What Determines a Utility’s Ability to Adapt to Disruption?

What determines how well a Utility adapts to the introduction of disruptive technology? And does the introduction of that technology always confer a competitive advantage on the utility?

Zainal Arifin, the VP of technological development and standardisation at PLN in Indonesia asked the exact same question and came back with some interesting results. In a paper published by Arifin, he came to the conclusion that in some cases, disruptive technology negatively affects a firm’s competitive advantage – but that it is possible to mitigate this negative effect.  In particular, Arifin believes that the results of his research will be of particular interest to directors or management teams who are struggling to implement a strategy to counteract the effects of disruptive technologies. He focuses on the impacts of renewable energy, battery storage technology and smart grids.

It is important to note that in no way does Arifin imply that disruptive technology or the utility transformation have no merit – far from it. He does, however, question the competitive advantage of the technology and provides insights into how to make the most of the technology by highlighting those elements which have a definite positive impact.  Arifin examined disruption for multiple perspectives – speed of disruption, organisational learning and leadership appetite for disruption, and technology push vs market pull.  Arifin postulates further that if all firms within a specific market have access to the same technology, they reach competitive parity. So, what is the defining factor or determinant of competitive advantage in a market in which competitive parity has been reached?

Arifin examined the challenge from three influencers: entrepreneurial leadership, absorptive capability and technology adoption.  His results found that the most important element in driving competitive advantage from disruptive technologies is absorptive capability.  This means the ability of a utility to implement resources, assimilate transformation, acquisition and exploitation. It aligns with studies presenting how dynamic firms learn, integrate and, if necessary, reconfigure and transform their resource base.

In particular, he believes that utilities will be more competitive if they adapt, integrate and reconfigure internal and external organisation skills, resources and functional competencies to match the requirements of a rapidly changing environment, in particular, disruptive technology. He believes that the ability to shift and manage resources and skills will ensure the rapid adoption and efficient utilisation of disruptive technology. Its lack will lead to inefficient management and damage to a firm’s competitive advantage.

Source: Smart Energy International, 2020 (www.smart-energy.com)

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