Nathan Rothschild knew before anyone else that Napoleon would lose the Battle of Waterloo in 1815. With this advance knowledge he dumped his British-backed government securities on the market, making it appear as if he had heard the opposite outcome. His competing merchant bankers, following Rothschild's move, also sold their securities. After Rothschild saw the market bottom out, he repurchased every piece of paper he could lay his hands on (em at fire sale prices. He made a killing.How did he accomplish this feat? Long before Waterloo, Rothschild had established a network of contacts throughout Europe. To each field contact he gave carrier pigeons. Whenever his contacts saw a critical change in the marketplace, they sent out a pigeon. They weren't always right and the news was not necessarily momentous. Yet, this carrier pigeon
network was like the E-mail of his day.
What gave Rothschild his competitive edge was his understanding of the randomness of the information flow. He therefore scattered his network throughout the European theater, not knowing where the answer would come from. At the same time, he focused his network. Rothschild knew what he was looking for and clearly told his field contacts what to watch for. This is the competitive art of "random focus," an art that all utility as well as nonutility power companies must learn.
Groupware, such as Lotus Notes(r) and other application software, provides today's utilities with the technological equivalent of an efficient carrier pigeon network. Groupware flattens the organizational structure by re-moving bureaucratic information barriers. In short, it allows a random flow of information.
Groupware will not, however, tell the organization what to look for and how to report it. Most electric utilities are still groping for strategic direction. Most executives feel overwhelmed by the strategic choices their firms must make in the coming years. They are unsure about which competitive target to watch: Nonutility generators? Energy service companies? Neighboring utilities? Overseas investments? Acquisition candidates? Investments in unregulated businesses?
In the near future, utilities will sort through many of these options (em just as the telephone companies, banks, and airlines have done. Yet, even once a utility's management selects its strategic options, the question remains: How will it become savvy enough to pull off the strategic and tactical moves it takes to succeed? Here, groupware plays a critical role.
AT&T (just prior to its divestiture), with almost 300,000 employees, and Corning, with over 25,000 employees, are both far larger than any utility and far more informationally agile. They use information technology to flatten the organizational hierarchy, employing a kind of electronic ringmaster that shuttles information to whoever needs it.
AT&T has established a companywide database of experts that anyone may call, despite their far-flung locations or different functions. This access to internal expertise has saved managers countless hours of fruitless searching.
Corning's solution is somewhat different. In the mid-1980s, it built the Exchange, a business database and information-swapping forum. A minicomputer network gives management instant access to published as well as internal information on any customer, industry segment, or competitor.
Pacific Gas & Electric (PG&E) launched a similar initiative in 1992. Using Lotus Notes(r) as a foundation, it has attached an online information filter known as HooverO (produced by SandPoint Corp., Cambridge, MA) to sort and sift through information from 25 databases and newswires. Over 300 of PG&E's 2,200 Notes(r) users subscribe to the HooverO system.
The PG&E system has become a true intelligence ringmaster, freely shuttling information around without any gatekeepers to block its flow. For the first time, any one of these subscribers can circumvent the library for simple searches, which frees the librarians for more complex research. More important, it allows others in the company to focus on issues that concern only their group. Public relations can use the system as a mirror for the market's perception of PG&E. Legal staff and company lobbyists can track changes in local and national legislation through Hoover's Legislation Tracking System.
No groupware can substitute for face-to-face contact as far as motivating people and having them participate in such a system. Without human ringmasters to oversee the system architecture and push others to contribute, no system will ever mature to the point where it becomes a truly universal tool. As the members of Corning's program will tell you, it takes three to five years of populating a database and training the organization before the system becomes part of a company's strategic way of life.
In the case of Mission Energy, a major independent power producer (IPP), the company's president became the system's self-appointed evangelist. Mission has built its system into a universal information carrier, conveying everything from international country reports for the nearly 100 employees working overseas, to business news updates, to a mail system that allows traveling executives to keep in touch.
Mission Energy has taken the ringmaster approach global. "We have a database called Meeting Tracker," says Bryan Sorensen, manager of Mission's information technology department. "It contains summaries of important meetings that people around the organization have had with outside companies. If someone in our London office, for instance, has a key meeting, other officials around the world will see the posting and can look at the document to see what was covered."
Establish Strategic "Catchbasins"
Nearly every successful competitor, irrespective of the industry, succeeds because it knows where to look (em and where not to look. As utilities enter deregulated markets where they will not be able to cover costs through rate increases, they will have to choose their investments carefully. Choice is the name of the game in the energy world of the future. Making the right choices will separate the winners from the losers.
Successful companies understand the forces that dominate their industries, and pursue an understanding of those forces with a zeal. For example, most traditional electric utilities will find their need for customer intelligence more pressing than their need for regulatory and competitor intelligence. If that is management's strategic directive, everyone in the company must concentrate on understanding powerful customers.
Translating this sense of focus to groupware means that the databases a company establishes must prompt its users in the same direction. Frank Mantha, financial systems analyst with Niagara Mohawk, describes how his group fashions information-gathering templates to direct the trade show team to collect certain types of information: "When we go to a trade show, such as the PC Expo in New York, we'll fashion a little database for the 10 to 15 Niagara Mohawk people who are attending the show. The database template actually becomes a punch list for us to go to the show with and research products. It takes us literally five minutes to create one of those applications. [This] becomes the working mechanism for us to plunder a trade show with."
