Do you remember when caveat emptor (buyer beware) was the predominant business attitude about customers? Over time, we’ve witnessed the evolution to what has been declared the Age of the Customer*. Companies that do well in the Age of the Customer will have to excel in their abilities to exploit realtime data to enhance interactions and embrace a customer-centric approach that is integrated across all interaction channels.

While re-orienting mindsets and operations for customers is a smart move, it’s only the first step in an evolutionary process that is unique to utilities and culminates in a new conceptual framework. For utilities, this is the Age of the Prosumer.

The word customer doesn’t adequately describe the relationship that utilities will increasingly have with the humans and assets on the other side of an electric meter. Consumer is a better, more encompassing term.   A residential or commercial customer has the direct bill-paying relationship with a utility, but multiple consumers, such as a family unit or multiple business tenants in an office building can be associated with that one customer. But the word consumer is also inadequate to describe the relationship with electric utilities.

Electricity consumers are transforming into prosumers capable of production as well as consumption. A prosumer can generate kilowatts in the form of rooftop solar or create negawatts in the form of participation in a demand response or EV smart charging program.   That’s why for utilities, this is the Age of the Prosumer. It’s a uniquely disruptive conceptual framework that will have significant impacts to utility business models.

Why is it unique? It’s unique on several levels. First, it’s not the typical Smart Grid disruption caused by technology, policy, or capital innovation although these drivers will heavily influence the responses that utilities can develop to deal with a world of expanding availability of prosumer choices. Second, it’s a unique designation in industry sectors. No other business sector has the potential for bi-directionality of the transacted product or service. We don’t have similar bi-directional transactions of buying and selling clothes from and to Bloomingdales or remodeling supplies from and to Home Depot. Prosumers can do that with utilities. And that bi-directional transaction is very disruptive. It will require transformations of utility business processes, metrics, best practices, and resource skillsets.

Although utilities will have to adapt in the Age of the Prosumer, they don’t have to reinvent wheels. There’s certainly experience from other business sectors that can speed their successful evolutions. One area that is particularly relevant is consumer value.  Consumer value is more than a formula. It’s a mindset that many businesses incorporate into their customer retention, acquisition, and value growth strategies. For example, the telecommunications sector invests considerable time and money to analyses of demographic and behavioral data to identify consumers with the highest real or projected value to them. That knowledge shapes their product and service development, influencer and partnership approaches, customer acquisition and customer retention strategies. The outcomes in increased revenue or customer satisfaction are carefully monitored and measured to ensure programs meet performance expectations.

Utilities need to take the lessons about how to assess consumer value and expand it into definitions of prosumer value that are leveraged in prosumer-centric operations. More on that in next week’s article.

*Forrester Research