You've heard talk lately about the convergence of electricity and natural gas. That idea has grown as commodity markets have matured for gas and emerged for bulk power.
"Utility mentality" has become synonymous with a clinging dependence upon regulation to protect an organization from risk and competition. It also denotes momentum planning and management (em that is, using past performance to project future performance. This way of thinking made sense when companies could count on regulators to shield them from market forces and competition. The current regulatory trend, however, encourages competition as a means of reducing costs to energy utility customers, as it did in other industries (em notably, oil and gas production, gas transmission, airlines, and long-distance telephone.
Reports of the death of utility mentality are greatly exaggerated. A number of utility executives have merely paid lip service to the competitive transformation of their companies. They await a return to a more regulated, less competitive atmosphere. They ignore the worldwide trend to reduce government control and increase competition. They fail to recognize that their industrial rates compete globally, not just regionally. They forget that capitalism founded the world's standard of living (and the wealth that accompanies it). Government control and ownership, on the other hand, have retarded progress. The logical progression is toward more open markets, and the pendulum is swinging. Companies must either move forward or die.
As in the case of any entrenched institution, a utility's fate may take several forms:
s Old Age (em The company suffers a slow, lingering death, often exhibiting dementia.
s Homicide (em Vitality fails and the company's final demise is brought on by disgruntled shareholders or an acquiring company.
s Born Again (em The company leaps into the competitive business world with an integrated, managed, planned, and controlled action that revitalizes the organization.
Old Dog, Old Tricks
A company dies of old age because it refuses to give up the old ways. It fights the regulators, fights competitors through regulatory ploys, and makes relatively mindless periodic personnel cuts to reduce costs without considering its other objectives. Such a company will not successfully acquire another because the risk is too high for the cost. Such a company sees cost-cutting opportunities only in the reduction of personnel costs, never in new markets.
A dying company does not realize its need for a major shift in direction. To appear innovative, such a company may try to dip its toes into competitive waters by adding a market affiliate or appliance service business, or by buying into oil or gas production. These minor forays into competitive business usually produce mediocre-to-dismal performance because the aging utility manages to avoid risk and competition. In short, they run them like utilities. And when these enterprises fail, the company feels vindicated: See, getting into a competitive atmosphere is bad business.
This company may enjoy good financial results for a short time, despite its decline, by maximizing its regulatory advantages. It will, eventually, sink into mediocrity or worse. If the stockholders and/or competitors do not "kill" it, the company will in time replace its old-school managers with others who have "grown up" in the new competitive
environment. The company will have "aged" into a new era company, and utility mentality will