Changing the culture at American Electric Power.
As the electric industry gears up for competition, attention shifts to things like load migration, technology and customer service. The pressure is rising like never before to identify, catalogue and track costs.
Thus, at American Electric Power Company, we decided two years ago to reengineer much of our internal financial management apparatus, including systems, databases and technology. With the help of consultants, we developed, designed, tested and implemented an activity-based management system.
Because ABM offers a powerful tool, not just for managing costs, but for facilitating business-alignment planning and work-driven budgeting, we expect that it will help us improve our business operations and meet new (and still-emerging) customer needs.
The first client-server
From the moment we decided to adopt ABM, we realized we'd have to orchestrate a large culture shift. Like most utilities, we had long kept track of costs by account, according to regulatory requirements. Yet ABM is requiring AEP to plan, budget and keep track of costs by activity. That subtle change marked a big difference.
ABM is a system to allocate, manage and track business resources by looking at each activity a company performs. ABM can assist a power plant manager, for example, in making everyday decisions about managing costs in his location. It can assist top-level executives in making strategic business decisions, such as whether to discontinue an unprofitable product line or shift resources from one area of the company.