Digitalisation with purpose – uncovering data to create utility stakeholder value
All data is not equal and data access alone will not deliver value to your enterprise.
For a simple statement, it is one that carries significant consequences. For every bit and byte of data exchanged from central, enterprise platforms to edge and connected devices or assets, there is a specific cost and value to the business and its stakeholders.
At a unit level the TOTEX (total expenditure, including upfront capital outlay and ongoing operational costs) associated with each byte of data may be small; however, with the exponential growth of data, related costs will continue to rise.
While that rise may not be as steep as the growth in data volume overall, the continuing fall in the cost of data storage is flattening out, meaning businesses need to look more closely at how they manage their data to keep costs under control.
The accumulation of data in isolation does not yield outcomes or deliver business returns. Data must be consolidated and consumed to turn it into value.
Data offers new opportunity
So how should data be viewed strategically, if not as a direct source of value but one with an inherent cost? Ultimately, data is an enabler – it enables use cases and applications, which solve the business challenges of today and support the ongoing advancement of an organisation for its stakeholders.
The potential value of data is equally reflected within the art of the possible – the emerging topics and innovative ideas that are yet to be conceptualised by the best and brightest of our global society yet to be brought to market which will increasingly rely on data to disrupt and progress.
Clearly data and information provide a basis to construct value and insight, which would be inaccessible without it. The emerging data-driven solutions of today and tomorrow will be a key facet within the necessary evolution and transformation of our utilities, cities and societies, as part of a net carbon zero future.
However, Rome was not built in a day and digitalisation represents more of a journey than a destination. It is vital, therefore, that we acknowledge that there is no silver bullet when it comes to digital and data enablement.
Challenges will be witnessed throughout the journey of individual organisations, evolving based on the maturity and capability of the existing systems, strategy and personnel at their disposal.
IDC MarketScape 2022
Siemens Advanta has been positioned in the Leaders category in the IDC MarketScape: Worldwide Industrial Internet-of-Things Service Providers for Utilities 2022 Vendor Assessment.
Understanding Digitalisation Challenges for Utilities
As we uncovered during my last blog, global spend within the Industrial Internet of Things (IIOT) is rising. In 2020 it was valued at USD 216.13bn, 20% of which is directly attributable to the energy sector. Investment at this scale will create transitional risks for utilities, but these can be mitigated with a prudent approach to business digitalisation strategy, planning, implementation and management.
As data volumes grow throughout the energy sector, there will be an unequivocal need to provide robust cyber security, auditability, standards adherence etc, and to control processes for stakeholder access to data. With individual platforms and systems, this can be challenging enough; when considering the wider direction of enterprise IT/OT integration, these headaches will be compounded.
A greater focus upon platform and system integration will increase the pressures on legacy systems to scale and meaningfully participate within an increasingly open digital environment. It is not too far-fetched, therefore, to suggest that there will be a push from both internal stakeholders and external suppliers to procure new, digitally native, application rich products and systems which can critically scale.
This increases the risk of stranded assets throughout the enterprise estate, both today and tomorrow. For example, how confident are businesses that software and products procured today will scale and grow with your organisation, aligned to your respective digitalisation strategy, throughout the mid-to-long term?
The sunk cost of data
Stepping away from technology, challenges also emerge when considering the sunk cost of data and its management, not just in storage and communications, as noted previously, but also in terms of the digital fluency of a workforce.
Tellingly, 47.3% of European transmission and distribution operators questioned in IDC's 'Utilities Core Business Transformation Survey 2021' confirmed that a lack of digital skills amongst employees was the largest internal challenge when investing in new technology. In comparison, the second highest challenge was budget and financial constraints, capturing 29.7% of the respondents’ concerns.
Then consider the challenge associated with determining the business impact of these investments. How frequently is Return on Investment (ROI) calculated and evaluated within digital procurement? How is this tracked throughout the operational lifecycle of the system?
