Top executives at AEP, the California ISO, and El Paso Electric address key challenges and opportunities.
What Utilities Should Expect from Competitive Intelligence
regulators for its major industrial customers. The company sought the new rate structure after realizing many of its major customers were seeking more competitively priced electricity.
The Organization (em
A House Divided
To support the range of regulatory requirements associated with electric generation, transmission, and distribution, utilities have traditionally organized their staffs by specialty or technical discipline. This structure proved successful under the regulated environment, but will probably not survive the next decade. The managers we spoke with feel that this structure has created an insular culture that discourages, if not prohibits, the flow of information across functional boundaries.
In addition, many utilities literally isolate various groups from one another by forming rigidly autonomous service areas. "Our organizational setup lends itself to the formation of information traps," commented one participant. "We have [several] marketing/customer service divisions set up on a geographical basis. The divisions will not share information with each other or with the corporate staff. One of the original goals of this structure was to foster competition among divisions. Today we find that is less meaningful and even counterproductive."
Instead of a consistent, coordinated information flow, most utilities have created little information whirlpools of market and competitor information that spin around and around within each group. That information is rarely shared or compared. But until it is, uniform market and competitive strategies cannot succeed.
Top management should direct the intelligence effort. The CEO cannot push responsibility down in the organization, expecting middle management to read minds. The single glaring weak spot that emerged from this study is that many managers do not yet understand the intelligence process and appear unlikely to give it direction.
Historically, it has taken three to five years for an intelligence system to reap companywide rewards. Even in utilities with existing intelligence systems, management often runs the risk of overreaching its capability or expecting too much from the system. "We have defined a process for using a competitive intelligence system," states one participant, "but we are having real disagreements within management as to scope. Some managers want to limit it to a few departments, while others want a companywide system right away."
Also, management itself needs to be educated as to what intelligence is and is not. "Consistency of expectations is a real problem. Some senior managers just want data, whereas others want data and analysis," comments one individual.
Management needs one final ingredient if it is to make an intelligence system work. It must act even if all the information isn't yet in, or may never arrive. Action, taking risks, distinguishes the successful from the unsuccessful intelligence user. Perhaps that is the meaning behind the comment "senior managers just want data." They may want more data for the security it supposedly bestows upon them. So, rather than act, they collect (em a dangerous trait in an increasingly risk-taking utility world.
Utility industry management must lead by example and focus the company on the information it needs to collect; then, act upon that information.
From Prudence to Risk
The utilities of 10 or 20 years from now