28 Jun 2023

Embracing ‘product-to-profit’ is the best way for utilities to truly transform and meet their business objectives. But what does it mean?

By Shay Assaraf, Chief Marketing Officer, Gentrack

For decades utilities have operated a highly transactional relationship with customers. In exchange for supplying water or energy, utilities measure (or estimate) consumption and charge accordingly, in what is largely known as the meter-to-cash process. But in an era of ambitious sustainability targets, evolving customer expectations and an explosion of data, terms like ‘energy transition’ and ‘utilities transformation’ have become commonplace within the sector. The industry is aware of the need to adapt and transform. But transform to what? 

With utilities rethinking their technology and their approach to servicing customers, the meter-to-cash process – while being the core of the utility business – should be expanded and augmented. The model needs to enable true engagement with customers and embrace the full scope of opportunities related to this.

So how do we define a new model that fits for the most innovative players in the industry? A recent study by International Data Corporation (IDC)[1], uncovers that if utility suppliers around the world are to tap into the true value of transformation, they must evolve their traditional meter-to-cash process to include a broader customer-first approach termed product-to-profit.   

But what is product-to-profit?

Meter-to-cash covers user-related journeys that go from a meter read to generating cash for the utility retailer, focusing specifically on transactional billing and finance process. In parallel, utilities have embraced front-end applications enabling them to engage with the customer. Then, to enable constant innovation and quicker speed-to-market with personalied bundled offerings, suppliers have explored additional products and services to extract maximum customer value. Finally, they have evaluated data related applications to leverage the vast opportunities that have evolved from it’s explosion.

Most significantly, the meter-to-cash model saw customers from a very specific angle, and to some extent ignored the individual needs of each customer. The transactional, one-way flow of interactions ensures suppliers receive cash: the right amount, at the right time. But it struggled to take into consideration whether this transaction is providing customers with the services they need. And while it guarantees cash for the utility supplier, it doesn’t guarantee profitability.

Product-to-profit changes that paradigm. This approach is designed to put utility customers at the centre. It breaks down data silos to create a single view of the customer and manages any interaction and engagement in a consistent way, from exploration, acquisition and onboarding, through to billing, right up to retention and loyalty. As well as breaking down data silos, embracing a product-to-profit mindset means streamlining the communication between marketing, sales, customer service, trading and finance. These business units are all able to use the same solution, ensuring that users also enjoy a consistent experience.

Managing the full cycle of a customer provides a detailed view of customer behaviour and profitability – enabling suppliers to market relevant revenue-driving offerings. Sustainability conscious or budget conscious customers, for example, will be supported to reach the relevant products, services and bundles that are best suited to them, through the right channels and at the optimum price-point.

The need for companies to transform their IT stack to eliminate system and data silos, improve flexibility in their operations, whilst leveraging pervasive data analytics to expose pockets of additional value is foundational to this new way of thinking.

Revolutionising revenue streams

Evolving to a product-to-profit approach is also about operating faster and smarter, in a more agile, and automated way. It enables utility providers to embrace revolutionary and highly profitable revenue streams, and once again, target these at the right customers.

Use-cases range from developing virtual power plants – supplying customers with low-carbon assets, such as solar panels or batteries and pooling the supply – to launching demand-side management programmes (DSM).

53%[1] of C&I customers say they are actively improving the efficiency of their energy usage and 40% plan to decarbonise their energy sourcing and production according to IDC, continuing to simply charge for usage is a race to the bottom for suppliers.

Energy-as-a-service is a prime example of one of these use-cases and of the product-to-profit model. Partnered with Gentrack, EnergyAustralia has successfully launched one of the most innovative propositions in energy. Domestic customers are provided with solar panels and batteries at no upfront cost, while the retailer ensures a consistent energy supply for seven years through a flat-rate subscription. This forward-thinking strategy not only benefits customers by reducing their carbon footprint but also provides a new revenue stream for the utility company.

How does the industry manage this pivot? 

Providers recognise now that clinging to legacy business models powered by outdated technology is not a viable option in the race to achieve sustainable objectives. IDC further projects that 73%1 of utilities globally will invest in customer-facing solar programmes by 2025, while 42% will invest in DSM programmes to encourage customers to drive down their usage.

For the much-discussed utilities transformation to be truly transformative, suppliers must revolutionise their IT stack, fostering scalability, agility, and adaptability. This will empower them to bring relevant products, services, and bundles to market at the right time, through the right channels, and at the optimal price point. Embracing a cloud-first strategy and adopting cloud-native applications is imperative for utilities that seek to enhance their existing offering and explore brand new revenue streams. Breaking free from restrictive legacy systems, utilities can embrace a composable plug-and-play architecture, enabling rapid launch of competitive and innovative offers within days, not months.

By leveraging low-code or no-code technology, suppliers can build tailored applications at an accelerated pace. Embracing composable architecture, with powerful API-first plug-and-play components will also eliminate data silos, enabling advanced analytics. This will empower forward-thinking suppliers to create hyper-targeted offerings and package up data insights to provide strategic support to customers.

But this is more than a technology transformation. Building a sustainable, profitable future requires suppliers to rethink their business models and propositions, decision making, operating models and processes, as well as the underlying technology.

It’s time for a complete mindset shift. By embracing the product-to-profit approach and harnessing next-generation technology, utilities providers can not only survive in the present but also thrive and adapt rapidly to the future.

Download the insight paper here.

[1] IDC Technology Spotlight, sponsored by Gentrack. Energy and water companies urgently need to transform their technology stack to prosper in the sustainable era, IDC #EUR150620423, May 2023

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