time to serve the needs of the bionic network.
Digital transformation is a complex undertaking. To succeed, it’s critical to follow a rigorous approach that focuses on developing digital products, building a foundation, and changing processes simultaneously. Bionic networks are best positioned to capture the value that a digital transformation has to offer.
The authors thank their former colleague Javier Argüeso for his contributions to this article.