Furthermore, how are the associated Environmental, Social and Governance (ESG) benefits monitored? These are aspects that are becoming increasingly important within the push for meaningful change in terms of reduced in carbon consumption over the coming decade. If businesses are unable to accurately document determine these required outcomes and benefits ahead of procurement up front, it is highly likely such KPIs will not be monitored nor realised during the lifecycle of the solution.
These points contextualise some of the typical challenges faced by utilities as part of digital transformation programmes. It is increasingly clear that the success of digitalisation initiatives depends on the provision of a client-orientated solution and outcomes, rather than potentially siloed digital products and offerings.
Avoiding pitfalls – how can digitalisation be de-risked?
Regardless of macro similarities, no two utilities are the same. Each business requires results consistent with its strategic direction, encompassing the underlying enterprise estate.
A client-driven solution goes some way to addressing nascent risk, though equally important is that solutions are underpinned with best-in-class common values – an effective set of guiding principles. Guiding principles offer consistency in approach, incorporating decades of best practice to minimise inherent risk within complex delivery.
Focus on business impact and ROI – All things data and digitalisation have inherent cost but this need not be a barrier to progression. The supporting business case for each investment should demonstrate where and how value can be created throughout the organisation.
Transparency in terms of target ROI and ESG benefits is critical because these elements provide justification as part of a robust business and investment case. Documenting how a utility company will benefit against its individual operational and strategic KPIs is a must.
Maximising the use of existing client investments – Throughout the operational lifecycle of any system there will be the need to maintain and even extend or enhance – activities which bear consequential cost. Driven by client need, building around and upon existing core systems to focus efforts within the enterprise IT estate can maximise existing capabilities and skills throughout the business, whilst limiting investment in new technologies.
If, for example, core systems can be enhanced to sanitise valuable data for wider use, this is likely to reduce investment cost in the enabling efforts and associated spend, thus improving ROI when creating new data-driven value.
Target Minimum Viable Data (MVD) – If not all data is equal, the task of prioritising which data offers most utilisation potential and consistency to support impactful use cases and applications is a vital activity. Determining what data exists, and what is accessible, creates a bespoke data landscape for your business – the MVD baseline.
Grow with your data landscape – As digitalisation is a journey rather than a destination, generating the MVD baseline to rapidly enable value with accessible data is critical. As your business and its ecosystem of increasingly connected technologies and digital personnel develop, so can the MVD baseline itself.
Therefore, providing a mechanism through open and scalable APIs for example, to integrate additional data from existing or emerging sources is essential to enrich and unlock additional digital value.
Coordinate data and increase accessibility – In collating a reusable MVD baseline, the opportunities to increase transparency and structurally open access to internal business stakeholders (subject to relevant access and governance requirements) becomes increasingly compelling.
How could the business benefit with an increasingly transparent approach to inter-departmental data access? What business challenges could be solved in new and innovative ways? In post-COVID operations, could data access and transparency support social cohesion for remote staff and increase digital fluency of the workforce?
The recent Gartner CDO Survey suggests it could. According to the survey, data and analytics leaders who increased data sharing led teams that were 1.7 times more effective at showing demonstrable, verifiable value to stakeholders.
Get your people on board – Early buy-in from employees, from the conceptualisation to implementation stages, helps to mitigate the scepticism often felt within a business in times of change. As presented within this Siemens Advanta blog, it is important to consider that digital transformation can often be as much a cultural transformation as it is a technical one.
Early engagement of your staff in the journey itself will help determine native digital fluency throughout the business, supporting the identification of internal experts, plus those areas that require future training and development.
These principles are constructed upon time-proven best practice and decades of solution implementation experience, underpinned by common sense. They are designed to directly reduce the risk and effort associated with data-led value enablement.
Embedding these principles supports the goals of early identification of business value based on common and existing data, and minimising enablement cost and business disruption in terms of systems and personnel alike. Consequently, these principles can be directly mapped within a wider strategic digital transformation approach, known as the ‘Digital Core’.
What is Digital Core?
