Utilities that defend the status quo are almost assuredly going to miss emerging opportunities, delaying their evolution to operating models that serve changing markets. You can’t reverse macroeconomic trends or shifts in market demand. To compete with a new breed of energy service providers armed with rapidly advancing technology requires flexibility in operations, simplified workflows, investment in the IT foundation, accountability in the organization and a hard-nosed, competitive approach to the market.
Utilities have taken action over the past few years to address some of the challenges. As these issues evolve, however, complacency is not a strategy for success. Given the recent structural and market changes in utility distribution environments across the world, we recommend utility executives take a fresh, comprehensive look at their strategies. Below are some actions that, in our experience, can make a difference:
Review or recast your corporate strategy.
If you have not undertaken a comprehensive review of your corporate strategy in the past two or three years, it is long overdue. Too many fundamental changes have occurred in the industry to rely on a 2012 vintage strategy.
Align your operating model to the corporate strategy.
An updated strategy often requires new ways of working and a new operating model (or an interim model).
Build your future capabilities today.
The revised operating model may expose gaps in capabilities. Fill the gaps by hiring, training and grooming the next generation of utility leaders. Many utilities have not hired significant numbers of young workers in several decades, despite a looming wave of retirements. Executives must make utility opportunities interesting enough to attract the best and brightest of the next generation of employees, while protecting the best elements of the corporate culture to retain the most experienced people.
Manage risk more effectively.
Utility executives will have to make some big bets in the next few years. Now is the time to put the right level of risk management in place to mitigate, allocate or accept the risks they are prepared to manage.
Simplify, simplify, simplify.
Examine all aspects of the business, including technology and key operational and support processes. Streamline and simplify the work, outsourcing non-core activities and eliminating or automating low-value tasks. This will allow your employees to focus on higher-value work. Often, extra steps in key processes may have been required to meet regulatory compliance or temporary needs, but once those issues were resolved, the process ceased to evolve. Enormous latent value is locked in highly manual and overly complex processes.
Harden the infrastructure.
Improve utility infrastructure with investments that increase security, reliability, flexibility and speed, while also reducing future maintenance costs. Information is the backbone of today’s utilities, and increasingly will be the case among the utilities of tomorrow. Yesterday’s pattern was to invest primarily in wires and pipes. The future will require significant investment in the bits and bytes required to increase operational responsiveness to changing market needs.
Focus on core strategic assets.
Build on areas of historic strength and eliminate investment of time and attention in geographies or functions. Divesting noncore assets and operations that are not core to the new corporate strategy will permit increased investment in new capabilities and functions that position the company for success.
Increase accountability.
Manage performance and hold your team accountable for delivering key metrics. Holding people accountable for results, while positioning them for success, is critical to increasing employee morale and retaining talent.
By developing enterprisewide strategies for change, utilities can strengthen their core businesses, build the speed and agility needed to pursue new opportunities, engage with customers to create channels for new products and services and increase the ability to respond to challenges. The executives that broaden the view of the business they are in (serving customers’ energy needs versus franchised regulated distribution) and refine their strategy accordingly, will improve both performance and shareholder value.
by: MICHAEL BRITT
Oliver Wyman Ideas App
