Game-Changing Analytics for Building Uncontested Business Models for Electric Utilities in Smart Grids

1. Game-Changing Analytics for Electric Utilities and Smart Grids How to manage customer engagement, retention & acquisition © Design for Innovation Ltd, 2008-10 1 Win-Win strategies that maximize margin while rewarding customers Game-Changing Analytics for Building Uncontested Business Models

2. “ When the Game Gets Tough, Change the Game” The Boston Consulting Group © Design for Innovation Ltd, 2008-10 2 Game-Changing Analytics for Building Uncontested Business Models

3. “ Some companies have built their very businesses on their ability to collect, analyze, and act on data. Every company can learn from what these firms do” Thomas Davenport, Competing on Analytics © Design for Innovation Ltd, 2008-10 3 Game-Changing Analytics for Building Uncontested Business Models

4. “ Business analytics involves using sophisticated technology to bring information together and sophisticated algorithms to filter and analyze that information. The outputs can include deep understanding of the workings of the business and its connections to the marketplace, key performance indicators to drive business decisions, dramatic improvements in the performance of the most critical business processes, and insights and innovations that can change the basis of competition…” nGenera © Design for Innovation Ltd, 2008-10 4 Game-Changing Analytics for Building Uncontested Business Models

5. A sample of 74 houses (H1 to H74) is used to create a Customer Dashboard to develop effective Electricity Demand Side Management (DSM) and Customer Relationship Management (CRM) practices © Design for Innovation Ltd, 2008-10 5 Channel-1: 21:00-06:00 Night Rate Channel-1: 21:00-06:00 Night-Rate Channel-2: 06:00-10:00 Peak-Morning Channel-3: 10:00-17:00 Day-Rate Channel-4: 17:00-21:00 Peak-Night Red Line = Threshold +ve = desired output -ve = output to avoid -ve +ve -ve +ve -ve +ve -ve +ve -ve +ve Game-Changing Analytics for Building Uncontested Business Models

7. Thresholds can be used to © Design for Innovation Ltd, 2008-10 4 create customer incentives Design for Innovation Design for Innovation Embedding best practice discipline in business

8. A different kWh threshold is set each month [based upon an average energy consumption profile], to encourage load transfer at different times of day © Design for Innovation Ltd, 2008-10 8 Game-Changing Analytics for Building Uncontested Business Models

9. The value of each Threshold Response (TR) and Energy Contribution (EC) is weighted according to the total energy cost over the year, for each month © Design for Innovation Ltd, 2008-10 9 Game-Changing Analytics for Building Uncontested Business Models

10. The different weightings vary the impact of the Energy Contributions from each house per month © Design for Innovation Ltd, 2008-10 10 Game-Changing Analytics for Building Uncontested Business Models

11. Threshold Response and Energy Contribution from each house for January © Design for Innovation Ltd, 2008-10 11 Game-Changing Analytics for Building Uncontested Business Models

12. Customer Threshold Response (TR) – Energy Contribution (EC) Dashboard © Design for Innovation Ltd, 2008-10 12 MAX TR MIN MIN January Dashboard: Number of Houses in each Segment Q 1 Q 2 Q 3 Q 4 EC -20  -15 -15  -10 -10  - 5 -5  0 9 21 0  5 44 5  10 10  15 15  20 TR EC 15  20 10  15 5  10 0  5 - 5  0 -10  - 5 -15  -10 -20  -15 Game-Changing Analytics for Building Uncontested Business Models

13. Customer Threshold Response (TR) – Energy Contribution (EC) Dashboard © Design for Innovation Ltd, 2008-10 13 MAX TR MIN MIN February Dashboard: Change in No. of Houses in each Segment EC -20  -15 -15  -10 -10  - 5 -5  0 0 - 1 0  5 +1 5  10 10  15 15  20 TR EC 15  20 10  15 5  10 0  5 - 5  0 -10  - 5 -15  -10 -20  -15 Game-Changing Analytics for Building Uncontested Business Models

14. Customer Threshold Response (TR) – Energy Contribution (EC) Dashboard © Design for Innovation Ltd, 2008-10 14 MAX TR MIN MIN March Dashboard: Change in No. of Houses in each Segment EC -20  -15 -15  -10 -10  - 5 +5 +1 -5  0 0 - 5 0  5 +9 +34 - 44 5  10 10  15 15  20 TR EC 15  20 10  15 5  10 0  5 - 5  0 -10  - 5 -15  -10 -20  -15 Game-Changing Analytics for Building Uncontested Business Models

15. Customer Threshold Response (TR) – Energy Contribution (EC) Dashboard © Design for Innovation Ltd, 2008-10 15 MAX TR MIN MIN April Dashboard: Change in No. of Houses in each Segment EC -20  -15 -15  -10 +5 -10  - 5 +2 +5 - 3 -5  0 +4 - 4 - 9 0  5 +7 - 16 +1 5  10 +5 +5 10  15 15  20 TR EC 15  20 10  15 5  10 0  5 - 5  0 -10  - 5 -15  -10 -20  -15 Game-Changing Analytics for Building Uncontested Business Models

