Local heroes: Mirco Pinske, CEO of the digitalization experts DIPOKO, and Michael Dusch, managing director of m3, on municipal innovations, discovering the customer and what municipal utilities can do better than tech giants.
Mr. Pinske, Mr. Dusch, why do digital, municipal platforms have transformative potential?
Mirco Pinske: Because they allow municipal utilities to radically change framework conditions, which have been in existence for decades, for the first time. What are these framework conditions? Municipal utility providers have different products: Public transport, energy, water, swimming pools, car parks or even airports. And each product has its own customers, payment runs, services. The municipal utilities don't even know most of these customers, such as the swimming pool or car park users, They are totally anonymous. About others, such as energy customers, they don't know much more than consumption-related information. In fact, we cannot answer the question if and how someone, who has a certain electricity rate, also uses car parks and recreational and cultural facilities. We don’t know the customers – and because we don’t know the customers, the citizens – we can't create intelligent product bundles. Furthermore, competitive differentiation, especially in the energy sector, can be based solely on price, contract term and perhaps a green tariff. In the long-term, there is no way to compete with new competitors that score points with innovative, simple contracting processes and tariffs.
„“The development and creation of intelligent product bundles requires precise customer knowledge.”
A platform that integrates all municipal services, that makes customers of different products identifiable for the first time, offers municipal utilities excellent opportunities for differentiation, for developing smart bundled products and new services. It creates beneficial opportunities for communication with citizens and helps convey a complete and differentiated picture of the municipal utility provider.
An interview with
DIPKO: Successful municipal utility cooperation
With DIPKO, the “Digital Platform for Municipal Services” (Digitale Plattform für kommunale Services), you want to help municipalities leverage precisely these strengths of the cross-utility network. How can we image the different municipal utilities collaborating in this project?
Mirco Pinske: Municipal utilities are rarely in competition with each other due to their clearly defined concession areas. It therefore makes all the more sense for them to pool their intellectual capital and also their innovation capital. The vision behind DIPKO is not to simply provide digital tools, but to combine change, innovation and digitalization in a future-oriented process. That's exactly how DIPKO came into being – from the collaboration of numerous municipal utilities that shared and supported the idea of a common platform. It is important that partners emerge that structurally have a certain degree of comparability and share the vision and priorities in the broadest sense.
When this is the case, you have good starting conditions for innovation. The platform defines a relatively open framework combining certain core functionalities. In this framework, creative scenarios and use cases for products and services, can be elaborated which contribute to the vision of an intelligent cross-utility network and which can be implemented in the individual municipality.
"A good platform architecture makes use of existing hardware resources – and must not be an initial hurdle."
Michael Dusch: In this phase, it is also crucial to define an architecture that does not constitute an initial hurdle. This means that high investments in hardware should not be necessary and that standard devices and existing systems should continue to be used. Central functions such as payments, single sign-on, identity management, data storage, customer communication, networking should form the basis of the platform. And individual modules, services that could be developed and adapted quickly could be linked to this basic structure. Faster implementation, testing and scaling would mean that even large cities can start operating the solution within three to four days.
Which topics, which modules are particularly suitable for launching the platform?
Mirco Pinske: E-mobility, public transport, energy, parking, lighting, ticketing – we developed different scenarios for these topics at the project outset and evaluated them together to get a feel for what is particularly suitable for bringing citizens into the new digital world of municipal utilities in the first place.
A very good example, which incidentally illustrates the transformative potential of the vision, is swimming pools. Here, municipal utilities have hundreds of thousands of customers that they don’t know, which they sometimes don’t even see as customers, who get their entry tickets anonymously at very antiquated pay machines. That's why the participating municipal utilities also set digital entry management as one of their first sprint goals. That was in 2019, during the pandemic the participants were then able to operate efficiently with the new product.
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Product innovation and customer retention
What is the transformative potential of such a product that goes beyond the increase of efficiency?