Digital Core is a term occasionally used in the industry to describe technology platforms and applications that support business transformation, enabling organisations to address the needs of nascent and evolving markets considered within the digital economy.
Central to our Digital Core thesis is the consideration that existing and legacy systems cannot and will not be replaced overnight. Certainly, there will be times when operational systems reach the end of their working life, fail to integrate or even scale, at which point strategic product replacement will lead the way.
However, it is reasonable to assume that the constellation of operational systems in place throughout today’s modern utility landscape is likely to broadly reflect the enterprise environment in operation towards the end of the decade.
Therefore, to our team at Siemens Advanta, the Digital Core represents a mindset and approach, as much as technology and solution.
The Digital Core enables facilitates transformation; its adoption enables businesses and their stakeholders to build upon existing investments and extract data from operational core systems with focussed investment, to create new business value, underpinned with a clear business rationale. This, in essence, is harnessing the data that is being created and stored today throughout your organisation.
Digital Core: systematic engagement and analysis
From a methodology and engagement standpoint, the Digital Core requires a baseline of technologies and systems which are strategically relevant over the mid-to-long term for a client. The theory is that each will represent the anchor for digitalisation initiatives over the coming years.
We consider the data from these core systems to be of principle value, as it is likely to be increasingly consistent and even enhanced, throughout a given time horizon, thus worthy of accessing for repetitive re-use.
Analysis of these core systems enables the creation of the MVD baseline, an activity that identifies what data and information exists and documents what is subsequently accessible today from these core systems. This environmental analysis of strategically and operationally relevant systems documents the data landscape and digital maturity of each core system.
Additionally, robust engagement sets out to understand and document the challenges faced by clients. In discussing business pain points and framing strategic and operational hurdles, it is feasible to derive data-driven resolutions in the form of new use cases and applications. Each of these can be subjected to cost-benefit analysis to calculate independent ROI.
Furthermore, this analysis includes consideration of the typical input data expected to bring individual use cases to fruition, tying the value directly back to the enabling, underlying data itself.
A gap analysis follows, assessing generated/accessible data from the business against highlighted use cases and input data. Any significant gaps can be either addressed via business change management to trigger additional data discovery or, where relevant, with targeted access to third party data, such as Metrological data. Armed with this insight, use cases could be reprioritised based on the MVD baseline and cost to supplement or extend. The outcome of this consultative process is to derive a common MVD landscape, which encompasses the following elements:
- MVD baseline – an overview of the data generated within the business from identified key systems, acknowledging which is and is not accessible to the business.
- Business challenges and resolutions – highlighting defined use cases alongside the common data required to enable each.
- Data gap analysis – available data versus use case comparison.
- ROI review – framing cost-benefit of key use cases from existing business data
As a consolidated activity, this gives a robust insight into the digital environment of any client, documenting how current data can address key challenges and create new value when enabled via the digital core.
Digital Core: a client-driven solution
The Digital Core is not only a consulting activity but also the provision of a client-orientated solution. Tasked to access the MVD baseline from core business systems, it facilitates the creation of impactful use cases via a reusable and accessible integrated solution.
In creating a common, reusable and accessible data framework or MVD baseline, the intention is to enable client stakeholders to rapidly ideate, test and develop parallel data-led innovations. At every step of the Siemens Advanta Digital Core journey, value is created, either in analysis and understanding or with rapid prototyping and testing of ideas based on common data.
Depending on the respective requirements of each business, the form of the digital core solution will change. This is to balance the need for on-premise versus cloud technologies and for creating a single source of truth, like the master data of the business data versus a reflective data extract from core systems.
Once available, this promotes wider internal access to useful data, away from critical business systems, with governance factored into the solution. Thus, the need to really understand what data you have, where it came from, where it goes, security implications and its quality is satisfied. Such technical considerations will be explored further in a later blog.
As the digitalisation journey progresses, the MVD baseline can be extended with additional, richer data and information, compounding the enabling value of data held within the digital core.
