The effect of process innovation on financial performance in utility companies in Kenya: a case study of the Kenya power and lighting company

Abstract

Utility services such as water and electricity are very important resources for a country‟s economic growth. Utility companies adopt innovations in order to provide better service delivery to customers, improve revenue collection, improve meter reading, billing accuracy, save customer and company‟s time and resources, empower customers of any upcoming service events and for up-scaling for competition purposes by adopting to the ever changing environment. The main objective of this study was to determine the effect of process innovation in in utility companies in Kenya. A case study was done on Kenya Power and Lighting Company on their prepaid service process innovation. Descriptive research design was used in the study. Secondary data used in this study was from year end 2005 to 2014 for KPLC. Data collected was analyzed using descriptive and inferential statistics to interpret the data. The regression analysis model showed that there was a positive correlation coefficient (r) = 0.978 and co-efficient of determination (r2) = 0.957 and adjusted r of 0.903. The results of r2 implied that the variations of process innovation, asset structure and debt ratio explained 95.7 % of the variations in KPLC return on asset. The findings showed a positive statistically significant relationship of 0.013 between sale of electricity, a measure of the prepaid process innovation and financial performance indicator of return on assets. Customer and sales (kWh) per employee, with 0.727 and 0.599 significance respectively does not affect the financial performance. The asset structure significantly affects the financial performance negatively with a significance of 0.004. Debt ratio with significance of 0.522 does not have a significant effect on financial performance of KPLC. The study recommended that there was need for government to foster innovation among the utility companies which was turn expected to improve revenue collection, improve utility billing and accuracy, reduce unnecessary costs and be more competitive in the market.