16. Customer Threshold Response (TR) – Energy Contribution (EC) Dashboard © Design for Innovation Ltd, 2008-10 16 MAX TR MIN MIN May Dashboard: Change in No. of Houses in each Segment EC -20  -15 +1 -15  -10 +2 - 2 -10  - 5 - 1 - 4 +1 -5  0 0 +2 +2 0  5 - 2 +2 - 1 5  10 - 2 +2 10  15 15  20 TR EC 15  20 10  15 5  10 0  5 - 5  0 -10  - 5 -15  -10 -20  -15 Game-Changing Analytics for Building Uncontested Business Models

18. Customer Threshold Response (TR) – Energy Contribution (EC) Dashboard © Design for Innovation Ltd, 2008-10 18 MAX TR MIN MIN July Dashboard: Change in No. of Houses in each Segment EC -20  -15 -15  -10 -10  - 5 - 1 0 -5  0 +3 - 2 0  5 - 7 +6 +1 5  10 10  15 15  20 TR EC 15  20 10  15 5  10 0  5 - 5  0 -10  - 5 -15  -10 -20  -15 Game-Changing Analytics for Building Uncontested Business Models

19. Customer Threshold Response (TR) – Energy Contribution (EC) Dashboard © Design for Innovation Ltd, 2008-10 19 MAX TR MIN MIN August Dashboard: Change in No. of Houses in each Segment EC -20  -15 -15  -10 +1 -10  - 5 -1 +2 -5  0 -1 0 0  5 +14 -14 - 1 5  10 10  15 15  20 TR EC 15  20 10  15 5  10 0  5 - 5  0 -10  - 5 -15  -10 -20  -15 Game-Changing Analytics for Building Uncontested Business Models

21. Customer Threshold Response (TR) – Energy Contribution (EC) Dashboard © Design for Innovation Ltd, 2008-10 21 MAX TR MIN MIN October Dashboard: Change in No. of Houses in each Segment EC -20  -15 -15  -10 -10  - 5 -5  0 0 0 0  5 - 4 +4 5  10 10  15 15  20 TR EC 15  20 10  15 5  10 0  5 - 5  0 -10  - 5 -15  -10 -20  -15 Game-Changing Analytics for Building Uncontested Business Models

22. Customer Threshold Response (TR) – Energy Contribution (EC) Dashboard © Design for Innovation Ltd, 2008-10 22 MAX TR MIN MIN November Dashboard: Change in No. of Houses in each Segment EC -20  -15 -15  -10 -10  - 5 -5  0 0 0 0  5 0 5  10 10  15 15  20 TR EC 15  20 10  15 5  10 0  5 - 5  0 -10  - 5 -15  -10 -20  -15 Game-Changing Analytics for Building Uncontested Business Models

23. Customer Threshold Response (TR) – Energy Contribution (EC) Dashboard © Design for Innovation Ltd, 2008-10 23 MAX TR MIN MIN December Dashboard: Change in No. of Houses in each Segment EC -20  -15 -15  -10 -10  - 5 -5  0 - 1 0 0  5 +1 5  10 10  15 15  20 TR EC 15  20 10  15 5  10 0  5 - 5  0 -10  - 5 -15  -10 -20  -15 Game-Changing Analytics for Building Uncontested Business Models

24. Drilling Down One Level: December Dashboard Revisited © Design for Innovation Ltd, 2008-10 24 December Dashboard: Change in No. of Houses in each Segment - 5  0 H3 H6 H9 H24 H27 H30 H33 H42 H44 H50 H58 H65 H67 H73 H1 H5 H7 H9 H11 H19 H20 H22 H28 H29 H32 H33 H36 H43 H52 H58 H59 H61 H69 H71 H73 0  5 H2 H3 H4 H6 H8 H10 H12 H13 H14 H15 H16 H17 H18 H21 H23 H25 H26 H31 H34 H35 H37 H38 H39 H40 H41 H45 H46 H47 H48 H49 H51 H53 H55 H56 H57 H60 H62 H63 H64 H65 H66 H68 H70 H72 H74 Key: Changes from Nov to Dec : Houses in Yellow = unchanged Houses in Red = removed Houses in Green = added TR EC 0  5 - 5  0 Game-Changing Analytics for Building Uncontested Business Models