Mirco Pinske: Today, only a small number of municipal utilities are viewed as holistic quality-of-life service providers with a large service portfolio. This diversity can only be presented if the individual products can be integrated, have a common basis – structurally, technologically and communicatively – and if you know the different life aspects of your customers. Today, for example, it is hardly possible to create a bundled product from telecommunications and energy or benefit programs based on the provision of specific premium services ,such as special parking spaces in municipal car parks. Here, an integrated perspective on the product portfolio and a common digital platform can lead to a radical change in product innovation and customer retention.
Let me illustrate this with the example of the swimming pools. One of the municipal utilities participating in DIPKO has launched an advantage program for its energy customers and significantly reduced the prices for tickets for their swimming pools when booking online. As a result, the number of new energy supply contracts has exploded. All of a sudden, anonymous, uninterested assets such as car parks or open-air swimming pools have turned into strategic resources in the design of interconnected products. You obtain data, which you can interpret and which can be used to optimize products and customer retention. Communication occasions and feedback channels are created. And last but not least, the perception and image of municipal utilities are changing.
“As a ‘local hero’, municipal utilities create an experience that no tech giant can offer.”
Michael Dusch: Ultimately, the radical aspect is the change in perspective on the individual's own action. The unique added value that municipal utilities can offer their citizens must be tangible. And it is also created from the networking of various activities and assets of the municipal utilities. Digital functionalities, which today can be mapped using communal platforms, play a highly significant role in this. As a citizen, I can log in to my municipality and can experience this intelligent, networked diversity. That's why we have to move away strategically and mentally from pure price differentiation, from the pure product view. As a ‘local hero’, municipal utilities create an experience that no big player, not even a tech giant, can offer, not to mention proximity and trust. Because that's what municipal utilities stand for to a great extent. And this also has an immense impact on their positioning and branding.
Technical complexity is not the critical factor here?
Michael Dusch: No. There are numerous solutions in different industries that can be adapted, which have been tried and tested. No municipal utility needs to delve deep into technology innovation. Be it integrated log-in systems or payment processes, which are especially important for new products and business models – charging e-cars, booking tickets, sharing scooters and bikes. Today, it is often the case that each of these services uses its own payment solution with its own payment service providers. Which firstly complicates the integrated customer experience and secondly weakens the negotiation position of municipal utilities vis-à-vis the payment providers in the case of transaction-based contracts. But these are not technological problems.
Driving forces of transformation
Where does the incentive for this change, for this new perspective in the municipal sector come from? Aren’t we expecting too much from the attraction of this vision?
Michael Dusch: This vision plays a decisive role – but, of course, it alone is not enough. For structural reasons, the competitive and revenue pressure on municipal utilities may not be as intensive as in the private sector.. But municipal utilities also have a political mandate. In many cases, they are essential for the municipalities' financing and ability to act. And that's why they keep a close eye on the competition and their aggressive and innovative business models in such important fields as energy or telecommunications. Digitalization and liberalization are leading to an intensification of this situation and are creating a need for action.
"With future-oriented visions, innovative projects and ambitious roadmaps, municipal utilities are also convincing as employers.“
Mirco Pinske: Another factor is attractiveness as an employer. Because very many municipal utilities, for all their regional and structural differences, are having increasing difficulty in finding highly qualified employees. The associated aging of the workforce is already threatening the very existence of some municipal utilities. Without a future-oriented vision, innovative projects and ambitious roadmaps, without a clear image and a higher quality and intensity of customer relations, we will not find solutions here either. And the number of municipal utilities that want to actively address these questions, is growing.
In addition, people are increasingly concerned with the question of which municipality they want to live in and what they expect from their municipality and the municipal utilities as their economic arm. Especially with regard to climate protection, energy efficiency, enabling new work models or the mobility turnaround, municipalities need to find answers. An integrated portfolio, an intensive and open communication with citizens and a precise knowledge of customers form the basis for this
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