In some regions, such as the UK, there is even a push towards ‘presumed open data' from the energy sector. This involves requiring that utilities, amongst others, reveal data to external parties, with the ambition to foster whole systems thinking and innovation to address sustainability and energy-related challenges.
The digital core methodology and solution accommodates even such a progressive take on data sharing, whilst providing governance and internal value creation simultaneously.
Delivering value from digitalisation should not be held to ransom over big data aspirations. Using a common or emerging MVD baseline to demonstrate quick wins in the form of a Proof of Value and Minimum Viable Products will promote longevity and acceptance of the broader digital transformation initiative.
Streamlining investment to deliver greater returns
According to a Siemens Advanta HBR pulse survey, 80-90% of respondents can’t or don’t accurately measure ROI for digitalisation initiatives. Given this, it is somewhat unsurprising that between 60% and 85% of digital transformation initiatives have failed. You can find more detail in our white paper, Internet of Things: From Buzzword to Business Case.
The paper spells out the direct costs associated with IoT/digitalisation initiatives, including applications, platform/solution, communications and devices/assets. It also quantifies the transition costs that align to the business and its adoption of new technologies.
Transition costs include the processes and tools, skills and personnel development that go alongside change management – all critical factors when considering the true cost of digitalisation.
A realistic ROI assessment will not yield a singular outcome. However, when considering variable uncertainty ranges within the calculation, the credibility of the results increases dramatically, as shown in the white paper.
The ROI analysis can, therefore, be enhanced when adopting a specific lens towards global utilities, offsetting the direct and transition costs against benefit created for the business.
As part of an activity called ‘360 business impact reflection’, analysis considers how data access and new use cases will impact the business. It addresses individual or shared challenges throughout internal departments with, for example, cost savings, efficiency benefits and improved KPI adherence.
This task includes the effort to prioritise and analyse common KPIs consistent with many utilities worldwide, based on the respective organisations. Examples include:
- Planned network interruptions
- Unplanned minutes lost
- Number of faults
- Inspection and maintenance cost
- Network reinforcement and refurbishment
- Asset health
- Customer satisfaction and complaints
- Cost to serve
- Time to connect
- Environmental management
These KPIs align within broad strategic pillars for utilities, which commonly include:
- Delivering a safe and reliable network
- Improving environmental impact
- Improving network connections
- Enhancing customer satisfaction
- Supporting vulnerable customers
360 business impact reflection in action
To explore the concept of 360 business impact further, let us take a specific example: heightened vulnerability of network assets due to sub-optimal network planning. In this example we’ll consider three key departments of the utility: 1) network planning, 2) network operations and 3) customer services.
- Suboptimal network planning can intrinsically increase the risk profile of the asset fleet throughout the network. 360 business impact reflection considers the effectiveness of asset intervention programmes, how asset risk is determined and the replacement/upgrade of each asset managed.
- The outcomes of this shortfall roll into network operations. Higher asset risk is likely to increase the number of faults and related costs of the network, potentially decreasing the operational lifetime of fleet assets and in turn increasing asset replacement cost.
- With increased faults come increased outages, impacting the customer in terms of minutes lost and supply interruptions. These factors are likely to come back to the customer services department, which must respond to stakeholders, both customers and regulators, as to the network performance.
- Such topics can additionally be reflected in the time to quote and connect of the connections department.
(Digital Core) Process + Solution = Outcomes
The cause and effect of decisions and activities is a constant within any operational environment and, as noted previously, digitalisation is not a silver bullet. However, what can be provided is richer, more powerful insight, using data from existing systems, manifested within new use cases, to solve current and future business challenges. As an inclusive and accommodating methodology, understanding the specific circumstances of each client, the Siemens Advanta Digital Core ensures a financially appropriate outcome is realised with clear investment rationale.
By linking the enabling and value creation activities, built upon existing client systems, and addressing specific business challenges using current and available data, it drives and unlocks impactful use cases as part of a tailored solution for your business.
Discover the Internet of Things and the challenges that need to be solved in a digital transformation. Get insights how to create value when optimizing processes or generating new business models out of data.