Cautious about prospects
Power & utilities CEOs are cautious about the financial outlook: only 29% think the economy will improve this year, compared to 37% of the overall sample. And they’re less confident of increasing revenues in the short or mid term than CEOs in other sectors.
Dealing with disruptive megatrends
What accounts for this wariness? Power & utilities CEOs are acutely conscious of how global megatrends are disrupting the entire business landscape, with profound implications for their industry. They’re steeling themselves for shifts in the way customers behave, competition from new entrants as well as traditional rivals and changes in their core production technologies. But it’s the prospect of regulatory upheavals that worries them most: 89% are nervous on this score, compared to just 66% overall.
The fact that power & utilities are so actively restructuring their operations is also revealing. The percentages planning to in-source previously outsourced processes or functions and to exit major businesses or markets this year is noticeably higher than it is the total sample – a clear sign that they’re preparing for turbulence.
New rivals from unrelated industries
More than half of all power & utilities CEOs expect greater competition from other industries – mainly technology and financial services – in the next three years. Yet the biggest threats may actually lie elsewhere: 30% of engineering & construction CEOs, and 28% of forest, paper and packaging CEOs, expressed interest in entering the industry. The latter are moving into energy production as a way of utilising wood residues.
Of course, attack is often the best form of defence – and 48% of power & utilities CEOs have already entered a new industry or considered doing so. They’re mainly targeting the professional and business services and technology sectors.
Creating value with new technologies
Power & utilities CEOs – like CEOs in other industries – are also exploring the opportunities to create additional value by capitalising on new technologies. They’re focusing on battery and power technologies, cybersecurity and data analytics, in particular. They’re less concerned with mobile technologies for customer engagement, the area that most interests the majority of CEOs in other sectors. But 52% are anxious about the pace at which technology is advancing – up from 32% last year.
Those power & utilities CEOs who have already invested in new digital technologies report that the benefits are considerable. They’ve achieved significant operational improvements, make much better use of the data they collect and have enhanced their company’s ability to innovate. But they stress that maximising the value of such investments isn’t easy. It takes a clear vision of the competitive advantages to be gained, a robust plan and a CEO who personally champions the use of digital technologies.
Dynamic alliances with new partners
The percentage of power & utilities CEOs planning to form new alliances has leapt from 39% to 52% this year. Most hope to join forces with suppliers, governments or customers, but a third of all P&U CEOs would also be willing to work with competitors. Their main motives for collaborating are to get access to new technologies, to share risks and to strengthen their innovation capabilities.
Conversely, the percentage of power & utilities CEOs planning to hire more people has remained flat, at 36%. Moreover, although 70% are concerned about the availability of key skills, only 47% actively search for talent in different countries, industries or demographic segments.