25. Keeping Score: Significance of TR-EC Values © Design for Innovation Ltd, 2008-10 25 +14% +10% +24% EC = 8: TREC = 18, 28, 38, 48, 58, 68, 78, 88 88 Segment-8: EC = 15 to 20 Segment-8: TR = 15 to 20 +8% +7% +15% EC = 7: TREC = 17, 27, 37, 47, 57, 67, 77, 87 77 Segment-7: EC = 10 to 15 Segment-7: TR = 10 to 15 +4% +4% +8% EC = 6: TREC = 16, 26, 36, 46, 56, 66, 76, 86 66 Segment-6: EC = 5 to 10 Segment-6: TR = 5 to 10 +1% +2% +3% EC = 5: TREC = 15, 25, 35, 45, 55, 65, 75, 85 55 Segment-5: EC = 0 to 5 Segment-5: TR = 0 to 5 -1% -1% -2% EC = 4: TREC = 14, 24, 34, 44, 54, 64, 74, 84 44 Segment-4: EC = -5 to 0 Segment-4: TR = -5 to 0 -3% -2% -5% EC = 3: TREC = 13, 23, 33, 43, 53, 63, 73, 83 33 Segment-3: EC = -10 to -5 Segment-3: TR = -10 to -5 -6% -4% -10% EC = 2: TREC = 12, 22, 32, 42, 52, 62, 72, 82 22 Segment-2: EC = -15 to -10 Segment-2: TR = -15 to -10 -10% - 8% -18% EC = 1: TREC = 11, 21, 31, 41, 51, 61, 71, 81 11 Segment-1: EC = -20 to -15 Segment-1: TR = -20 to -15 User Portion Utility Portion Margin Scoring Categories Combined TR-EC Segments EC Segment TR Segment Game-Changing Analytics for Building Uncontested Business Models

26. Drilling Down to the Next Level – Descriptive Analytics : Use Individual House Data to Classify Existing Customer Behaviour © Design for Innovation Ltd, 2008-10 26 Game-Changing Analytics for Building Uncontested Business Models

27. Drilling Down to the Next Level – Descriptive Analytics : Use Decision Trees to Classify Customer Behaviour for Incentives © Design for Innovation Ltd, 2008-10 27 Game-Changing Analytics for Building Uncontested Business Models

28. Drilling Down to the Next Level – Predictive Analytics : Predict Best Suburbs and Potential Customers to Target in Campaigns © Design for Innovation Ltd, 2008-10 28 Game-Changing Analytics for Building Uncontested Business Models

29. Drilling Down to the Next Level – Predictive Analytics : Use Decision Trees to Predict which Potential Customers to Target © Design for Innovation Ltd, 2008-10 29 Game-Changing Analytics for Building Uncontested Business Models

30. Decision Trees can be Used to Develop Business Rules Guiding Decisions Concerning Customer Responses to DSM and CRM © Design for Innovation Ltd, 2008-10 30 Game-Changing Analytics for Building Uncontested Business Models

31. Drilling Down to the Next Level – Game-Changing Analytics : Use Customer Insight and Foresight to Change Customer Behaviour © Design for Innovation Ltd, 2008-10 31 REVENUES COSTS PARTNERS RELATIONS KEY RESOURCES ACTIVITIES OFFER CUSTOMER SEGMENTS CHANNELS Which customer segments are most adaptable to change? How can we use new services & technologies to help our customers change ? How can we minimize costs & optimize profits to maximize customer lifetime value? Can we satisfy the other customer needs we’ve identified or partner with others to do so? Can we increase customer responsiveness with better channel integration? Are our activities consistent with, and do they enhance our customer value proposition? What level of personalization is required to change customer behavior? Which partners will grow and leverage our customer value proposition? What resources could be better and more cheaply supplied by our partners? Game-Changing Analytics for Building Uncontested Business Models

32. © Design for Innovation Ltd, 2008-10 32 Game-Changing Analytics for Building Uncontested Business Models

33. Electric Utilities require Game-Changing Analytics to Break Free from the Vicious Cycle of Squeezed Margins and Inflated Costs © Design for Innovation Ltd, 2008-10 33 Data  Information  Knowledge  Intelligence $ ROI Power of Information REPORTING : What Happened? ANALYSIS : Why Did It Happen? MONITORING : What’s Happening Now? PREDICTION : What Might Happen? Game-Changing Models LEADING AND DIRECTING : How Can We Change What Will Happen? Predictive Models Business Intelligence (BI) Raw Data E.G. Logging Customer Call Standard Reports E.G. Panorama Sales Recorded Descriptive Models E.G. Performance Measure Alignment with KPIs Ad hoc Reports & OLAP E.G. Crystal Reports compiled Game-Changing Analytics for Building Uncontested Business Models

34. © Design for Innovation Ltd, 2008-10 34 Focus on Outcomes INFLUENCE AND MODIFY BEHAVIOUR ACQUIRE profitable CUSTOMERS 1. GET CUSTOMERS RETAIN profitable CUSTOMERS WIN BACK profitable CUSTOMERS ELIMINATE Unprofitable CUSTOMERS 2. KEEP CUSTOMERS Upsell ADDITIONAL PRODUCTS Cross-sell OTHER PRODUCTS Referral BENEFITS Reduce SERVICE & OPERATIONAL COSTS 3. GROW CUSTOMERS Game-Changing Analytics for Building Uncontested Business Models

35. For further information contact: Dr. Iain Sanders Skype: iain.designforinnovation.com Email: [email_address] Web: http://www.designforinnovation.com Web: http://www.gamechanginganalytics.com © Design for Innovation Ltd, 2008-10 35 Game-Changing Analytics for Building Uncontested Business Models