New Jersey’s bid to force prices downward in PJM’s capacity market not only raises the alarm about market manipulation. It also reveals a dilemma that’s preventing new generation from being built...
The Innovation Imperative
Adaptive companies stand the greatest chance for success.
The IBM Institute for Business Value recently completed its biennial Global CEO Study , in which over 1,100 CEOs were interviewed in person about their views on changes in customer attitudes, business models, and the globalization of business. Based on these interviews, which spanned 40 nations and 32 industries, IBM compiled a comprehensive report, The Enterprise of the Future , which describes traits that the leading companies across all industries will share. Key industries—including utilities—also were evaluated individually to see how these traits might emerge as industries reshape and evolve in the face of customer demands, environmental pressures, global integration, workforce changes, and other challenges. Meeting these forces becomes even more challenging as executives sort out the current crisis impacting the global financial markets.
In many respects, utility CEOs expressed opinions on the future that were very similar to their peers across industries. Seventy to 80 percent of the CEO pool in general, and utility CEOs specifically, stated that they were bracing for substantial changes over the next three years. 1 These numbers significantly werehigher than those from two years earlier. 2 The emergence of more informed and collaborative consumers in particular is seen as a key change and a likely driver of new business; almost 70 percent of utility leaders see this new type of customer ultimately having a positive impact on the business. But in other areas, the CEO study results pointed out some of the challenges that utility executives face that differ in scope or intensity than those of many other industries.
Coping With Uncertainty
When asked to point to the external factors most likely to affect their business in the next three years, utility executives were almost five times as likely to include environmental issues on the list as did the average CEO (see Figure 1) . While the focus on environmental issues (particularly climate change) has increased across all industries, it is interesting to note that this ratio is almost exactly the same as it was in the 2006 version of the CEO Study —the industry clearly has maintained its leadership on recognizing and addressing the impact of its operations on the environment.
Sustaining this leadership position does not come easily, however. While utilities have been trailblazers in environmental stewardship on many fronts, there remains relentless uncertainty around the evolving nature of new carbon regulations, costs, and markets. This elevated level of scrutiny likely will transfer to all of the other corporate social responsibility (CSR) issues of concern to stakeholders as well.