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3 Recommendations for Utilities to Avoid The Fate of the Trolley Car

Springtime is upon us and as such, so is one of my favorite industry events: CS Week. Last year we generated many discussions  about data-driven, digital customer engagement, and I have no doubt we’ll expand on that this year, with even more detailed conversation on how to optimize both data and digital communications within the energy industry (think: analytics and mobile).

While we will definitely spend a lot of time at CS Week on how to best engage customers, it’s important to think ahead of the conference about why that engagement is so important. We work in an industry in which we deal in necessities: people need and will use energy no matter what, and therefore the threat of losing customers often feels a bit farfetched. But take heed, and read the tale of a company in another necessity-based industry that ignored the importance of customer satisfaction and innovation.

The San Francisco-based trolley company, Market Street, was the go-to means of public transportation for city residents in the 1920s. It served such an important function in people’s lives that when buses came on the scene, Market Street took little notice and neglected to compete. Why should they? They were in the trolley market. But what if they viewed their market more broadly, as in the transportation market? Or the comfortable and convenient transportation market? Instead, the company ignored market realities and called upon its regulators for more and more rate increases to cover infrastructure development. It was a fruitless tactic, and Market Street soon became largely irrelevant.

Only in retrospect could Market Street -- once such a hallmark of San Francisco transportation -- see that it had been short-sighted. The company underestimated the popularity of the buses and cars that would propel its downfall. Paying attention to customers’ preferences could have made all the difference and allowed the trolley provider to adapt, perhaps changing its service or approach, and thereby remaining a relevant part of the transportation mix.

There are parallels between Market Street and the position in which utilities currently find themselves. Things are changing, but it’s hard to tell how fast. New players are entering the market, but it’s hard to tell how they’ll actually do when it comes to converting customers. But if Market Street’s story teaches us anything, it’s that we can’t ignore the winds of change. And those winds are definitely blowing.

The questions utilities face as change promises to come are, what to do? And, what not to do? The second one has a clear answer: don’t take a protectionist approach to change. Don’t attack the innovators or fail to let innovation in. Figure out how to let it in at a pace that works for your organization, but start the process now. As for what to do, we recommend three tactics:

  • Own the customer – The customer is your most important asset. The competition wants his/her attention, and they’re doing everything they can to get it. You’ll keep the customer’s business if you put him/her at the center of everything you do. Think about energy the way they think about energy. It’s more likely that a customer thinks about their HVAC more than they think about kWh. Ask yourself, are you in the energy business or the home comfort business? Or perhaps both - could you bundle a service or extended warranty with energy supply?  More on this at CS Week. 
  • Optimize your assets – Asset utilization rates that hover close to 50% aren’t economically sound, yet they’re the norm for many utilities. Technological innovation (in, for example, demand side management) can add value for you and for customers. Utilities are in the best possible position to deliver this new technology: for now, you already own the customer base.  
  • Sell more than just energy – With more and more DER penetration including solar and wind, the marginal cost of energy will continue to decline.  Therefore, it’s smart to reorient your thinking around services and solutions. You have the infrastructure in place to deliver connected home services that go beyond energy as a commodity. Your customers want those services.

I hope these recommendations provide food for thought as CS Week approaches. There’s sure to be a wealth of information there on how to put these plans into action. Stay tuned for more detail here, too, on how to take these actions we’re suggesting. We’ll be posting more soon, and we look forward to continuing the conversation in Fort Worth.  



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