On a day-to-day basis, Niagara Mohawk realizes it must keep its competitive sights tightly focused on commodity purchasing of natural gas. Supplier and pricing intelligence is key. Mantha explains that his firm has geared its information system toward understanding the dynamics of gas supply and acting upon the intelligence: "The people in the war room, gas-supply specialists, have managed to negotiate the lowest gas rates in New York State. It's the quality of the people there, and the ability of those people to manage information, including textual information, that enables them to prosper, and not be bound up in the day-to-day intricacies of finding paper."
Niagara Mohawk not only uses the information system to communicate among internal gas-supply specialists, but also with other gas suppliers. This supplier focus has allowed Niagara Mohawk to break out of the traditional utility box. Its market intelligence has become seamless (em internal information mixed with external information, all equally available to the decisionmakers who need to make potentially costly decisions.
Bring Yourself Up to Speed
Utilities, like most risk-averse companies, tend to sit on information, delay decisions, and lose opportunities. In an increasingly competitive market, however, they need to find ways to save time digesting information. They need to act faster than ever before.
Speed and focus go hand in hand. Cathy Clark, a communications manager for Duke Power, describes how her organization kept management constantly informed of competitive activity, using groupware to reduce planning time significantly: "When we did strategic planning in prior years, we spent about 13 days (em first getting people up to the same level of understanding on the many issues, then the planning time itself. This year we spent two days of our executives' time, because we've been keeping people informed as we go along. If you calculate the chairman's staff time at $1,000 an hour, plus support people, the benefits for our decisionmakers begin to add up."
A speedy rate case is the ultimate utility oxymoron. Utilities can spend countless thousands of man-hours of time, collecting data and responding to interrogatories during discovery. Inefficient collection and analysis consumes management's time and creates market-dragging delays. Along with these distractions come postponed investment decisions and marketing initiatives.
"This regulatory process is what we were focused on," recalls Pat Patterson, regulatory systems manager for Florida Power & Light Co. (FP&L), explaining why FP&L decided to jump to a
groupware-based solution. The investment in manpower and in sheer numbers of hours are staggering. The process involved a tremendous volume of paper (em each and every piece had to be reviewed and re-reviewed. Delays cropped up because it was difficult to decide who should read and sort through a particular document.
Patterson relates an informational horror story: "We had
several deadlines over a two-year period. To meet just the first requirement for statements required about 33,000 pages. As the case went to trial phase, we had 9,000 pages of transcripts. ... Trying to keep track of what everybody had said with that volume of material was about to drive everybody crazy. On top of that, we might go through 10 or 15 drafts.
"Under the old process, you might send, receive, and forward groups of documents back and forth. For instance, you might send a document to eight people and get back eight people's ideas on how to answer it. You had to take all these responses and assimilate the information, figuring the best way to combine it all. This was random information, covering everything from organization to rate design to accounting. Everything and anything!"
Once the regulatory group switched the process over to groupware, they found it far more efficient and easier than the manual approach. While the man-hour dollar savings were great, it was probably balanced by the out-of-pocket initial costs incurred in purchasing the groupware software and systems packages. In the long run, the real victory for FP&L was its new-found speed and efficiency in making decisions and executing strategy; accomplishments not possible under the old way of managing information.
Patterson concludes, "We previously took a whole team of people to Washington with us. . . . It wasn't unusual to take 50 people on these trips. The groupware allowed us . . . to get it down to five."
Get Your Pigeons in a Row
As the FP&L case indicates, utilities will always suffer from information overload. Yet they need not become its victim. Information richness is no excuse for lack of competitiveness; it should have the opposite effect. Savvy energy companies, such as Enron, have tackled the information issue head on and won considerable market victories. Like Rothschild at Waterloo, they are nimble and willing to take risks. Are traditional utilities ready to do the same?
Technology is no substitute for a focused strategy. It is also no substitute for aggressive, firm corporate management. Therefore, when utilities consider installing a groupware system, they first need to refine their strategy. Be warned: It takes a great deal of corporate training and rethinking to use technology properly, as well as to deploy the right strategy. This has been the experience of nearly every utility cited here.
Gone are the days when utilities could simply raise rates to compensate for increased costs. Utility management must make firm, specific strategic choices today (em not in a few years. It must direct its troops to watch one or two market conditions (em not all. Telling your marketing people and field engineers "Let me know if you see anything" is like telling them to see nothing. An unfocused stream of inquiries will jerk the organization's attention in all directions.
Management needs to accomplish two goals: 1) It needs to decide whether it has to watch customers more than competitors, or regulators more than some other group; and 2) it must ensure that information moves freely around the company. A random, free flow of information will give the troops the intelligence to fight the battle. Focus will bring a utility to victory. Those that do not (em or cannot (em focus, or do not have the available intelligence, will lose track of their markets and will instead find their Waterloo. t
Leonard Fuld is president of Fuld & Company, a Cambridge, MA, consulting and training firm specializing in business intelligence for new product launches, benchmarking projects, joint ventures, competitor monitoring, and mergers and acquisitions. His latest book is The New Competitor Intelligence (Wiley, 1995). Diane Borska, Director of Fuld & Company's utilities practice, has over 14 years' experience in the electric utility industry. Her experience includes work in generation engineering, prudence and rate case support, and regulatory compliance. The authors would like to thank the Lotus Development Corp. and its vendors for allowing us to interview their customers for this article.
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