What’s holding utilities back?

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What’s holding utilities back?

by admin

by admin

While already exposed to disruptive forces today, utilities are even more susceptible to disruption in the years to come—a condition Accenture Research classifies as “high vulnerability.” This is particularly true for traditional utilities that face the threat of commoditization, experience declining margins in their core business, and find it challenging to capture growth via additional services. These are the utilities that should be upping their investments and pursuing new business models and revenue streams. But right now, they are not.

The Utility industry, collectively, continues to exhibit an overly conservative reaction to uncertainty. That is reflected in their timid approach to investments. Accenture Research revealed that from a sample of 96 utility companies, investments grew only 4.3 percent annually between 2006 and 2016. And while capital expenditure relative to revenue has recently gone up, research and development levels remain low. In fact, only 38 percent of utilities aggressively invest in future growth.

Generally, utilities hesitate to act decisively because of two investment challenges. The first is Capacity, a function of having liquidity, cash replenishment capability, and financing. The second is Velocity, which concerns the speed and direction with which they shift investment into future businesses. Only 2 percent of utility companies are confident they have “sufficient investment capacity to pursue all change activities.”

While already exposed to disruptive forces today, utilities are even more susceptible to disruption in the years to come—a condition Accenture Research classifies as “high vulnerability.” This is particularly true for traditional utilities that face the threat of commoditization, experience declining margins in their core business, and find it challenging to capture growth via additional services. These are the utilities that should be upping their investments and pursuing new business models and revenue streams. But right now, they are not.

The Utility industry, collectively, continues to exhibit an overly conservative reaction to uncertainty. That is reflected in their timid approach to investments. Accenture Research revealed that from a sample of 96 utility companies, investments grew only 4.3 percent annually between 2006 and 2016. And while capital expenditure relative to revenue has recently gone up, research and development levels remain low.2 In fact, only 38 percent of utilities aggressively invest in future growth.

Generally, utilities hesitate to act decisively because of two investment challenges. The first is Capacity, a function of having liquidity, cash replenishment capability, and financing. The second is Velocity, which concerns the speed and direction with which they shift investment into future businesses. Only 2 percent of utility companies are confident they have “sufficient investment capacity to pursue all change activities.”

While already exposed to disruptive forces today, utilities are even more susceptible to disruption in the years to come—a condition Accenture Research classifies as “high vulnerability.” This is particularly true for traditional utilities that face the threat of commoditization, experience declining margins in their core business, and find it challenging to capture growth via additional services. These are the utilities that should be upping their investments and pursuing new business models and revenue streams. But right now, they are not.

The Utility industry, collectively, continues to exhibit an overly conservative reaction to uncertainty. That is reflected in their timid approach to investments. Accenture Research revealed that from a sample of 96 utility companies, investments grew only 4.3 percent annually between 2006 and 2016. And while capital expenditure relative to revenue has recently gone up, research and development levels remain low.2 In fact, only 38 percent of utilities aggressively invest in future growth.

Generally, utilities hesitate to act decisively because of two investment challenges. The first is Capacity, a function of having liquidity, cash replenishment capability, and financing. The second is Velocity, which concerns the speed and direction with which they shift investment into future businesses. Only 2 percent of utility companies are confident they have “sufficient investment capacity to pursue all change activities.”

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