How to achieve continuous digital innovation

To implement smart meters and intelligent grids, to integrate operational control rooms and executive situation rooms, to migrate data platforms to the cloud or apply artificial intelligence to maintenance and customer service, to develop service and customer engagement mobile apps, companies in the energy and utility sector have developed various forms of “digital factory,” that is, units—more or less formalized—dedicated to the experimentation, design, development, and scaling of advanced digital solutions.

The research project Digital Factory nel settore Energy/Utility: modelli e pratiche di gestione dell’innovazione digitale (Digital factory in the energy and utility sector: models and practices for managing digital innovation, in Italian), conducted by SDA Bocconi (Paolo Pasini and Marco De Bellis) in collaboration with Deloitte, analyzed six companies in the sector (A2A, CAP, Hera, Iren, MM, and Sorgenia), selected by excluding the three largest players in order to avoid distortions due to scale and complexity. Only one of the six companies analyzed has a formally established digital factory clearly identifiable in its organizational chart; in the other cases, activities are distributed, integrated into existing structures, or carried out by centers of excellence primarily acting as advisors and supporters of digital innovation.

In a sector that has progressively become “digital intensive,” where technological change is unlikely to slow down, companies’ priority must be to consider how to organize themselves—through structures, processes, people, and skills—to manage the experimentation, evaluation, and adoption of new digital applications on an ongoing basis, creating a corporate context of “digital innovation as usual” in which IT & Digital functions and business units work together with strong synergies and tangible results.

Business continuity and innovation management

The main question addressed by the research is: how can business continuity and digital innovation management be systematically combined, preventing transformation from remaining episodic or dependent on enthusiasm for individual projects?

In recent years, the debate has focused on organizational architecture such as the Chief Information Officer/Chief Digital Officer model and dual structures designed to separate legacy system management from agile innovation. However, the concrete experience of Italian companies suggests a more articulated landscape. In the energy and utility sector, where networks and services must operate without interruption and with increasing efficiency, innovation must not create conditions that destabilize operations. It is no coincidence that, for new “digital-intensive” businesses, some companies in the sector have created new group subsidiaries highly focused on new business models and detached from the traditional core business.

The research, therefore, aims to understand which organizational models are emerging, how the relationship between internal and external skills is managed, whether distinct processes exist for digital innovation compared to “business as usual,” and how results are measured.

The four models

The study was conducted through in-depth interviews with IT & Digital managers, analysis of industrial plans and organizational charts, and the collection of data on budgets, staff, and projects, followed by a cross-sectional comparative assessment.

The analysis identifies four digital factory configurations, based on the degree of formalization and the degree of centralization or decentralization of underlying activities and responsibilities, much as occurs with other types of “factory” within companies:

• Formal digital factory: a centralized, structured, and dedicated unit within the IT & Digital department, with clear responsibility for the design, development, and governance of innovation.
• Distributed digital factory: typical digital factory activities are divided among various IT units (applications, architecture, project management, technology, etc.), without an autonomous structure, but with central coordination mechanisms.
• Advisor digital factory: a cross-functional center of excellence that supports vertical business units on architecture, data, and innovative technologies, without full ownership of projects and budgets.
• Adaptive digital factory: innovation is pragmatically integrated into the existing structure, activated based on opportunities, and managed through internal governance and extensive outsourcing of operational activities.

The use of external resources is a constant, although to varying degrees (from 2 external FTEs for every internal FTE to more than 6): software development, data engineering, testing, and part of application management are almost always outsourced; internally, companies concentrate governance, architecture, project management, data governance, and—only in some cases—data science and AI skills.

In terms of processes, differences are equally significant. In many companies, there is no formal distinction between demand and innovation portfolios and traditional projects; Proofs of Concept are used very selectively; measurement systems remain focused on service level agreements, compliance with timelines and costs, tickets, and post-release anomalies. Only in one case are structured “digital performance management” models adopted, which, from a “continuous monitoring” perspective, track medium-term business impact KPIs.

Priorities for continuous digital innovation

The findings of the research, although derived from the analysis of a specific sector, can in many cases be generalized to companies across industries.

Organizational evolution, meanwhile, is ongoing. In most cases, digital factories do not have full autonomy or dedicated experimentation budgets; innovation is activated in a more top-down manner at the request of the business and financed within ordinary planning cycles.

For managers, this means confronting several structural choices. Defining a digital factory model consistent with the company’s digital strategy implies clarifying responsibilities, boundaries, and modes of collaboration with business units. It also means clearly deciding on the sourcing model, that is, which activities and skills to manage internally and which to entrust on a stable basis to external partners.

The IT & Digital function must also play its part and profoundly change its mindset, processes, and behaviors. It must become the proactive director and pivot of change and digital transformation, in strong partnership with business units.

Another front concerns measurement. Without performance indicators that go beyond technical and operational control and include organizational and business impacts, innovation risks remain a set of initiatives that are difficult to evaluate, compare, and prioritize over time, whose value can easily dissipate. The research shows how this value can derive from the intersection of two main dimensions: profitability, linked to the more tangible impacts on financial performance, and attractiveness, connected to cultural aspects, talent, and reputation in the labor market.

Finally, there is the issue of evolutionary trajectories, which could move from distributed or advisor digital factories toward a formal digital factory and beyond: one of the three largest operators in the sector (not analyzed in the research) has built a digital NewCo with the aim of concentrating skills, agility, synergies, and economies of scale within a more autonomous and entrepreneurial structure; in one of the companies examined this path has been undertaken, strongly focused on digital innovation; in other contexts, the hypothesis is under feasibility assessment.

Today, AI in all its forms (analytical, generative, and agentic) and its associated risks attract widespread attention; tomorrow, it may be brain-computing or advanced and humanoid robotics. Preparing corporate organizations for “digital innovation as usual” is a critical success factor.

Paolo Pasini, Marco De Bellis, Stefano Gasparin, Laura Alberti, Cosimo Luca Negro, Digital Factory nel settore Energy/Utility: modelli e pratiche di gestione dell’innovazione digitale.