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Envision the Utility of Tomorrow

How will the industry change in the future?
Fortnightly Magazine - June 2004

organization will become the hub of a network that includes internal systems, outsourced processes, and interconnections with external parties. Internal systems, because of standardization and commoditization, will require much less of IT's time.

However, the technology group will have operational responsibility for human resources, customer service, and accounting processes, most of which will have been outsourced to specialist providers, and for scalable networks that link to other firms or industry consortia. CIO will change from "chief information officer" to "chief interrelationship officer." The CIO will have to screen out the strategically important from the merely fashionable. From time to time, an idea seizes the popular imagination and makes its way to the boardroom, and there can be great pressure to climb aboard without full analysis. The CIO will focus on innovation that can create enormous value. IT investments that don't drive value will be wasted. Technologies that improve a utility's response to developments and interaction with its customers, vendors, and employees-such as through the work of the field staff and others who perform basic operations-can produce significant profits.

A CIO with an innovative outlook that is shared by the rest of the company can become a value creator. This is a major departure from the conventional view of the CIO as primarily a steward of assets.

Across the business world, studies show that high-growth enterprises put 45 percent of their IT investment into innovation. Their counterparts with low profit growth put only 20 percent toward innovation and 80 percent into operating existing technology.

A recent survey showed that only 28 percent of companies tie IT investment to their business goals, and only 12 percent accurately measure the impact of their investment on the business. The most effective IT executives feel their leadership and understanding of the business are more important than technical know-how.

They also point to the need for a shared language within the company. In utilities, there can be poor dialogue between business analysts, policy-makers, and IT people. Until they have a common lexicon, they will be like ships passing in the night.

Taking Charge

Whatever specific developments govern the utility of the future, the industry's leaders today clearly have two choices: to merely react to the forces of change, or to climb into the driver's seat and shape their destiny.

Utilities have been through 15 years of experimentation with alternate industry models, yet there is still no consensus on which is best. On the question of deregulation, for instance, the process in North America has stalled. Are utilities really happy with the hybrid model that is out there today? How does it help employees and customers?

Consider this fact: In 2002, in states where restructuring was active, average revenue per kilowatt-hour was 22.91 cents, compared to 26.8 cents in states where restructuring was delayed, suspended, or inactive.

For the industry to take charge of the future, we must first make our companies great examples of high performance by taking management to new levels of sophistication, by shifting the culture of our organizations to more readily accept new technologies, and