In this insight, we explore the essential elements utility companies must consider for their digital strategy right now.
A significant portion of the UK population is facing economic challenges, with 15% of people suffering severely from fuel poverty. The middle 45% of the market also feels increasingly squeezed by economic pressures. These financial strains highlight the critical need for utility companies to find ways to support vulnerable customers and manage costs effectively.
Customer service inefficiencies are a major financial burden for utility companies. Handling customer service issues is estimated to take 2.8 days per month per full-time equivalent (FTE), costing the industry £7.1 billion per month. Conversely, companies that excel in customer service can see substantial benefits, including a 10% uplift in profitability, a 7% increase in revenue, and doubled productivity.
Artificial intelligence (AI) is rapidly transforming customer service in the utilities sector. However, the pace of AI development presents challenges, particularly in gaining senior leadership buy-in and managing the evolving landscape. While 35% of customers report positive experiences with AI, such as chatbots, 58% still prefer human interaction after initial AI engagement. This underscores the importance of balancing AI with the human touch to enhance customer satisfaction (CSAT) and build trust.
Consumer trust in the utilities sector is waning, with increasing concerns about fraud. This decline in trust necessitates robust measures to protect customer data and ensure transparency. Companies like OVO leverage AI to analyse complaints and identify root causes, enabling proactive measures to improve service and reduce complaints. This approach enhances CSAT and builds consumer confidence in the sector.
OVO’s innovative use of AI exemplifies the sector's digital transformation. With 60% of its 5 million customers engaging digitally, OVO uses AI to transcribe and script customer calls, eliminating delays caused by accent misunderstandings and providing summaries and advice post-call. Additionally, AI monitors advisor productivity, recommending training during quiet periods and efficiently managing overtime, shift swaps, and holidays.
The sector is increasingly adopting agile methodologies and fostering cross-functional collaboration to understand customer needs better, digitise the workforce, and enhance efficiency. Key strategies include embedding product teams throughout organisations, focusing on co-creating digital products and experiences, and continually iterating based on technological advancements. This approach also helps overcome internal resistance to change, with relationship managers playing a crucial role in aligning business area owners and operational teams.
Vertical integration and alignment within the supply chain are essential for seamless digital transformation. Utilities companies must work to the same standards and share data effectively across the supply chain. Ofgem closely monitors this aspect as data sharing is crucial for the UK’s net-zero ambitions. Enhancing technology that supports data sharing horizontally and vertically within the sector is imperative.
There is a significant digital skills gap within the utilities sector. Upskilling the existing workforce and attracting new talent are vital to maintaining and advancing the digital transformation. Positioning digitisation as a means of creating real value, rather than merely maintaining operations, is crucial for gaining buy-in from all stakeholders.
Finding the right balance between AI and human interaction is a major challenge. This balance is especially important for vulnerable and priority customers. As AI evolves, utility companies must ensure that it complements human service, enhancing overall customer satisfaction and confidence.
The UK utilities sector in 2024 is at a pivotal point, with economic pressures, technological advancements, and shifting consumer expectations driving significant change. By focusing on improving customer service, leveraging AI effectively, fostering collaboration, and addressing the digital skills gap, utility companies can navigate these challenges and thrive in the evolving landscape.
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