The following is a viewpoint by Austin Whitman, VP of Energy Markets at FirstFuel Software.
Technology companies live and die by their ability to bring products to market. The process is so critical that the specialized product managers who oversee it often earn more than software engineers.
In order to become more customer centric, utilities and other energy providers are investing in digital platforms that improve customer satisfaction and help utilities bring more products to the market. Because of these investments, the utility of the future could carry as much digital infrastructure on its balance sheet as it does poles and wires. This is why utilities are starting to resemble tech companies.
The ongoing transition includes technology as well as people and processes. Yet in one area, utilities are still lagging behind the tech industry: product managers are not commonplace on utility teams.
This needs to change, and fast. As they diversify into distributed energy, blockchain, online marketplaces and other innovative energy solutions, utilities will want to take a cue from the tech industry by expanding their product management competencies.
Moving beyond energy
Across their customer base, almost every utility uses their digital customer engagement platform to promote product offerings for energy efficiency programs, yet almost none of them use the platform to promote other products.
That shouldn't come as a surprise. For more than a century, utilities have sold two products to customers: electricity and natural gas. Instead of prioritizing product innovation, they have invested in core operations and complementary capabilities that support the "big three" objectives: reliability, safety and affordability. Also, regulated utilities typically count 100% of their addressable market as customers, making the two functions of product management — stewarding new product innovation and figuring out how to build products with maximum market potential — superfluous.
The implementation of energy efficiency programs changed this as utilities had to manage the rollout and contemplate market demand for individual products. But the highly scripted design and rigid segments within these programs have left little room for innovation. Moreover, achieving market penetration of one to two percent typically satisfies program goals, with little upside (and too often, downside) for outperformance.
The good news is energy efficiency programs have given utilities a taste of what it's like to sell non-energy products and services. The less good news is that scaling other offerings will require a new culture of innovation.
Rising demand for new energy solutions
Today's energy consumers have different expectations than they did in the past, creating new market opportunities. Within the business segment, broad interest in cleaner energy raises the ante for anyone competing for customers. Seventy percent of business energy users report that their customers are asking them to account for the source and impacts of their electric supply.
To meet these expectations, businesses are looking for solar, battery storage, new rate options, cost hedging tools, interconnections, renewable energy contracts and other products that offer cost savings, control and cleaner energy.
For many of these new products and services, customers have the flexibility to choose their provider. But the simplest choice is often to call the utility. As a result, for the first time since the dawn of the electric age, customers are pressing their utilities for product innovation. A poll conducted by the Smart Energy Consumer Collaborative showed that 61 percent of small and medium business customers — even those who engage infrequently with their energy provider — want their utilities to provide more products and services.
In most industries this would be a product manager's dream. But if they don't have product managers, utilities must find other homes for new product innovation. This ad-hoc approach can work during early stages, but as any tech company will tell you, there is no substitute for effective, coordinated product management.
Utilities become agile
At the 2018 CS Week conference, many utility executives spoke about staying "agile" as they revamp their customer experience. This language, focused on product innovation, is familiar to tech companies but, until recently, was foreign to the utility sector.
The tech industry has embraced "agile" because it replaces long development cycles with short time-to-market and learning-by-doing. Agile strategies favor "minimum viable products" with short product cycles and depend on continuous user testing and feedback.
Energy efficiency programs, with their three-year planning cycles, are anything but agile.
The critical insight of the agile philosophy is that it's impractical to achieve the perfect product at the first launch. Imagine telling that to a distribution engineer working on a 35 kV line upgrade, and you'll see why utilities are new to this approach.
CS Week executives highlighted how agile approaches are helping them launch effective digital engagement tools. For example, PG&E's chief customer officer described how better collaboration between the IT group and the business team is improving online engagement. A manager of market research for CenterPoint talked about the customer benefits of a "design-prototype-test-repeat" process.
It's a welcome shift in perspective that should help utility product managers hone their digital engagement and develop successful new customer solutions.
Platform products and commercial products
Newcomers to the electricity industry find it weird how utilities determine their revenues based on their costs. This upside-down accounting means that cost management is central to utility operations. Revenue generation is secondary.
Utility products, accordingly, can be classified into two groups: "platform products" and "commercial products." Platform products are free or subsidized and deliver value to customers by helping reduce service costs and/or save customers money. Products in this category include rate plans, e-billing and energy efficiency programs.
Commercial products earn revenues for the utility because the customer pays for them. Products in this set might include anything from charging stations to power purchase agreements. This category is where the growth opportunity lies. Commercial products are rapidly expanding.
Both platform products and commercial products need product management to determine specifications, pricing, target markets and what constitutes the "success" of a product line.
Product management: Bringing products to market
As author and venture investor Ben Horowitz puts it, a good product manager acts as the CEO of the product she manages. Product managers steward new products through conception, construction and launch.
Every utility is weighing which products to offer to customers. For many of them, product management is new and may clash with traditional ways of thinking.
Utilities are well-staffed with line engineers, call center teams and regulatory experts. Their mission is to provide electricity service safely, reliably and affordably. Given the high stakes, these people have incentives not to take risks and not to fail.
In technology, product managers are not expected to fail — but know that they might. Managing that possibility is part of their job. As Horowitz writes, "Good product managers know the market, the product, the product line, and the competition extremely well and operate from a strong basis of knowledge and confidence…A good product manager knows the context going in…and they take responsibility for devising and executing a winning plan."
A cohesive product strategy and roadmap defines the value proposition for customers, the target market, the launch strategy, the pricing and other information. Product managers usually rely on market and product requirements documents to ensure the best fit between products and customer needs.
The energy data utilities already collect from customers gives them a distinct process advantage. Advanced analytics can turn this data into information about customers that supports segmentation, needs assessment and market research. In addition, customer intelligence should inform market launch strategies, including critical periods where customers are educated on new product offerings.
Product-focused utility teams will need incentives that encourage agile development and create a new cultural acceptance of risk-taking. This may require the addition of new skillsets, including professional product managers from outside the industry.
In addition to having the right people on the team, it is important to include the right people in decisions — and knowing when to shut the door. This means developing comfort with decisions being made by small groups.
Product management: High stakes
Managing new product lines will be a high stakes activity for utilities for years to come. Customers will continue to want easy access to new products. Utilities will see more revenues tied to these products. Stakeholders in clean energy will care about customers adopting new energy products. Scale won't be achievable without well-managed energy products.
Utilities should embrace the fun process of creating and bringing products to market. By tapping unique assets, including past program successes and customer data, product managers will have a stronger shot at success. Reliability, safety and affordability will remain top priorities — but they are now joined by innovation, agility and product strategy.