The North Carolina Utilities Commission (NCUC) has approved price-cap regulation plans for four major telecommunications local exchange carriers (LECs) in the state: BellSouth Telecommunications...
What Utilities Should Expect from Competitive Intelligence
unsure and unfocused. For example, when we asked managers to decide which of the three most-cited factors (em customers, competitors, and regulators (em were most important, they could not pick one (see Figure 1). All the competitive balls appear to be in the air.
Clearly, utilities are finding it difficult to strike a moving target. Many managers we spoke with expressed concern about how to effectively monitor future competitors without knowing when and under what conditions regulators and legislatures will permit competition. One manager even said, "Our greatest intelligence challenge is to clearly define and identify not only our current but our future competitors." In the face of such major changes, many utilities struggle both to define and set priorities for their strategic business goals. This struggle creates real obstacles to establishing a productive, focused intelligence system.
The Unexplored Terrain
The utility industry has traditionally viewed electricity purchasers as "ratepayers," and ratemaking authorities as "customers." As the industry faces deregulation and increased competition, utility managers have
re-characterized ratepayers as "customers." In part, utilities emphasize "customer-focus" as a way to retain or protect market share. Participants in our survey ranked customers either first or second in importance, clearly reflecting the recent move toward customer-centric thinking at utilities. As one manager explained, "Customers drive the actions of all other entities including regulators and competitors."
Despite their stated focus on customers and concerns about market share retention, over two-thirds of the participants lack any intelligence infrastructure for collecting, analyzing, and disseminating information about their customers, as typified by the two quotes seen above. Without this infrastructure, utilities are unlikely to uncover current, pertinent information about their customers' operations, such as electric generation technology, expansion or consolidation plans, or how energy costs stack up as a proportion of total operating expenses. Some utilities do not even employ the simplest intelligence procedure (em that of using the utility's own field force to collect this kind of information.
If an electric utility pinpoints customers as its primary focus (em as many already have (em then it must design its intelligence system to reflect that aim. The managers we spoke with all described an increasingly common practice: Negotiating rates with key customers. As this practice grows, detailed customer information will be vital not only to effective rate negotiations but to the design of value-added services. One study participant put it this way, "In the short term, the return [on an intelligence system] is for us to get closer to our existing customers,
to show improved customer retention figures, and an overall increase in the number of customers."
Morphing the Competition
Electric utilities generally appear uncertain about their future competitors, as to both their number and category. Most managers seem to measure the increase in competitive threats by the sheer number of competitors they will have to face in years ahead. They project, on average, a 50-percent increase in the actual number of competitors in their service territories by 2000.
As in telecommunications, a utility's metamorphosis from being "all things to all people" to a more specialized entity